E marketing is something every business owner knows could be done better. If you want to get a great return on your email ad campaign, take a look at our example from the personal care industry below.
Our personal care e marketing example starts with these parameters:
Ad spend $3 million on email marketingAd reach (how many emails went out) 30 million (10 cents per name)Discounted gross margin is 30% or $3 on every $10 purchase.Average purchase size was $10.HERE’S WHERE IT GETS SUPER INTERESTING:
Only 20% of people who received the email opened it. So 6 million people saw the subject line and opened the email to see the offer. 24 million did not.
That means you spent the money to reach the 24 million who didn’t open it, but since they didn’t read the offer, you received no return on that investment. In this case, that was worth 75% of the investment.OUCH.
Most advertisers would say that’s typical, in fact, pretty good. What if you could double open rates just by changing how you communicate the offer?
If they used mobile push advertising, that’s probably what would have happened.
They sold 150K new customers at a $10 per customer for $1.5 million in sales (at a discount). Total wholesale is half of that or $750,000 to the manufacturer.
Total wholesale gross margin was 1/3 of that or $250,000.
Without a PhD you can see they didn’t come close to covering their advertising expense. That $250K is the gross margin the manufacturer generated from the e marketing campaign. Each new customer would have to buy 12X at the average price and discounted rate to break even.
What would have happened if email open rates were double?
Instead of 150K new customers, we’d have 300K new customers. Let’s also assume the same average sale of $10 per customer.
That’s $3MM per customer at retail or $1.5MM at wholesale.
Gross margin went from $250K to $500K. It too doubled.
Now we only need 6X transactions to break even.
If we doubled the average sale to $20, then you need 3X transactions to break even.
What would have happened if they used mobile push advertising?
Open rates would have doubled and so would have profits.
And what if instead of discounting the retail price of the product, costing $2.50 per transaction, they gave away product at $1.00 cost per unit?
Unit gross margin would be $3.00 a purchase instead of $1.50. It would double.
This is using leverage and strategy to get a larger and faster return on investment.
Mobile push advertising doubles response rates.
Giving away product instead of discounting product will ALWAYS be less costly and can be every bit as effective. You want loyal customers not price shoppers.
Improving open rates only would have changed their economics. They could have invested half the money to do the same amount of business.
I’ll be capturing more ways you can leverage your advertising and promotional spend to get HUGE returns on investment.
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