I was speaking at a conference on marketing analytics right before the holidays and one of the big questions that marketers threw their hands up on, was the cost of an unsubscribe. Most marketers just assume this is the cost of doing business. Others realize that there is some value there but don’t know how to capture and measure how their marketing causes unsubscribes that might have a potential future value for the company.
Unless unsubscribes are considered in the ROI calculation the marketer may be under or over estimating the true ROI of their marketing efforts.
How do unsubscribes influence marketing ROI
Unsubscribes are caused in a number of ways:
- A prospect changes job
- The prospect simply isn’t a prospect
- The prospect just gets tired of receiving innumerable emails from your company
There are probably more, but just using these as a guide, we can start to determine how to tackle this critical marketing effectiveness question.
Sometimes we’ve found that when a person changes jobs, an administrator will actually actively unsubscribe from various emails as they receive emails looking for potential valuable emails sent to an employee no longer employed at the company. The good news is that these are relatively few. If it were possible in the unsubscribe process, the email originator, could then ask for the email of the replacement and then potentially begin marketing to that individual.
For prospects that simply aren’t prospects, as might be the case when email addresses are gathered through purchased lists or other reasons, the marketer can again ask for a potential referral to the right person during the unsubscribe process.
In the last case the marketer has spammed their potential prospect once too often and once that happens it may be difficult to ever be able to send a marketing email to this individual again. Yet when this person entered the list, they were a potential customer for the marketers’ services. So, what does this mean in terms of potential lost future revenue?
If the marketer could better segment their email list, then let’s assume that their unsubscribe rate could be reduced by 50%.
If the unsubscribers are just as likely to purchase as those still on the list and if the marketers’ unsubscribe rate is 1% per drop using an unsegmented list and, then if an email is sent every month, the incremental cost of not segmenting is:
1 - (1-1% * 50%) to the power of 12 =~ 6%.
Thus for an unsegmented list receiving a monthly email the additional cost of the unsubscribes is 6% higher than otherwise (assuming the cost of distribution to be zero).
If the unsubscribe rate is 2% per drop, the cost escalates to 11%.
If the frequency of the email drop is instead weekly, these incremental costs grow to 12% and 23% respectively.
The actual calculation is much more complex, but my primary point is that the cost of segmentation is non-zero.
If you would like to understand further how this calculation can be made in full, drop me a line. I would love to hear from you.
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