The Direct Marketing Association s (DMA) Power of Direct

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1 Deliverability and the Marketer s ROI The connection between deliverability and marketing effectiveness by Dave Lewis The Direct Marketing Association s (DMA) Power of Direct study has consistently shown that remains the workhorse of the industry, outperforming other channels by a healthy margin. In 2009, the DMA estimated that commercial returned $43.62 for every dollar spent. Search advertising, with the second highest ROI, brought in just half that, and other channels performed at even lower levels. Given its strong usage and continued growth, it s obvious that companies recognize the remarkable revenue potential of commercial . Equally obvious is that marketers know that achieving good deliverability on their campaigns is important to realizing that potential. No one contests deliverability s bottom line impact after all, it s the starting point for any ROI calculation on program effectiveness. Simply put, if your s don t reach recipients, they can t be opened, clicked or converted into sales, so you have no ROI. marketers

2 apparently recognize this central truth because in successive industry surveys they ve ranked deliverability as a top concern. Given all this, what s puzzling is why deliverability prompts an eye-rolling reaction amongst marketers whenever the topic is brought up. More importantly, why should it remain as a top concern when the fundamentals of deliverability have been well known for years? And why does at least 20 percent of from legitimate companies, as estimated by Return Path, still go undelivered? The answers to these questions play directly in to the marketer s true understanding of deliverability, its impact on ROI, and what attitudinal changes need to occur for marketers to overcome their deliverability challenges and realize the potential of for their companies in posting higher ROI results. Imagine what the DMA s stat would be without the 20 percent+ penalty imposed by faulty deliverability $52.34 or more for each dollar spent? Remember, we re talking averages here, both in terms of ROI and undelivered . That means that some companies those that have figured out the true nature of deliverability, know and apply its fundamentals perform much better than those averages, and sadly, others perform much worse. As a point of reference, I see some companies routinely post delivery rates in the mid-90s or higher, while others struggle to break the 60 percent or 70 percent mark. These delivery-rate swings not only translate into huge differences between what some marketers can deliver to their company s bottom line versus others, but puts them at tremendous advantage or disadvantage in their use of marketing in the marketplace. What Is Your Deliverability Rate? This is the first question to ask because in demonstrating the importance of deliverability to ROI, you must know where you re at now. Like any question in direct marketing, the answer is in the numbers. The formulas for connecting deliverability to ROI are pretty straightforward: Step 1: Determine Revenue per Delivered Click Rate x Conversion Rate x Average Order Size = Revenue/ Delivered

3 Your monetary investment relates to the technology platforms you re using to send and how they re deployed across the enterprise (insourced, outsourced or combination). Step 2: Calculate Revenue per Delivery Rate Point s Sent/Year x Revenue/Delivered x 1% = Revenue/ Delivery Point Step 3: Estimate Revenue Gain with Improved Delivery Estimated Delivery Point Gain x Revenue/ Delivered x Revenue/Delivery Point = Total Revenue Gain Note: In estimating your revenue gain, be aware that not all systems or providers calculate delivery rates the same; see the sidebar below for additional information. Your potential gain may be greater than you think. Do the math and the ROI potential of improved deliverability what s currently your opportunity loss becomes obvious, even eye-popping. Using a simplistic example of a 6 percent average click rate, 3 percent conversion and $100 average order size, your revenue per delivered would be $0.18. If your annual volume is 24 million (2 million/month), a single delivery rate point gain would deliver $43,200 in incremental revenue to your bottom line; $216,000 at 5 points. And those gains don t count revenue that might be delivered through in-store or other channel activity prompted by your . Nor do they reflect the customer experience gains to be had when your transactional or highly desired offers, such as daily deals, are more reliably delivered. Deliverability ROI Fundamentals An improved ROI doesn t just happen. It takes an understanding of the landscape, planning and, most important, intelligent, disciplined and targeted action. Here are a few pointers: KNOW YOUR METRICS. Knowing your metrics starts with understanding how they re calculated. You d think that core metrics, such as delivery (acceptance), open and click rates would be calculated in a standard way by all IT groups and service providers, but you d be wrong as the DMA s Experience Council (EEC) discovered several years ago. Make sure your crucial business decisions are based on reliable data by educating yourself on what your metrics mean and how they should be calculated. Review the S.A.M.E. (Support Adoption of Metrics for ) report at experience.org and look

4 for service providers who display the seal indicating that their metrics conform to these standards. MANAGE YOUR METRICS. Segregate your mail streams by business unit and type of mail so the results of one don t adversely affect another, and you can cleanly see the performance of each. Establish trend lines for each mail stream, and seek to isolate and address the causes for deliverability differences, such as targeting criteria, content, list management and other practices. Examine your delivery results on each mailing and drilldown into meaningful positive or negative variations from your trend line to replicate or avoid those results in the future. In short, treat deliverability as you do other aspects of direct marketing: Make it a cumulative learning experience and get progressively better at it. MINE YOUR METRICS. Understand the correlations between your practices (marketing and technical) and deliverability results. Normalize and organize your delivery failure data into actionable categories and set up rules for taking action. For example, hard bounces, such unknown user reasons, are particularly toxic to your deliverability and reputation and you ll want to remove them from your list as soon as possible. But don t stop there; find out how they got on your list in the first place. Often such data points directly to deficiencies in data capture, partner programs or list hygiene that you ll want to address, too. Apply the same discipline to discovering other correlations, such as blocks to spam complaints, and spam complaints to content appropriateness, targeting criteria or levels of customer engagement. Net/net: Mine your metrics to improve your marketing effectiveness and an improved ROI will follow. ENABLE YOUR METRICS. You don t score points with good intentions. Your knowledge of marketing and technical best practices won t produce the desired results if you can t enable them in your technology platform. And increasingly, messaging technology is the enabler of those who excel at marketing. Unfortunately, many marketers are saddled with platforms ill equipped for today s environment one that s becoming more sophisticated and complex, especially as converges with other channels like SMS, instant message and social media. Yes,

5 it s important to segregate your mail streams and set up rules for how you ll respond to certain deliverability conditions, but it s no longer sufficient to take action after-the-fact once the damage to your deliverability and reputation has already been done. Today s standard is to proactively apply your rules on the fly as conditions, such as blocks, bounces or complaints, are encountered during the send process itself. This adaptive approach to managing deliverability is a technological advancement that can prevent such damage and save you time, resources and untold hassle in recovering from deliverability train wrecks when mistakes happen. So as you assess your deliverability game plan, make sure your messaging technology can deliver on it and scale to your future needs as the channel evolves. Looking Beyond the Return Of course, this is simply looking at the Return side of your ROI calculation. While this may be a strong monetary motivation to do something about improving your deliverability, the Investment side can t be ignored. In fact, how you regard the investments you re currently making (and those you ll need to make) will likely dictate your success. I see two forms of investment: monetary and non-monetary. Your monetary investment relates to the technology platforms you re using to send and how they re deployed across the enterprise (insourced, outsourced or combination). It also relates to what you ve committed to managing deliverability. Your non-monetary investment relates to how you re operating or should principally the marketing and technical practices surrounding your use of . There s undeniable interplay between these components because you can t apply some of the best practices required to lift deliverability or achieve optimal resource efficiency in managing it without the right technology platform that s becoming increasingly evident as marketing and deliverability management grow in sophistication and complexity, and itself converges with other online channels. Yet all of this from a recognition of s unrealized potential through improved deliverability to the decision and plan to recoup that potential by realigning investments in is predicated on your understanding of the numbers and what drives them. But therein lies the rub. By in large, marketers don t pay sufficient attention to their deliverability stats and know less about what drives them. As a

6 consequence, marketers are caught on a deliverability treadmill; they see and complain about the symptoms of poor delivery (bounces, blocks, bad placement, reputation issues) yet don t delve into the underlying causes that, if rectified, would enable them to improve the effectiveness of their programs, post a higher ROI and sustain those gains. Instead, they pursue quick fixes and half-measures destined to throw them back on the treadmill even if able to temporarily escape it As a veteran of this space and a marketer myself, I can appreciate (though not excuse) the reasons for this being the case. Many of the reasons have to do with the nature of marketing and deliverability management, how they ve evolved and the way marketers see their role. Nonetheless, these reasons are part of the attitudinal shift that must occur if companies are to maximize their deliverability and ROI potential from . The Reasons for Inattention Reason No. 1: It s not my job. This reason directly relates to how both marketing and deliverability have evolved, and consequently, how many marketers see their job responsibilities. marketing had its origins on the technology side of the house independent of the more quantitative approach and expansive view of marketing afforded by the direct marketing discipline. Undeniably, there s been some crossover of seasoned direct marketers since, but the impact of its origins persists in marketing to this day. There simply isn t the same emphasis on the numbers that s evident in direct mail. Nor is there the same end-to-end view of how marketing, as well as technical practices, impact business results. marketers too frequently defer to IT or their delivery specialists on matters they should better understand. No question that things like configuration of mail servers, adherence to domain-specific rules, etc. should be left to the experts. But there are many aspects of marketing such as segregation of mail streams, domain/sub-domain strategy and authentication, bounce and reputation management where marketers should more actively engage, directly tie into how the brand, list and customer relationship are managed. Lastly, too often a job in marketing is viewed as an entry point into a marketing career, so the expertise needed to do it well isn t as highly valued as it should be, and many skilled practitioners move out of the field. All of these factors are in sharp contrast to the importance that has assumed in the marketing mix, and what companies must do to realize its potential.

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