Arthur Middleton HughesThe Database Marketing Institute

May 3, 2011

May 3, 2011

It is the profit you will receive from your opt-in e-mail subscribers over a three year period

It varies from company to company, depending on the product and the effectiveness of their e-mails.

Monthly e-mail Program Effectiveness Calculator Typical (actual) Retailer

Relevance Score 0.7 R1 Off-E-Mail Multiplier 5.0 R2

A. Costs of Service E. Opens and Conversions

E-Dialog e-mail Expenses $37,950 A1 Open Rate (HTML) % of Delivered 19.62% E1

Internal e-mail Expenses $12,500 A2 Unique Clicks as % of Opens 11.61% E2

Total e-mail Expenses in Month $50,450 A3 This month unique buyers 8,288 E3

New Subscriber Acquisition Spending $120 A4 E-mail conversions % of Unique Clicks 1.27% E4

B. e-mails Sent Unique Buyers % of Mailable Addresses 0.19% E5

Campaigns in Month 75.00 B1 Annual % Unsubscribers 4.60% E7Total e-mails Sent 29,850,662 B2 Annual % Undeliverables 19.32% E8Total e-mails Delivered 29,454,352 B3 F. Clicks

Delivery Rate 98.67% B4 Total Clicks 944,826 F1

C. Monthly List Growth Measures % Conversions per delivered e-mail 0.029% F2

Deliverable subscribers in month 4,330,913 C1 Total Unique Clicks 670,838 F3

Gained in Month 202,000 C2 Unique Clicks as % of Subscribers 15.490% F4

Unsubscribed in Month 16,598 C3 G. Value and Costs

Perm. Undeliverable in Month 69,729 C4 Average Order Value $151.49 G1

Apparent Change in Subscribers in month 115,673 C5 Cost of goods sold plus overhead % 40.00% G2

Average e-mails per subscriber per month 6.80 C6 H. Return on Investment and Costs

D. This Month's Results e-mail Spending This Month $50,570 H1

e-mails Delivered 29,454,352 D1 ROI per $1 spent on e-mails $91.02 H2

e-mails Delivered per Campaign 392,725 D2 Cost per Delivered e-mail $0.002 H3

HTML e-mails Opened 5,778,737 D3 Cost per Opened e-mail $0.009 H4

Unique Clicks 670,838 D4 Cost per Unique Click $0.075 H5

Total Email Conversions 8,533 D5 Cost per e-mail Conversion $5.926 H6

Total revenue from email conversions $1,292,652 D6 E-mail Conversions per campaign 114 H7

Total offline revenue due to emails $6,463,260 D7 Cost Per Campaign $674 H8

Total Email Induced Revenue $7,755,912 D8 Online Revenue per Delivered $0.263 H9

Cost of goods sold plus overhead $3,102,365 D9 Annual Revenue per Active Sub. $1.79 H10Total e-mail costs in month $50,570 D10 Monthly Profit per Active Sub $1.06 H11Net Profit from e-mail Operations $4,602,977 D11 Value of an Opt-In e-mail Address $27.42 H12

E-mails can sell directly in shopping carts. They also get people to go to a mall, or pick

up the phone to order. For every sale in the e-mail, there are

1,2,3,4 or more sales that result from the e-mail.

E-mails are like TV ads. They get people to do something which is hard to measure.

The e-mail produced 79% of its sales in the store and only 21% onlineThe multiplier is 3.76Multipliers vary from 0 (no sales beyond the shopping cart) to 6 or more.

Grand Total CountResponse

Rate

Average Order Value

Dollars per

name mailed

% sales in store

% sales online

Direct mail and e-mail 35,000 25% $71.71 $17.67 79% 21%Direct mail only 35,000 24% $68.62 $16.39 83% 17%E-mail only 35,000 23% $67.82 $15.71 79% 21%

Note: each of these 4,330,913 subscribers is worth $27.18 in 3 year profit.

Even though most of them will leave, and most will buy nothing.

Retailer LTV Rates 2011 2012 2013

Subscribers 4,330,913 3,137,671 2,387,140Unsubscribes 4.60% 199,222 144,333 109,808 Undeliverables 19.32% 994,020 606,198 461,195 E-mails Delivered 81.60 353,402,501 256,033,954 194,790,632 Opened 19.62% 69,337,571 50,233,862 38,217,922 Unique Clicks 11.61% 8,050,092 5,832,151 4,437,101 Online sales due to e-mails 1.27% 102,236 74,068 56,351 Off Line Sales due to emails 5.00 511,181 370,342 281,756 Total sales due to e-mails 613,417 444,410 338,107 Total e-mail induced revenue $151.49 $92,926,542 $67,323,661 $51,219,841

Marginal cost of goods sold by e-mail 40% $37,170,617 $26,929,464 $20,487,936Cost of acquiring new subscribers $0.10 $433,091E-mail Cost CPM $1.50 $455,400 $384,051 $292,186Total Costs $38,059,108 $27,313,515 $20,780,122

Profit $54,867,434 $40,010,145 $30,439,719Discount Rate 1 1.1 1.15NPV Profit $54,867,434 $36,372,860 $26,469,321Cumlulative NPV $54,867,434 $91,240,294 $117,709,614Subscriber Lifetime Value $12.67 $21.07 $27.18

Use it to justify your e-mail marketing budget

Use it to determine the value of your unsubscribers – so you can work to keep them.

Use it to justify a subscriber acquisition program

Use it to justify scores of new e-mail strategies,

Retailer Subscriber Acquisition Plan

Number of Added Subscrib

ers Cost Each

Budget for

Program

Value of Subscribers

Added

Additional sales through higher open rates

Total Client Added Revenue

LTV for this

program1 Contest for subscribers 800,000 $0.04 $30,000 $21,743,150 $100,000 $21,843,150 $27.182 ECOA 50,000 $0.40 $20,000 $1,358,947 $0 $1,358,947 $27.183 eappend 100,000 $0.40 $40,000 $2,717,894 $0 $2,717,894 $27.184 Employee Contest 100,000 $0.30 $30,000 $2,717,894 $0 $2,717,894 $27.185 Popover on website 40,000 $0.25 $10,000 $1,087,158 $0 $1,087,158 $27.186 Signup in Store 200,000 $0.25 $50,000 $5,435,788 $50,000 $5,485,788 $27.187 Cash Register Receipts 30,000 $0.50 $15,000 $815,368 $0 $815,368 $27.18

Total 1,320,000 $0.15 $195,000 $35,876,198 $150,000 $36,026,198

E-mail account teams are busy sending out e-mails. They don’t have time for much else.

To get them to focus on the uses of LTV is not easy

For three years, I trained 46 teams serving 213 clients.

Results: in 2010 acquisition programs brought in 75,928,572 new subscribers that generated $477,970,361 in annual profits.

# Acquisition Tactic Diffi

culty

# Acquisition Tactic Diffi

culty

Basic Steps -- Getting Started Locate New Subscribers1 Score and improve your website for sign-ups 1 19 Append e-mails to customer postal records 12 Determine your Subscriber Lifetime Value 2 20 Put e-mail signup reminders in product packages 23 Develop an acquisition Plan 3 21 Ask for e-mails in TV, Print Ads etc. 1 Enhance the Registration Process 22 Use search engine optimization to boost e-mails 44 Reward Subscribers for signing up 3 23 Print e-mail invitations on cash register receipts 45 Provide contests for subscribers 4 24 Buy e-mail lists 46 Provide special prices for subscribers 4 25 Use viral marketing such as forward to a friend 37 Reward employees for getting registrations 1 26 Use social media to build your subscriber base 48 Have employee contests to boost registration 3 27 Use surveys to generate e-mail subscriptions 29 Train employees to ask for e-mails 1 28 Use co-registration to boost subscriptions 5

10 Capture e-mails at retail locations 4 29 Use Smart PR to build your subscriber base 511 Capture e-mails at catalog locations 3 KeepYour Existing Subscribers12 Send rapid welcome e-mails 1 30 Make e-mails relevant 313 Offer subscribers birthday and anniversary gifts 3 31 Feature interactive contests and games in e-mails 314 Sign up subscribers in transaction e-mails 2 32 Keep subscribers using a loyalty program 415 Use popovers to boost subscriptions 2 33 Build relationships using preferences and profiles 316 Use mobile as an acquisition channel 4 34 Make sure your e-mail gets delivered 317 Use testimonials to spur registration 6 35 Ask why they unsubscribe 118 Use cookies to recognize subscribers 1 36 Make it easy to change your e-mail address 1

37 Use ECOA on all undeliverables 438 Send direct mail to undeliverables 5

One clothing retailer with 900 stores scattered these terminals inside his stores with compelling signage.

To enter your e-mail, slide your credit card through these terminals, and a keyboard appears. You enter your e-mail.

He got 300,000 new e-mails per month!

They were worth $8.26 each.

LTV justified the costs for the system.

They boost not only acquisition, but also the open rate.

Ratings and reviews Abandoned shopping cart Building a marketing database Transactions and Triggers Social and mobile marketing Analytics and Modeling Loyalty Programs Interactivity: links and clicks

LTV gives you POWER

Calculate LTV. Determine your off-e-

mail multiplier. Use LTV to assure you

are spending enough on e-mail marketing.

Empower your e-mail teams.

Grow your profits.

Arthur.hughes@dbmarketing.comwww.dbmarketing.com