E-mail ROI Crushes Other Channels … For Now

Though the money marketers spend on it is a pittance compared to other channels, e-mail delivers the highest return on investment by an eye-popping margin, according to the Direct Marketing Association.

E-mail returned a whopping $57.25 for every dollar spent on it in 2005, according to the DMA’s Power of Direct economic-impact study released last week. This compares to $7.09 for every dollar spent on print catalogs and $22.52 for every dollar spent on non-e-mail Internet marketing.

“What this says is that e-mail is a highly profitable means of communicating, much more so than a catalog, or any other form of communicating with your customers,” said Jay Schwedelson, e-mail expert and corporate vice president of list firm Worldata.

Marketers are expected to sink significantly more into e-mail this year. However, the channel’s share of the average CMO’s budget is still barely a rounding error.

Marketers in the U.S. spent $300 million on e-mail in 2005 and are expected to spend $400 million on e-mail in 2006, an increase of 24.4%, according to the DMA. For comparison, marketers spent $18.9 billion on print catalogs in 2005, and are expected to spend $20 billion in 2006, an increase of 5.7%, according to the DMA.

However, the bad news is that e-mail’s ROI is dropping, and headed downward for the foreseeable future.

E-mail is projected to return $51.45 for every dollar spent in 2006, $48.29 for every dollar spent in 2007, and $41.05 for every dollar spent in 2011.

In contrast, print catalogs are expected to return $7.20 for every dollar spent in 2006, $7.24 in 2007 and $7.28 in 2011, according to the DMA.

Like e-mail, the ROI from non-e-mail Internet marketing is expected to drop, but not as dramatically. The ROI for every dollar spent on non-e-mail Internet marketing is expected to be $21.08 in 2006, $20.59 in 2007 and $20.22 in 2011, according to the DMA.

As a result, Schwedelson warned, given e-mail ROI’s current downward trajectory it wouldn’t be wise to consider killing print catalogs or any other channel in favor of e-mail.

“I wouldn’t kill any of my efforts,” he said.

Meanwhile, e-mail driven sales in the U.S. will show a compound annual growth of 14.9% between 2006 and 2011, according to the DMA.

Commercial e-mail generated $16.5 billion in U.S. sales in 2005, according to the DMA. The organization projects e-mail sales to grow to $18.5 billion in 2006 and $37 billion by 2011.

For comparison, overall direct marketing-driven sales in the U.S. were $1.806 <ital>trillion<I> in 2005, according to the DMA The organization projects overall direct-marketing-driven sales to be $1.939 trillion in 2006 and $2.627 trillion in 2011. Overall direct marketing sales will show a compound annual growth rate of 6.3% between 2006 and 2011.

Meanwhile, non-email Internet-driven sales were $275.3 billion in 2005, according to the DMA. The group predicts non-e-mail Internet driven sales will be $338.9 billion in 2006, and $705.4 billion in 2011.

As for consumer versus business-to-business marketing, the DMA said e-mail drove $7.7 billion in consumer sales and $8.8 billion in business-to-business sales in 2005. The organization predicts e-mail will drive $8.7 billion in consumer sales and $9.8 billion in business-to-business sales in 2006, and $18.4 billion in consumer sales and $18.6 billion in business-to-business sales in 2011.

Also according to the DMA, non-e-mail Internet marketing generated $129.9 billion in consumer sales and $145.4 billion in b-to-b sales in 2005. The organization projects non-e-mail Internet marketing will account for $160.9 billion in consumer sales and $178 billion in b-to-b sales in 2006, and $353 billion in consumer sales and $352.5 in b-to-b sales in 2011.

Non-e-mail Internet marketing-driven sales will clock a compound annual growth rate of $15.8% from 2006 to 2011, according to the DMA.

The DMA’s definition of commercial e-mail includes all e-mail designed to immediately sell a product or service, identify a lead, generate a retail purchase or solicit contributions. It excludes all e-mail not compliant with the federal Can-Spam act.