E-mail Tops in ROI

THOUGH THE MONEY MARKETERS spend on it is a pittance compared with other channels, e-mail delivers the highest return on investment by a wide margin, according to the Direct Marketing Association.

E-mail returned a whopping $57.25 for every dollar spent on it in 2005, the DMA reported in its Power of Direct economic impact study released last month. In contrast, print catalogs generated $7.09 and non-e-mail Internet marketing produced $22.52.

“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, corporate vice president of list firm Worldata.

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

U.S. firms spent $300 million on e-mail in 2005, and that number is expected to rise by 24.4% to $400 million this year, according to the DMA. But they put $18.9 billion into print catalogs in 2005, and that reportedly will increase by 5.7% to $20 billion this year.

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 in 2007 and $41.05 in 2011.

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

Like e-mail, the ROI from non-e-mail Internet marketing is expected to fall off, but not as dramatically. According to the DMA it will hit $21.08 in 2006, $20.59 in 2007 and $20.22 in 2011.

Given e-mail ROI's current downward trajectory it wouldn't be wise to eliminate print catalogs or any other channel in favor of e-mail, Schwedelson warned. “I wouldn't kill any of my efforts,” he said.

Meanwhile, e-mail driven sales in the United States will show a compound annual growth rate of 14.9% between 2006 and 2011.

Commercial e-mail generated $16.5 billion in U.S. sales in 2005, and that figure should climb to $18.5 billion in 2006 and $37 billion by 2011, the DMA stated.

By comparison, U.S. direct marketing-driven sales hit $1.806 trillion in 2005, and that will increase to $1.939 trillion in 2006 and $2.627 trillion in 2011. Overall, DM sales will show a compound annual growth rate of 6.3% between 2006 and 2011.

Meanwhile, non-e-mail Internet-driven sales reached $275.3 billion in 2005, and will hit $338.9 billion in 2006 and $705.4 billion in 2011, the DMA added.

E-mail drove $7.7 billion in consumer sales and $8.8 billion in business-to-business sales in 2005. Both those numbers will rise by roughly $1 billion in 2006, and by 2011 should be well above $37 billion combined.

And the split in non-e-mail Internet marketing? According to the DMA, it stimulated $129.9 billion in consumer sales and $145.4 billion in B-to-B sales in 2005. And by 2011, the gross will be $353 billion in consumer sales and $352.5 for B-to-B.

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

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 messages that do not comply with the federal Can Spam Act.