Why is email investment falling despite high returns?

Marketers continue to see email as a highly effective marketing channel, second only to search in delivering ROI, yet they are dropping their investment in the channel and potentially risking the revenue it brings back.

Marketers rate email highly for its return on investment (ROI), but with spend in the channel declining as a proportion of overall budgets, brands could do better to optimise its performance using the techniques and tools available to them.

Email marketing is second only to search engine optimisation (SEO) as a marketing channel that delivers ROI, according to the ninth email marketing industry census published by Econsultancy in partnership with Adestra.

The report surveys 1,000 marketers and supply side professionals looking at the amount and type of email marketing carried out by organisations, the way that email marketing is conducted and issues affecting the industry. It shows that over a fifth (22%) rate email’s ROI as excellent, compared to 27% for SEO and 18% for paid search, which rank first and third respectively.

However investment in this channel is decreasing, as almost two-fifths (39%) spend £5,000 or less per year on email marketing – the highest proportion of companies within this lowest budget bracket in the Econsultancy study’s history. In addition, email is assigned only 13% of the marketing budget on average, down from 16% a year ago.

The report shows the effect of the budget reductions as a loss of revenue derived from the channel. Organisations attributed an average of 20% of their total sales to email, down from 22% last year.

Organisations are also slightly more likely to assess their own performance in the email channel as ‘poor’, with 15% of client-side respondents giving themselves this rating, up from 12% in 2014.

Agency respondents were more positive on the performance of clients’ email campaigns as more than half (51%) rated email performance as ‘excellent’ (6%) or ‘good’ (45%), compared to 41% of responding companies rating email campaign performance as above average.

Econsultancy research analyst Bola Awoniyi argues: “Seeing as budgets are decreasing [marketers] need to attempt to be efficient. If they are in a position where they can send relevant emails they can get a return on their investment.”

However the report finds that marketers are not making use of the optimisation techniques available for brands to create relevant emails for customers.

Over three-quarters (76%) of company respondents use basic segmentation techniques, with 15% saying they will implement this in the future. In comparison just 21% are using advanced segmentation, with 44% hoping to implement this in the future.

Companies engaging in advanced segmentation are 16% more likely to perceive email marketing as an ‘excellent’ or ‘good’ method for delivering a return on investment than those who are doing basic segmentation.

Awoniyi says: “We know that when marketers segment their audiences and they are able to personalise and make emails more relevant, they can get a return while sending fewer emails, therefore spending less on the channel.”

Econsultancy’s study shows that in automation marketers are still finding their feet. More than half (54%) identify marketing automation as a technique they are not utilising in a satisfactory way, and when asked which areas they would like to focus on in 2015, the highest ranked option was automated campaigns at 29%.

In comparison, mobile is an area that is receiving close attention. The proportion of marketers optimising for these devices grew by 88% in 2014, and has increased again by 30% this year. The only other practice to see significant growth in adoption from last year is web-based behavioural targeting (20%), which has increased in use by 43%.

Views on the future of email are optimistic, although a surprisingly high 9% of organisations believe that email marketing will be redundant in five years. Three quarters (74%) say it will continue to be one of the highest channels for delivering ROI.

Furthermore, 84% see email as being fully integrated with other marketing channels within the next five years and 76% believe all email communications will be completely personalised.

However the report highlights barriers that need to be overcome. The quality of the email database continues to be the most common barrier to effective email marketing for over half (54%) of respondents.

“Until marketers get their act together this will continue to be the case – whether that is dealing with their legacy systems or incorporating new techniques to segment their audiences appropriately,” says Awoniyi.

A lack of strategy (46%), integration (43%) and segmentation (42%) are also listed as hindering email marketing efforts. According to Awoniyi, marketers that will benefit from email marketing’s potential are those that are prepared to invest, experiment and tie up data sets.

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Comments
  • carl 22 Apr 2015 at 10:26 am

    This research and commentary is very interesting. Although I agree with the data segmentation issue I have another, less technical, thought on why budgets are reducing for email and increasing for other channels
    .
    Email is not sexy.

    And for many marketers, it is not that interesting either.

    Humans have a tendency to rush to anything new and exciting, which of course mobile and other forms of digital are.

    The cynic in me does wonder what channels people would stick to if they were risking their own money as opposed to the funds of their employers.

    It’s just a thought.

    • Josep Riera 28 Apr 2015 at 10:28 am

      Very good point, I totally agree with you.

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