CMA Email Marketing Measurement Quick-Start Guide

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					                          Email Marketing Measurement
                                Quick-Start Guide
   A CMA ‘digital toolkit’ resource

   Why Email Marketing?
   Marketers have many media options and companies are
   looking for impact. Digital marketing is gaining momentum and
   budgets are shifting from mass advertising to digital media
   due to three reasons: high penetration of the internet,             This guide provides an
   significant usage/consumption and measurability. Email is           overview of various email
   recognized as one of the strongest and most reliable digital        marketing metrics. It
   messaging tactics. In some industry circles, there is a             presents seven levels for
   misperception that email marketing is old school. In reality,       measuring success – and
   email has the highest penetration of all the digital marketing      suggests how to approach
   tools. Recipients click (respond) to legitimate commercial          measurement depending on
   email messages.                                                     your organization’s level of
   According to a number of different polls, email marketing still
   ranks in the top three of marketing/communications (marcom)
   vehicles used by marketers (email is usually second in
                                                                       Also included are key
   popularity to paid search). Email marketing delivers quick          statistics, benchmarks and
   responsiveness and is measurable. Campaigns often                   FAQs to help you evaluate
   generate 5-7% click-through rates within 48 hours of message        your email marketing
   deployment.                                                         effectiveness.

   Given the low cost of email deployments, many marketers can justify email based on the factors of
   reach, targeting and efficiency. But best practices leaders go further…

   Email Formats
   Email marketing is a mature digital marketing tool and its roots come from both the publishing and
   direct marketing industries. Emails are delivered in two formats: a newsletter or an alert. An alert
   is a shorter message focused on one call to action (CTA). The alert message is often product
   related and contains some graphics to draw the eye to the key message. A newsletter is a mix of
   informational copy with some relevant product soft sell. Newsletters have more content and are

   It is best practice to code email messages in a multi-part format so they render in both HTML and
   plain text. The format in which they render depends on a how the message is being read by a
   recipient. Many email clients (Outlook, Gmail etc.) now default to “images off.” Therefore, only the
   text copy renders in an email message. In the ideal world, marketers prefer that their messages
   are read with graphics enabled because the images supplement the text and guide eye flow.
   Overall, HTML email messages have higher click-through metrics. On a mobile device, email
   messages are typically read in text format. However, many email campaigns have an optional link
   that renders the graphics for any smart phone’s mobile device.

Produced by CMA’s Digital Marketing Council
                                                                   Email Marketing Measurement Quick-Start Guide

  Email Tracking
  Email is an addressable digital medium and, therefore, easily trackable. Messages are sent to
  permission-based lists (each with a unique address) and are received on a computer or mobile
  device. Recipient engagement can be measured through opens of the HTML message or clicks
  on trackable links.

  Simple email campaigns are relatively easy to deploy and measure using basic “clickstream”
  metrics: bounces, opens and click-through. According to Marketing Sherpa, more than 70% of
  digital marketers today use an external Email Service Provider (ESP) to help them with email.
  Most email systems provide tabular data reports sorted by campaigns, as shown below.

  Technology Requirements
  Measuring email campaigns is relatively easy from a technology perspective. Every email
  message should have a unique transparent 1x1 pixel gif image embedded in the HTML code.
  When the message is opened in an email client (or preview pane), the transparent gif is activated
  and an open is counted. Note that email systems should only count unique opens.

  It is important to note that messages read in a text format will not activate/register an open. In
  addition, up to 30% of email clients have “images turned off,” so these opens will not be recorded.
  In both these scenarios, the actual message open rate for the campaign will be higher than
  reported on the interface.

  Most email systems allow the campaign manager to name each of the links (within an email
  message). These name/tags are then displayed in the campaign report along with the absolute
  number and percentage of clicks.

  The main report table typically includes the following metrics1:
               Messages sent                Total clicks
               Bounced                      Click through rate (CTR%)
               Bounce rate                  Unique clicks
               Delivered                    Unique click through rate (UCTR%)
               Opens                        Click through rate percent open (CTR%O)
               Open rate                    Unsubscribe rates
      Definitions provided in the glossary of the online version of the CMA Guide to Email Marketing

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                                                               Email Marketing Measurement Quick-Start Guide

  Note that marketers can drill down into all the absolute measures and see the individual
  “clickstream” data). Email measurement is transparent to recipients and does not negatively
  impact the user experience.

  On the contrary, clickstream data can be a goldmine and is highly useful for identifying the content
  that resonates most with each individual. Future offers and content can be matched using the
  historical clickstream data. Dynamic messaging technology leverages the clickstream data to
  create highly targeted and relevant messages.

  Most email systems also allow campaign managers to download tables in Excel or CSV formats.
  Using Excel, it’s easy to graph trends and analyze by type of campaign, but this takes time.

  Email measurement is done in real-time and it’s exciting to watch the metrics increase. It is not
  uncommon to see that 80% of results occur in the first 48 hours. Analysts should monitor the
  campaign right from the start to ensure opens and clicks are being tracked. In addition, the
  delivery manager should monitor complaint feedback loops and delivery alerts. If there is a high
  proportion of bounces, the delivery manager may need to reduce the deployment throttle speed or
  Internet Service Providers (ISPs) may block your messages (which will cause delivery problems).

  Campaigns can sometimes be paused if problems arise, but deployment servers typically send at
  high rates (over 100,000 messages per hour), so campaign managers need to be extra vigilant.

  What to Measure
  Email marketing creates a lot of data, but the trick is to focus on the metrics that match your
  business model. Digital marketers need to develop a plan for how email fits into the overall
  marketing activity. Then, they need to select and focus on the 2-3 key indicators for success.
  Functional teams in your organization will likely focus on different metrics.

  Overall, there are seven levels for measuring success of an email program. If you are just starting
  with email, focus on levels one to three. Levels four to seven are important, but need more time
  and expertise to configure and interpret.

     1. Campaign Metrics: Campaign metrics, such as open rates and CTR%, measure the
     performance of a campaign. Given that email is a direct marketing medium, marketers should
     quantify the campaign effectiveness. Did you achieve the primary objective outlined in the
     creative brief? What was the response rate and how many units did you sell? Email marketers
     who have a relational program should examine the proportion of clicks that are generated by
     different types of content. Are you generating a significant critical mass of clicks and are they
     with the most important content? Drilling into the click data indicates what content resonates
     most with subscribers.

     Remember email is a sensitive medium and marketers need to carefully balance operational
     factors (coding, deliverability) in addition to targeting, offer, creative and timing. The broader
     your reach (the less targeted), the smaller your open rates and CTR%. A typical response
     funnel can visually identify where to optimize.

     If you are just starting out with email, then you’ll need to initially monitor bounces and
     deliverability to make sure your messages are getting through. According to Return Path, on
     average, more than 20% of legitimate email messages end up in junk folders or missing.

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                                                                                Email Marketing Measurement Quick-Start Guide

     As a rule of thumb, open rates should be used only as a rough indicator of success and CTR%
     is the more important measure. CTR% measures response and it is a precise number. It is a
     simple metric that senior executives understand. It tells them what per cent of messages
     delivered, received a click. Canadian CTRs are found in the chart below.

                                                 Canadian Click Rates by Year
                               10%                     8.9%
                                        8.5%                             8.4%
                                7%                                              6.1%     6.4%
                                               5.3%            5.7%
                                6%                                                              4.8%
                                          2007           2008             2009            2010
                                                      Clicks     Unique Clicks
                           Source: Inbox Marketer, “Email Marketing Trends in Canada”, 2010
                           Note: Combined B2C and B2B Inbox client data

     Note that CTR varies by industry sector as well as by house vs. prospect files. The table below
     from Epsilon (U.S. data) illustrates this point.

                                                                 Non-             Open             Click    Click to
          Q3 2010 – North American Industry
                                                                Bounce            Rate             Rate    Open Rate
          Business Products and Services General                 94.6%            23.9%            3.7%     15.6%
          Business Publishing/Media General                      97.9%            16.7%            5.3%     31.7%
          Consumer Products (CPG)                                94.5%            15.8%            6.9%     43.5%
          Consumer Products Pharmaceutical                       90.4%            25.3%            7.4%     29.4%
          Consumer Publishing/Media General                      98.4%            14.8%            6.0%     40.7%
          Consumer Services General                              98.2%            18.2%            4.5%     24.9%
          Consumer Services Telecom                              94.3%            22.1%            5.8%     26.2%
          Financial Services Credit Cards/Banks                  94.8%            29.7%            4.4%     15.0%
          Financial Services General                             96.0%            30.7%            6.5%     21.1%
          Retail Apparel                                         98.0%            15.7%            4.7%     29.7%
          Retail General                                         95.6%            24.8%            7.1%     28.7%
          Retail Specialty                                       98.2%            19.9%            4.0%     19.9%
          Travel/Hospitality                                     96.2%            27.1%            5.0%     18.3%
         Source: Epsilon (U.S.), 2010
         Notes: Red indicates a decrease over the previous year; blue indicates an increase

     When analyzing creative, a useful metric is CTR as a percentage of open (CTR%O). CTR%O
     examines the response in a tighter view. While CTR looks at the response over the broader
     funnel from delivered to clicks, CTR%O measures response as a ratio of those messages
     opened. According to Inbox Marketer, the average CTR%O in Canada is 20%. This means
     that, of the recipients who opened an email message, 20% of them clicked somewhere on the
     message. It is worthy to note that companies with relational newsletters programs generate 40-
     55% CTR%O.

Produced by CMA’s Digital Marketing Council                                                                            4
                                                                       Email Marketing Measurement Quick-Start Guide

     2. Benchmark and Trend Analysis: As you get more experience with email marketing, you
     should be able to optimize your metrics. Disciplined email marketers outperform the industry
     and have positive trends (versus the general industry). Gap and trend analysis helps marketers
     identify their weaknesses and proactively optimize areas before fatigue and serious erosion
     occurs. According to Inbox Marketer data published in the CMA’s Marketing Facts, 2011, open
     rates range between 19.5% and 23.7%. Click-through rates range between 4.9% and 6.6% for
     North America.

     There can be significant differences between the performance of email alerts and email
     newsletters. Companies that adopt a relational approach tend to generate higher click-through
     rates. The following chart from Marketing Sherpa shows the pulling power of newsletters.

                                   Response Rates for Email Newsletters,
                                            by Target Market
                         25%               23%                                         B2C

                         20%                                                           B2B
                         15%                                     11%
                                                                                  4%     3%
                                Newsletter open rate    Newsletter click        Newsletter offer
                                (% of email actually   through rate (% of   conversion rate (% of
                                      opened)            emails clicked)    clicks accepting offer)

                       Source: Marketing Sherpa’s Email Marketing Benchmark Survey, 2009
                       Notes: Fielded July-August 2009, n=1,409

     3. Cost Per: All it takes to calculate cost efficiencies is a table of your campaigns and the
     related costs. Cost per email message deployed depends on the size of the list but is often well
     under $20CPM (including campaign management and other deployment fees) for those
     marketers with a list over 100,000 addresses.

     Marketers often find that a permission email (house file) is the most efficient targeting vehicle
     and that it delivers a click at low cost (relative to other digital media). Make it your goal to
     reduce the cost each year. Optimizing campaigns and overall programs is smart business.

     4. Web Analytics: Clicks only tell part of the engagement story and it is useful to tag your
     email campaigns and track them in a web analytics package. Tagging an email campaign
     shows you the depth of engagement after the click. One retail client of Inbox Marketer found
     that email customers typically clicked on five pages of the store’s website after each email
     campaign. The trick to web analytics is to carefully map the metrics to your plan. Focus on
     what matters and know what to ignore (beware of dashboard overload).

     5. Health of the Base (Community):
         • Size & Growth - Many marketers point to list size and house file growth as an indicator
            of success. Leading email programs have high penetration rates (of their total customer
            base) and great email programs grow quickly through referrals. Are you getting your fair
            share of penetration?

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                                                                       Email Marketing Measurement Quick-Start Guide

                Growing your permission email list to a critical mass provides cost efficiencies but
                remember that address quality is also important. There are often significant variances
                between different segments of your list. Measure the health of the segments.

           •    Activity - Experienced email marketers track campaigns into new, active and inactive
                segments. Email addresses eventually fatigue and you need to track the “new” cohort to
                ensure they are highly engaged and stay engaged as long as possible. In industry, it is
                not uncommon to have a list with 30%-40% inactives. To combat inactivity leading
                digital marketers identify which opt-ins are in danger of becoming inactive and then
                proactively target them with special messages. Targeting decliners is important
                because it takes a lot more effort to reactivate an “inactive”.

           •    Scoring Segments - Measuring “activity” is just a point in time. Some advanced digital
                marketers take it a step further and rank their house file based on engagement history.
                Scoring is a powerful direct marketing technique and can provide an insightful decile
                view of your base. Through automated “engagement scoring algorithms” marketers get
                a view of how deciles skew and their profiles.

           •    Satisfaction - Leading online marketers, such as Amazon, Jet Blue and Costco, use a
                simple survey technique called Net Promoter Score (NPS) to measure satisfaction &
                willingness to refer. The survey question typically reads: “On a scale of 1-10 with 10
                being high, how likely would you be to refer a friend to the Company x email program.”
                NPS provides a simple benchmark number (promoters minus the detractors) which can
                be used in longitudinal tracking. If you have a large email program, you may want a
                research company to conduct an independent survey of your email base.

     6. Return on Investment: The U.S. Direct Marketing Association (DMA) reported that email
     has a proven ROI of over 40 dollars for every dollar invested2, followed by Internet non-email
     marketing, such as Internet search at $21.90 and Internet display at $19.57; and non-catalog
     direct mail at $15.28.

     To measure ROI properly, marketers need to track the incremental margin that is attributable to
     the email activity. But for most marketers, measuring multichannel campaigns and isolating the
     impact of email is a tough exercise. According to the Ipsos Reid 2009 Study on Trends in
     Digital Marketing, only 26% of marketers agree with the statement that “measuring ROI in the
     digital space is easy to do.”

     Marketers need consolidated data from multiple sources and then need to isolate the
     incremental lift versus a baseline or control group. Rather than measuring a single campaign,
     marketers can get a good picture by measuring over a longer time frame (i.e. a one year time
     period). Measuring the net revenue (or margin) impact of your permission-base versus a non-
     email contact group provides a valuable internal benchmark.

     For those companies that have an E-commerce website, tracking email campaign ROI can be
     done easily within a web analytics package.

         DMA, Power of Direct Marketing, 2009-2010, conducted by Global Insight

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                                                              Email Marketing Measurement Quick-Start Guide

     7. Brand Impact: Traditional marketers with large budgets sometimes prefer to focus on the
     efficacy of email marketing relative to mass media. In mature industries, there can be a direct
     correlation to brand awareness gaps and net retail sales.

     The traditional measures for consumer brands are top of mind awareness and purchase intent.
     Leading consumer marketers survey their different segments and measure differences of their
     permission-base customers versus non email segments. Permission email should generate
     higher satisfaction and better awareness which translates to higher purchase intent.

     Remember email is a retention tool. The right email marketing program, can keep engagement
     high and prevent customers from defecting. Retention has a significant impact on profits.

  Email Marketing Measurement FAQs
  Q. What are the possible digital marketing tools that marketers use?
  A. Website, display advertising (banners), paid search/SEO, email marketing, social, online video,
  mobile, blogs, gaming.

  Q. Measuring email marketing sounds like a lot of effort. Why should I bother?
  A. Email measurement is actually simple to set-up and there is a lot of campaign and subscriber
  data at your fingertips. Optimizing campaigns will save your company money and generate more
  revenue. Given the low cost of email campaigns, ROI is often high.

  Q. Is email measurement real-time?
  A. Yes. As soon as an email is sent it is trackable. Most email systems track in real time.

  Q. What is the difference between delivery and deliverability?
  A. Delivery is calculated by subtracting the number of bounced messages from the sent
  messages. The delivered rate is the number of messages that are “accepted”. With ISP filters,
  messages can be automatically filtered to junk folders and some are unaccounted for (and are
  labeled “missing”). Deliverability is a quality assurance metric. Deliverability tools like Return Path
  have a sample seed list of worldwide email accounts and track the proportion that go to
  inbox/junk/missing. This third party monitoring highlights deliverability issues for a specific
  campaign. It provides a weighted average percentage of what messages in the test went straight
  to the inbox (called inbox placement rate). The actual deliverability rate will depend on the
  breakdown of the domains on the list.

  Q. What one metric should we measure?
  A. It depends on your business model and overall objective. Total clicks and CTR% are an
  excellent indicator of customer engagement.

  Q. Are open rates a useful metric?
  A. Open rates (OR) are an imprecise metric and only provide a rough measure of how many
  recipients view your message. OR is measured through the auto insertion of a transparent gif
  which is activated by any recipient opening an email or viewing it in the preview pane. Just
  because someone activated the pixel doesn't mean they read the entire email. Email technology
  systems increasingly turn off images so ORs vary considerably. Email leaders track their open
  rate trends and worry less about the absolute number.

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                                                             Email Marketing Measurement Quick-Start Guide

  Q. Where do I find email benchmarks?
  A.There are many sources on the Internet, including Marketing Sherpa, Mailer Mailer and the
  Email Experience Council. Always check the survey audience for relevancy to your company as
  some sources are biased. Inbox Marketer publishes Canadian email metrics annually in the
  Canadian Marketing Association’s Marketing Facts publication.

  Q. What are the cost efficiency deployment metrics for my industry?
  A. For marketers with large lists, the cost to deploy is less than a penny per message. When you
  factor in creative and agency fees, the cost of the campaign can increase. The total cost per
  message depends on the size of your list. Creative costs can be amortized with larger lists. The
  final cost of an email campaign depends on the amount of copywriting, level of design, coding and
  in-house management. Even with all these costs, email still should be pennies per message.

  Q. How does the cost efficiency per click in email compare to other online vehicles?
  A. Remember that email is mostly used for retention and cross-sell, so it is not always fair to
  compare it to acquisition vehicles. Digital marketing benchmarks from the U.S. DMA show that the
  average cost per click for paid search (which is highly targeted) is $1.50 (with an average
  conversion rate of 3.6%). Internet display ads average $1.80 cost per click (0.38% CTR).
  Statistics from Inbox Marketer show cost per click for email house lists is often below $0.50
  (based on an average 6% CTR).

  Q. My ROI metrics for email campaigns seem very high. To senior executives, that may be
  unbelievable. What should I do?
  A. Make sure your ROI formula matches the formula/methodology used to calculate direct mail
  campaigns. Some marketers over inflate their metrics by measuring revenue (should be margin)
  and forget to measure the incremental lift (versus a control group or baseline). You can also
  reference other research studies on ROI, but if it’s too high, direct executives to other indicators
  that also point to success.

  Suggested Reading
       CMA Guide to Email Marketing (incl. Glossary)
      “Email Marketing Trends in Canada”, 2010 Inbox Marketer Whitepaper

   Industry Resources
      Marketing Sherpa
      Mailer Mailer
      Email Experience Council (email marketing arm of the U.S. Direct Marketing Association

  Special thanks to Geoff Linton, Vice President, Inbox Marketer, for preparing this guide on behalf
  of the CMA.

  If you have any comments, suggested updates or information gaps to report in this or any of the
  other CMA Quick-Start Guides, please contact us with your feedback at:

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