Lessons for B2B Marketers from the DMA Study on Email, Direct Mail and Search Marketing ROI

The Study…

The Direct Marketing Association recently published an update to their annual study - The Power of Direct Marketing: ROI, Sales, Expenditures and Employment in the U.S. (2009 -2010 edition).  The results of the study compiled for DMA by author Global Insight indicate the following:

Email has the best ROI over other marketing channels at $43.62 per dollar spent.  However, the top ROI position held by email has dropped slightly from $44.93 in 2008, and the author expects it to slip to $42.08 in 2010.   

Internet Search Advertising had the second highest ROI at $21.85 per dollar spent.

Direct Mail (non-catalog) returned $15.22 for every dollar spent.

These results are not very surprising when you look at the costs for marketers to implement campaigns and programs in these channels.  Email is by far the least costly and it employs many fewer people than either the direct mail or search advertising industries.  

Marketers spent $600 million on email in 2009 and are expected to spend $700 million in this category for 2010.  By contrast, overall spending for direct mail was $44.4 billion (down from $56 billion in 2008) and is expected to increase to $45.5 billion in 2010.  Internet search racked up $11.2 billion in spending during 2009, and are expected to increase this to $12.2 billion in 2010.

In addition, the study reveals the sales potential for various channels.  Commercial email resulted in $26 billion in sales, down a bit from $26.4 billion in 2008, and is projected to reach $27.9 billion in 2010.  Internet search, by comparison, was attributed to $243.9 billion in sales during 2009, and is expected to grow to $266.3 billion in 2010. 

While email delivers the best ROI, this study indicates that it does not have a proportional impact on sales and, in fact, email results in the lowest sales of any channel, except for social media ($14.3 billion in 2009) and mobile marketing ($2.1 billion in 2009). 

Since email never became the great prospecting medium that it was expected to be a decade ago, it may not be surprising that email appears to drive fewer sales than most other marketing channels, according to this study.

…And What It Means

I believe the study’s conclusion may be a bit short-sighted, at least for B2B marketers.  Email is still a great prospecting medium; however it is NOT necessarily a great lead generator.  Other channels have proven to be far more effective in creating leads.  For “prospecting,” which I define as the development of a sales opportunity, not lead acquisition, I believe email is the single most important medium.  It is the only way, outside of personal selling, that a significant one-to-one marketing initiative can be conducted and a relationship formed.  And, if the prospect has opted-in via some form of registration or other interaction with a company, a continued dialog is very likely to occur. 

The ultimate goal is to nurture the prospect along his/her buying cycle, so that when the time comes to purchase a product or service, the host marketer is in a good position with the prospect.  This is accomplished by providing assistance to the prospect in his/her quest for information, evaluation criteria, etc., throughout the buying process.  It’s done through multiple touch points over a long period of time, in some cases up to two years.  And it can be integrated with other channels (direct mail, telemarketing, events, etc.) to make the prospect’s experience deeper and more memorable.

After thirty years of practicing marketing communications, I realize our industry has never had as powerful a tool for one-on-one marketing as we now have with email.  And, as reported by the DMA study, it’s also the most cost-effective channel to use, with the greatest ROI.

I believe that email can have a much more significant role in generating sales if it’s used for nurturing leads through to conversion.  However, many companies haven’t been able to connect their lead nurturing programs to their CRM to systems, which breaks the ROI metric linkage.  Until we do this, we won’t really be able to measure the sales that are generated by lead nurturing.  However, industry research, case studies and best practice information all point to lead nurturing via email as one channel that holds a great deal of promise for the generation of sales.  After all, if 80% of leads are not ready to buy until nurtured to conversion (Gartner study), then we’re leaving the pot of gold on the table without e-nurturing, aren’t we?