Gauging ROI on Retail Email Marketing: A Complex Puzzle

Many retailers understand that there are significant trade-offs involved when trying to optimize email marketing return on investment. Within the direct channel, the goal of an email marketing message is to get customers to act now. Within retail, the goal is to encourage customers to get into their cars, drive to stores and purchase merchandise. For multichannel retailers, the message must somehow be calibrated to do both.

Email and web analytics make it easy to understand how customers respond from a direct channel perspective. How customers respond in-store, however, isn't as easy to measure.

The retail database marketer typically creates mail and holdout test panels, and measures the performance of email campaigns in stores by comparing the difference in the performance of test panels.

The retail database marketer also tests in-home dates and often learns that the later in the week an email is sent, the more the retail channel benefits.

The biggest challenge comes in the form of the merchandise assortment offered in the email campaign. Whereas measurement in the direct channel clearly indicates what works and what doesn't, measurement in the retail channel is much more indirect. So items featured in an email marketing message must cause customers to get into their cars and drive to stores.

As a result, items featured in emails may create a lot of retail response but might not perform all that well as individual items. Retail database marketers learn over time what items and messaging get customers to get up and drive to their stores.

The results of each email marketing campaign must be stored in a results database so all employees have the benefit of learning how different merchandising and messaging strategies impact retail and direct channel performance.

It's also a good idea to appoint an employee to be responsible for multichannel results communication. This employee should be able to effectively illustrate the unique activities that drive ROI across all channels and at the same time teach company leaders how to balance the conflicting initiatives that drive results in each channel.

Retailers know that 50 percent or more of the incremental sales generated by email marketing occur in retail stores. By making sure that adequate mail and holdout testing is executed, and by appointing one employee to be responsible for evangelizing multichannel email performance, businesses can achieve optimal ROI across channels.

Kevin Hillstrom is president of MineThatData, a database marketing consultancy. He can be reached at kevinh@minethatdata.com.