E-mail ROI Still a Stunner, But Diminishing: DMA

As most marketers devote tiny amounts of their budgets to their e-mail efforts, the channel continues to deliver insane returns on every dollar spent, according to the Direct Marketing Association.

However, e-mail’s ROI has dropped significantly in the last year and will continue to do so, the organization said in its annual Power of Direct Marketing economic-impact study released last week.

Marketers are projected to have spent $500 million on e-mail to drive a comparatively astronomical $23 billion in sales by the end of 2007, according to the DMA.

The DMA forecasts marketers will spend $600 million on e-mail to drive $27 billion in sales in 2008.

The group calculated that by the end of 2007, e-mail will have delivered $48.56 in sales for every dollar spent, and $45.65 for every dollar spent in 2008.

The figures are a serious drop from the $57.25 the DMA said e-mail returned for every dollar in 2005, and $51.58 the channel reportedly returned for every dollar spent in 2006.

The reason for the drop is that even with their comparatively minuscule spending on the channel, marketers are investing in e-mail faster than they’re creating new revenue from it.

John Rizzi, president of e-mail service provider eDialog, said companies are increasingly spending more on non-revenue generating e-mails, such as order confirmations and “thank you” messages. This could be one reason for the reported drop in the channel’s ROI, he said.

However, just because they don’t drive immediate revenue doesn’t mean they don’t drive it at all, he said.

“These types of messages cost money to send and it’s hard to measure their ROI, but there is no doubt they have a positive effect,” he said.

Still, e-mail’s ROI is an eye popper by any standards.

“E-mail ROI is declining the way Bill Gates is not getting as rich as he used to,” quipped Peter Johnson, research strategy and platforms vice president for the DMA, during a presentation of the findings.

For comparison, the DMA forecasts non-e-mail Internet marketing to return a smaller, but nonetheless still impressive $20.67 in sales for every dollar spent by the end of 2007. This is down from $21.10 in 2006.

The trade group forecasts catalogs to deliver $7.22 in sales for every dollar spent on them by the end of this year. That figure is up slightly from $7.19 in 2006 and is expected to edge up slightly again to $7.28 in 2008.

Not surprisingly, e-mail also employs a small percentage of the direct marketing industry.

Commercial e-mail currently employs 85,400 people, according to the DMA. This figure is expected to grow to 96,400 in 2008.

Comparatively, non-catalog direct mail employs 2.8 million people and catalogs employ 793,000 people.

Non-e-mail Internet marketing currently employs 1.5 million people and is expected to employ 1.7 million people in 2008, according to the DMA.