How Email Marketing Can Boost Return Over Investment (ROI)

May 3rd, 2008 by Ismail Ismail

Do you know that it’s normal to get over 50% response rate when you send messages to your existing customers? And do you know that an ad is a good ad when it can generate even 1% response rate? And if an ad can gather a 10% response rate, it’s considered a super-duper good ad.

The point here is, it’s a whole lot easier to sell to those who already know you, rather than strangers. When you advertise, you are selling to strangers, people who don’t know you. And it would take a longer process to build some trust in strangers.

I am not saying that you should ignore advertising all together. I am saying that apart from advertising to get new customers and leads, you should also work into getting more from those who already have come in contact with you.

You should have a formalise communication system with your customers and prospects.

Imagine if you spend RM10 to get a single customer. And that customer bought products worth RM100 from you. If the cost of the products is RM50, your total cost would be RM60. And your profit would be RM40.

For many businesses, that is it. No more can be done after that single transaction. If that customer comes again in the future, it’s sheer luck.

So, you return over investment is about 1:4. You spend RM10 to get RM40.

Now imagine this. Everything remains the same. You still spend RM10 to get a customer, and that customer still spends RM100, and your product cost is still RM50. But there’s one thing different about this time. Instead of letting the customer walk out the door, you ask the customer if he would like to receive a short report. All he has to do is just fill in a simple form.

If you don’t already realise this, this time you are capturing customer’s details. With the details you have just collected, you have way to contact the customer in the future.
When there’s a way for you to contact the customers, you have a better chance at getting the customer to come back to your store and spend some more.

I use email to get in touch with my customers. It’s fast and it’s cheap. It costs almost nothing. Not only that, with the right software, I can even automate the email sending. Emails are sent out without having to lift a finger.

Do you remember that special report? That too can be delivered via email. And the marketing messages start in that very report. It educates the customer about the right way to use a product, the right products to use and anything else related to it.

What you don’t realise here is not only it’s soft-selling to your customer, it’s also putting an image of you as an expert in your field. This will build a higher respect for you in your customer’s mind, and he’ll come running to you when he needs advice.

Apart from the report, you also can send discount vouchers, announce special sale day, educate the customer about your products and services, and many more.

Let say after implementing this, your customer comes back once in that year and spend another RM100. Your products still cost RM50. This time your profit is RM50.

Let’s add this up to the first transaction where your profit is RM40. You just increased your profit to RM90.

Now your return over investment is 1:9. Your cost to get that customer is still RM10. That hasn’t change because we are talking about the same customer here. So now you are spending RM10 to get RM90.

You have just boost your profit by over 100%.

If you have 100 new customers that year, your profit will be RM9,000 instead of RM4,000. If you have 1,000 new customers that year, your profit will be RM90,000 instead of RM40,000.

You think this is not a normal occurrence?

Well, you just got your customer to visit your twice that year, instead of once. That is not so hard to do. Even if only one in every two customers does that, you still have increased profit per customer by RM25 (RM50 divided by 2). Your total profit per customer will be RM65 (RM25 add RM40 from first transaction), which is still more than 50% increase.

Your cost to that additional increase in profit? Almost nothing.