The unaccounted cost of using purchased email lists in your marketing efforts
The ROI calculation is usually a straightforward calculation in marketing that looks like ROI = Net income / Cost of investment x 100. While this is an excellent way to measure a newspaper advertisement or tradeshow participation, it’s not the best approach for measuring ROI for purchased email lists.
On the surface, there is still a cost associated with email lists and a net income from that effort. And say you purchased a list of targeted buyers for $1,000, and as a result of the effort, you made $10,000 in net income. Fantastic, that’s 1000% ROI! But why shouldn’t we use the traditional ROI formula to calculate? What are we missing here that might negate any of this marketing effort?
Our inboxes already see a fair share of traffic from companies we agree to receive emails from, i.e., our financial institutions, maybe some apparel companies, etc. And it’s easy to keep track of these companies we interact with. But, now and then comes a new email from a sender I had never interacted with. Now this is fishy. I didn’t give them my email address nor permit them to email me. This is where things get murky when they start spamming my inbox with unsolicited email messages.
So, I start questioning the ethics of this company. If they feel they have the right to spam me without my consent, what else do they feel they have the right to? And why would they need to take this marketing approach? Don’t they have legitimate means to gain clients? Have they run out of money and resorted to buying email lists? Will they honor my unsubscribe request? And so on…
As you see, it’s easy to build a negative view of the company and the product or service they are trying to offer. From this point on, not only do the chances to acquire the services and products reduce, but also my future consideration for this company diminishes.
This is precisely what we need to include in our ROI calculation, the tarnished company reputation and the diminished consideration of future purchases had I not received that email from them.
How can we reconfigure the formula, then?
I am going to do a back-of-the-napkin calculation here. Let’s say the company is 1 of 10 that provides that service. Now let’s conservatively say 20% of the list is filled with people who pay attention to this type of marketing effort, spam emails, which will effectively negate their buying decisions. And let’s also add that 1% of the list returned a $10,000 net profit through sales. 1% is the expected conversion from a highly targeted purchase list.
The 20% who were turned away from your brand had a 1/10 chance of purchasing the company’s services. That makes 2% of the list. So, in a very conservative calculation, our purchase list effectively Gained $10,000 then also lost us $20,000, which brought us down to -$10,000.
Rarely do marketers stop emailing their purchase lists only once, so we need also to consider the gains and losses from repeated attempts.
With the most basic version of the spam sent with only 1 email, we should rework our ROI formula to the following.
ROI = (Net income-Lost Opportunity Cost) / Cost of investment x -100
In conclusion
It’s easy for us to make decisions based on quick return on investment, i.e., buying a list and sending our offer and getting an approximate 1% response rate with a 1000% return on investment looks very enticing to many marketers and sales teams at first sight. But when we look deeper into the real impact of using purchased lists and emailing those without consent, we get a completely different picture of the ROI, often damaging our businesses and reputation in the long term to favor short-term gains.
I am curious to hear what you think about using purchased lists for marketing efforts and your experience with them.
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I provide email services and training for teams on email marketing best practices. Please let me know if I can help you or your organization get the most out of your email marketing efforts.
