In the previous article you learned about the SEM–SEO cycle, and how balanced spending can result in optimal conversion rates. When working with clients, I always recommend they go through a few iterations of that cycle before engaging in any e-mail marketing. Why, you ask, given that e-mail marketing costs pennies per address and SEM easily costs 10x that per lead? Well, the first answer is that that comparison is falacious. With SEM, you don’t pay for people seeing your ad, but you do pay when they click on it. With e-mail marketing, you pay for people seeing your add, but don’t pay when they click on it. Before any optimization, the expected cost per customer is about the same for the two methods; but the cost of learning and doing the optimization is significantly lower through the SEM–SEO cycle.
Let’s go back to our hypothetical paddle-sports outfitter we’ve been following through this series. In the last article, our entrepreneur learned that he could get three times the business by optimizing his SEO around “canoeing lessons” instead of “paddling lessons”. This has two direct impacts on a future e-mail marketing campaign. First, he knows to purchase a list of canoeists rather than a list of paddlers. Second, he knows exactly which marketing message is going to create the highest conversion rate: which color schemes, which descriptive text, which offers are actually going to get customers coming through the doors. Going back to the cost question, our entrepreneur learned all of those lessons much less expensively than he would have had he done e-mail marketing first.
Using the pricing from the previous article, the shop owner was able to survey over 500,000 potential customers (those who actively searched on his keywords and were exposed to his ads), and translate those into almost 700 qualified leads for a price of about $4,000. To learn the same lessons through e-mail marketing would have cost on the order of $12,500 — assuming that such a list could have been purchased for as little as 2¢ per name, and that e-mailing in that volume could be had for 0.5¢ per address.
Saying that SEM and SEO should happen before e-mail marketing is one thing, but when, then, should you engage in e-mail marketing? This is another way in which your SEM informs your e-mail campaign, and the short answer is, when SEM becomes more expensive than e-mail marketing.
As you start iterating through the SEM–SEO cycle, initially, your cost per customer will go down — perhaps precipitously. Over time, the speed with which the cost-per-customer decreases will approach zero. That is to say, at some point you will be “fully optimized”, or at least, sufficiently optimized that it is no longer cost effective to spend time doing further optimization. When that happens, it’s time to start increasing your SEM budget. You’re getting your customers as cheaply as you can, and every new customer is additional revenue, some percentage of which should be plowed back into marketing in order to further grow your business. However, as you spend more-and-more in SEM, your cost per customer will start to go back up. The reason for this is that you’re beginning to saturate the medium.
Meanwhile, on the e-mail side, once you reached the lowest cost-per-customer with SEM, you were in a position to start shopping for e-mail solutions. Given your successful target keywords, how much are you going to have to pay per e-mail address to a list company? Our hypothetical list of canoeists in a 5 zip-code radius is going to cost something much different than a list of, say, CFOs in that same radius. Similarly, once you know which list you’re interested in purchasing, you’ll be able to get an idea of how big that list could be, and, ergo, how much it’s going to cost you per piece of email (if there are only 500 CFOs, then the cost per e-mail might be a few cents each; if there are 500,000 canoeists, the cost per e-mail might be down at 0.5 cents). Using your optimized SEM conversion rates (which will stand in as reasonable approximations for your e-mail conversion rates … now that the message, layout, design, and target are all known), you can figure out what an approximate initial cost per customer will be with your e-mail campaign. Once your ever increasing marketing budget saturates your SEM campaign to the point that your cost per customer has exceeded this projected cost per customer for e-mail, you know that it’s time to stop increasing spending on SEM and start spending on e-mail advertising.