List rental, lead generation and organic growth â considerations for email data acquisition

So, you’re running a business and you’re sending some email marketing. It looks like you’re generating some good ROI from it. Great stuff. Now you’re wondering how to go about growing your database, send more email and hopefully generate more revenue.

It’s a question many growing businesses face and it’s the one the DMA Email Marketing Council tackled in a recent debate. I’ll use some of the themes that came up as the framework for this post.

I should point out up-front I’m overlaying my own views and ideas in places – so consider this a personal as opposed to organisational perspective – and that I’m using the prism of a B2C retailer or service to frame the discussion.

Organic-lead-gro-generation what now?

Let’s start with a few definitions, adapted from a DMA white paper, for some common ways of scaling an email marketing database:

Organic growth: An organisation invests in its own marketing initiatives, with a direct or indirect goal of capturing new marketing permissions.

List rental: An organisation rents data from a data owner with the intention of the data user sending a marketing message to that list.

Lead generation: An organisation collects specific leads on your behalf, for example a fitness firm offering sign-ups to a company offering health foods.

So which is best?

Inevitably ‘it depends’ – but I’ll explain some factors you should weigh-up when you're choosing the right way for your business.

Volume vs value

Seems straightforward, right? The more email addresses we throw in at the top of the funnel, the more value our finely tuned business with generate at the bottom.

The size of your database is a factor in calculating its revenue potential, but only when multiplied by the value of your data. Growing your database volume can be misunderstood as being directly correlated with growing its revenue potential. Not necessarily. Size, in itself should not be something that keeps you awake at night.

Say you’re Aston Martin, and you’ve a tidy little database of 1,000 well-healed people of whom 500 are likely purchasers one of your cars. There’s little value going out and acquiring 1,000 more people into your database if they don’t have the means to purchase your product, you’re just watering down your original list. It’s an extreme example, but the same applies to any number of products and services. The only data of value is data that converts to your business goal. Don’t get misled by irrelevant figures along the way, think about the bottom line.

It’s a little oversimplified, but if your business can get at the metrics, you can calculate the value of a database like this:

Database revenue = volume of contacts x conversion rate to customer x lifetime value (LTV) per customer

Summary: Volume is good, but it’s only part of the equation. If you’re going through an exercise acquiring data it’s important to get down to the conversion rate and lifetime value metrics of the data you’re acquiring. Never just ask someone for x thousand email addresses, I pretty much guarantee it will be a net negative for your business.

Attribution and data origin

Next up, knowing your data. It’s nice to have a simple looking formula which can tell you how much you can expect to make from your database, but we need to look one level deeper.

It goes without saying, all data is not created equal. And it’s an oversimplification to suggest that all organic data is the same, or that all rental lists are the same. Having said that, an often overlooked element is understanding the sources of your data and the performance of each independently.

A simple piece of advice is, from the outset, to assign a source to all data you gather. Having an ability to draw a line between organic acquisition versus data you’ve acquired from lead generation is a well-worthwhile exercise.

Often ‘existing’ data isn’t clean, we aren’t sure where it came from and how it’s been treated to date. That’ll make doing retrospective analysis tough, but set yourself up for the future by recording the data source and the conditions under which it was acquired.

Once you’ve some data, you can run the formula I suggested above for each of your data sources in turn and see how the value for each data source compares.

Simplifying the language a little and using the term ‘source’ to represent a group of data from one origin:

Source value = volume from source x conversion rate of source x (LTV of source - cost per acquisition (CPA) of source)

A nice extra/alternative step from here is a rough ROI figure per row of data, by source.

Summary: If you do this maths for each data source and make comparisons, you’re getting close to understanding which way of growing the database has been effective for your business. We’re considering the long term value of each data set and the main costs associated with acquiring it.

In one way, it’s that simple, in another there are some buts…

Reputation management and deliverability

We’ve some external effects and considerations to bear in mind and which you should put a value against.

Reputation. In a couple of different senses of the word:

1. Bad email addresses will hurt you. If you engage in data naughtiness when you’re growing your database you should expect it to come back and bite you in one way or another. If you put spam traps or large sections of unresponsive data into your set, you’re set up for all kinds of problems getting in front of your active customers (spam filters and so on). As a result, it is perfectly possible that adding data can have a negative overall impact on total revenue. I’d refer you again to the white paper on email list rental and lead generation for further guidance on this and to the email marketing guide for some pointers on data hygiene best practice.

2. Consider the ethics and business practices you’re engaging in. How would you feel if you received the proposed communication – does it feel like something you’d want your company associated with? Recently we’ve seen Optical Express get in trouble for some questionable permission handling alongside Thomas Cook. While the tribunal here was ruling on SMS, I remember receiving one of the emails that I suspect was part of this campaign. The rough message was ‘Would you like to see your next holiday better? Why not get laser eye surgery?’ – hmm. Hardly similar product or service is it - and as a fairly OCD opt-out triple-checker, i've no recollection of giving the consent. Net result, far from acquiring me as a customer, both Optical Express and Thomas Cook have distanced me from their brands and they’ve also ended up with an ICO investigation to deal with. Don’t shoehorn yourself into a data acquisition opportunity, if it feels wrong your prospects will probably smell a rat too.

Scalability and diminishing returns – it’s easy enough to get an email address of someone who might buy your Aston Martin, but getting 1,000 of them in the right area who also like the fetching pink colour you have parked on your forecourt might be tougher. The first few keywords you find to invest in might give you a pretty cheap organic CPA, but get beyond the obvious and that number can balloon pretty quickly. I won’t try and tackle the challenges and ways of dealing with this here, but bear in mind the place you got 10 great contacts might not have 10,000 at the same CPA.

Conclusions

1. Acquire data organically wherever you can in a legitimate and fair way, make it easy for people to enter into a relationship with your brand

2. Do the maths when you’re reviewing external data acquisition, test everything you do and look as far down the conversion funnel as you can. If they don’t convert to value then there’s no point chasing volume

3. To help with no.2 make sure you know what data came from where, and its value as a cohort

4. Consider the external effects of the data you acquire and be aware of reputational risks

5. Don't be blinded by statistics. If it smells wrong, dont do it. You can end up in some rather customer unfriendly coners if you chase the wrong metric at the wrong time. Keep it human.