The death of Email Marketing CPM and why that is great for you

email-marketing-software-cpm-pricing

Back in the days when I ran the regional office of a major ESP, pitching new business was a lot easier once I started listening to my head of sales.

It was almost all about price, but is it still?  And what does the death of the CPM pricing mean to you?

Winning new clients with the best idea

Coming from the world of advertising, I was convinced that winning new clients was, like in advertising, a contest of who had the best solution.  In advertising it was all about who had the best creative idea.  In email marketing, I assumed the best solution was a combination of platform, people and creative/strategic ideas.  But as it turns out in email marketing the best idea never won.

Rigid pricing didn’t work
As a result, during the first several new business pitches I worked on with my head of sales I tended to be very rigid regarding our pricing.  After all, if the clients wanted the best solution, shouldn’t they be willing to pay more for it?

This attitude drove my sales guy out of his mind.  And we weren’t winning much business.  I remember quite a few shouting matches with him over our email marketing CPM pricing — to the point where some people outside my office thought we were going to come to blows (he’s actually one of my best friends to this day).

We were losing pitches because of price

And then one day, it hit me.  Nick was right; regardless of the quality of our solutions, we were losing pitches because of our price.  In the deals we pursued, clients would go through the motions of checking out the platform (the dreaded demo), and meeting the team, and listening to our creative and strategic ideas.

But in the end, the selection of ESP came down to one driving factor—price. Pitches were driven on the client side by procurement folks whose job it was to get as low a sending rate (CPM) as possible.  If you were one of the top vendors in the Forrester wave Email marketing vendors research the procurement folks viewed you as interchangeable with any of the other top vendors.  So hiring the one with the lowest price just seemed to make sense.   Once I stopped fighting the pricing game, we started to win a lot of business. I mean a lot.

Downward spiral of Email marketing CPM fees

And so, in my own way, I ended up contributing to the relentless downward spiral in CPM’s the industry has seen over the last six-seven years.  There’s a “factory” cost of sending emails.  The difference between that cost and the CPM represented the margins being made by the ESPs.

During this time reductions in factory costs could not keep up with the downward trend in the pricing paid by senders.  As margins were shrinking towards zero, investments back into the email platforms shrank as well.  That was one negative outcome of the contraction of email marketing pricing.

CPM prices hitting rock bottom
The other major consequence of the pressure on ESP’s to cut their CPM fees was the fact that few took the time to think about what would happen when prices hit rock bottom—when further reductions became impossible.  Because that’s where we find ourselves today.  Even Nick was appalled when it took a bid as low as of 65 cents per thousand to win a new client.

The glory days of Email marketing CPM have come to an end

Clients who would have been satisfied with a $2 CPM six years ago, now expect to pay 50 cents or less.  But because there isn’t an ESP today that can stay in business sending emails for free, the days of choosing your ESP based on price are coming to an end, if they haven’t already.  Prices can’t get much lower than they already are.

Selecting email service providers on quality

However, some consequences are not inherently negative.  Interestingly enough, the fact that CPM’s have hit (or are about to hit) rock bottom brings us full circle back to where I started.  By that I mean that the search process for a new ESP is going to become much more complex than simply who has the lowest price.

A bigger role for marketing in email marketing
Email marketing software and service providers will need to be evaluated on the quality of their people and ideas for your business.   The role of procurement will be reduced and the role of marketing will be increased in the selection process.  Qualitative evaluations with replace quantitative ones.  The entire solution offered by the ESPs competing for your business will need to be thoroughly examined, discussed and agreed upon by the various client stakeholders.

This means good news for your email program

There is two pieces of good news that go along with this development.  First, it should mean that your overall email marketing program will get better, faster than in the days where price drove your decision-making.  ESP’s are going to need to hire more people who can deliver agency services (creative, strategy, account management) with their email platforms.  And they are going to need to spend more time upfront thinking about your business and how they can grow it.

Help in choosing the best email service provider

And second, there are resources available that can help you navigate the process, companies like David Daniel’s Relevancy Group, as well as websites like this one.  For years marketers have used search consultants to assist them in selecting new advertising agencies.   The cost of switching out a fully imbedded ESP providing a comprehensive solution is much more than just switching platforms. If you’re running a multi-million dollar email program, now is the time to consider using email search consultants for your next RFP.

About Chris Marriott


Chris has been in the email marketing space since 2004 and is an experienced digital marketing executive with a focus on creating data-driven experiences for customers of leading Brands. He is the Vice-President of Service & Principal Consultant at The Relevancy Group. The Relevancy Group provides market research and consulting services to both vendors and buyers in the data-driven marketing technology space. The Relevancy Group also measures consumer and marketer behaviors to discover new trends and prove the return on marketing investments. Chris also sits on the on the Board of Directors for eDataSource, a marketing services company that collects, analyzes, organizes and archives millions of marketing messages, providing competitive intelligence and analytics to the email marketing community. He remains a consultant to a variety of fast-growing companies, including AuthorBee, a patent-pending social writing platform.

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  • Dennis, ListsUK

    Thanks Chris, good article and very, very true.

  • Chris Marroitt

    Thank you, Dennis!

  • Dori

    Chris, this is a great article.  I have found the trickier areas to be in ESP “bundled” prices that affect mere CPM rates.  I would love to hear your thoughts on the “bundling” of services and cpm and how companies can decipher how to deconstruct that.   Or how to tell companies how to instruct ESP candidates to break down simple pricing models so they know what true and delineated costs they will be facing over time.  Because you know your stuff.

    Best regards, Dori Thompson
    information era marketing + consulting

    • Jordie van Rijn

      That is a great question Dori. In previous selections, I have asked for a certain price model. Like the breakdown you mentioned. Would be great to offer a template or example for that on the site. 

  • Chris Marriott

    Hi Dori, thanks for your nice coments!  You raise a great question regarding the bundled prices some ESPs and even some clients push for.  Clients often like the “all in” CPM which includes any and all services.  ESPs like to do it because–as you imply–it makes it very hard to discern what you are paying for as a client.  Jordie, this sounds like the subject for another article!

  • Dori

    Yes, a new article!  Bundled services can be beneficial on both ends, but as you point out, the cost of switching an embedded ESP… that is one area where this topic resides… If I have an integration specialist who is helping to work with API configurations and analytics, and an SLA agreement for Client Services or an escalation path, or Account Management and Deliverability services in one price – how do you escape when you don’t know the base costs  – including vendor CODB?  If a vendor can clearly define the line-items against said cpm, then that’s good.  If they can’t, seems they’re shooting at the hip.  Yes?  No? 

    • Chris Marriott

      You’re right to call it “shooting from the hip”