Introduction
How much do you pay your email service provider (ESP)? Do you pay per email transmission? What features do you have access to as part of your service agreement? Does your ESP offer advanced features or does the service basically amount to loading email addresses, composing a message, and sending it?
Here's a more important issue—do you know the answers to these questions?
Many email marketers look for the lowest price point and equate that to the best value, but the lowest cost may not be the best value. The industry overall has not done a good job of defining what constitutes a good value. Email service providers are often lumped together in one big group with average cost per email transmission serving as the comparison points for potential clients. This lump categorization might have worked in the early days of email marketing when large companies (with even larger budgets) ruled the email marketing airways. It doesn't work today. Small businesses have just as much marketing savvy as their larger counterparts and the use of email as a dominant marketing medium is higher than ever.
Understanding how ESPs determine price and what features you're paying for is an important part of being a successful email marketer. This white paper attempts to unlock some of the mysteries of email marketing pricing by reviewing why price is so important, discussing different pricing models, and creating value categories to help marketers make the right choice and achieve their marketing goals.
Environmental Scan – Why is Price so Important?
Digital Equipment Corporation sent the first, bulk commercial email (albeit unsolicited) in 1978 on ARPAnet or the Advanced Research Projects Agency Network, which was the predecessor to the global Internet. Since then, email marketing has grown into a thriving industry, commanding almost $2 billion per year.
Email marketing was reserved for the privileged few in its infancy—the ones who had the resources to develop their own software and hardware solutions. These systems were complex and produced a variety of internal issues for managing marketing via email including programming resources, corporate IP blacklisting, bandwidth restraints, and computing power. The major challenge to internally managed email marketing systems, though, was that smart entrepreneurs created their own, external systems and started selling them as a "boxed" solution. The "boxed" solutions come on a disc or DVD and are installed on the organization's server. It's not hosted on a vendor's server. Email as an accepted, and often preferred, marketing medium became the norm. The practice spread through the marketing ranks like wildfire and, as it did, the market became crowded with competition.
With the new "boxed" solution, email marketers didn't have to worry about building an in-house software platform to send thousands of emails at a time. Instead, they could focus more on developing compelling marketing messages that sold their products and services—the goal of marketing in the first place. The solutions worked for a while until two major shifts in the industry occurred. First, email lists grew to the point that marketers required more internal technical resources, such as expanded processing power and bandwidth, to manage them.
Urgent email messages were held up because internal servers were crowded with email marketing blasts. Second, the rise of spam presented deliverability challenges. In a recent survey, only 40 percent of marketers reported delivery rates between 90.1 to 100 percent (EmailStat Center, www.emailstatcenter.com). The ESP was coming of age at the same time as marketers were dealing with these challenges.
ESPs are web-based services that allow anyone, regardless of limitations on internal resources, to send massive quantities of email transmissions. ESPs closed the gap between the very savvy marketer with the resources available to use the increasingly popular marketing medium and smaller businesses that were limited by their size.
Today, the majority of email marketing is practiced using an ESP. More than 100 ESPs currently service marketers—marketers that have a wide variety of needs and audience size. Some ESPs will only service small businesses while others work only with Fortune 500 companies. The one thing all ESPs have in common is that they are in business to send email. They research price points, define price packages, identify basic and advanced features, and solicit new clients.
