Email Deliverability, Transactional Emails, Cloud Emailing, SMTP Relay Service, Email Delivery, Cloud-based Email Infrastructure, SMTP Server Software, Bulk and Transactional Email Sending Service, Cloud-Based Email Marketing and Delivery Provider, Inbox Delivery, SMTP Gateway…
And my list of marketing terms that Transactional Email Delivery providers use could continue, but I’ll stop there. I think you get my point. Within the market, and even within some companies, the terminology for this solution varies. For simplicity, we’ll refer to this solution here (and elsewhere in Ombud) as Transactional Email Delivery.
If you’re constantly resending emails or waiting for responses from customers because your email is sitting in their spam folder, you are losing potential revenue. A Transactional Email Delivery solution will help mitigate this risk with potential for a significant ROI.
Transactional Email Delivery Solutions
Organizations use Transactional Email Delivery providers to deliver large numbers of legitimate emails without outages or being wrongly classified as spam.
Transactional emails are those emails customers expect – password resets, order confirmations and shipping notifications. A report from Borrell Associates, Inc. and Merkle revealed that 64% of consumers consider transactional emails to be the most valuable messages in their inbox. These engagements are important for customer service but also serve as a marketing tool.
As a sender, you can increase your delivery rates by actively managing your sender reputation. Best practices include the following:
- Keep your mailing lists clean
- Honor permission grants
- Processing bounces properly
- Ensure email content is well constructed and relevant
However, even the most carefully crafted content, written according to best practices, can be blocked because of a blocked IP address, a hosted filter or an email client filter. Transactional Email Delivery providers offer tooling to perform the best practices listed above in addition to helping provide authentication.
“Authentication has become a best practice for email senders since spammers have gotten really smart about disguising malicious email under the veil of a trusted brand,” said Carly Brantz of SendGrid in her blog post How to Authenticate Your Email in 5 Steps. “By pretending to send email from your domain, a practice known as phishing, spammers are tricking your customers into giving out their passwords, account information and other personally identifiable information for their own financial gain.”
Transactional Email Delivery providers help companies scale the delivery of transactional messages, effectively and legally. They would help manage one’s email reputation through mailing list and email content tools in addition to managing the transmission of these emails with IP selection strategies and delivery verification.
ROI: A Back of the Envelope Calculation for Email Deliverability of Transactional Emails
Email monitoring firm Return Path calculated that legitimate emails are mistakenly blocked or misclassified as spam 24% of the time! With every “lost” email, you are losing potential revenue. Furthermore, lost emails may also be increasing your customer support costs and losing goodwill with customers who are expecting transactional emails and newsletters.
To calculate the email deliverability ROI for transactional emails, follow these steps:
- Multiply the number of emails you send a year by the current delivery rate. You just calculated the total contact reach. (E x D = R)
- Subtract the contact reach from the number of sent emails. That’s the number of lost emails, or, in other words, the people who did not receive your email. (E – R = L)
- Multiply that number by the cost of a customer support engagement like an email or call to customer support. (L x C = ROI)
(Note, this calculation considers only those emails that were blocked or bounced. It does not consider those which were delivered but caught in the addressee’s own spam filter.)
Or, to further simplify, just use this formula: [E – (E x D)] x C = ROI
Now, let’s walk through those steps together with an example. If you send 100,000 transactional emails a month, with a delivery rate of 76%, you could have 24,000 additional customer service requests from users looking for that missing password reset or purchase confirmation. If responding to a customer service request costs $1, email deliverability could be blamed for $24,000 in your customer service costs. Again, this estimate does not include the costs of a frustrated customer.
Your ROI is even greater if these emails serve a marketing function. Email deliverability ROI for marketing emails can also be calculated easily.
- Calculate the lost emails, as you did before. (E – (E x D) = L)
- Multiply that number by your conversion rate and the average sale value. That’s a good estimate of what the lost emails cost you in potential revenue. (L x T x V = Lost Revenue)
Formula: [E – (E x D)] x T x V = Lost Revenue
Let’s walk through another example for clarity. If you send 100,000 marketing messages a month, with a delivery rate of 76%, a typical conversion rate of 3% and an average sale of $50, you could be losing over $430,000 of revenue in one year.
Even if you’re a large company, that’s a lot of zeros, but can you still expect to see a ROI from a Transactional Email Delivery provider when you consider the fees? Let’s talk cost.
Typical Pricing
Typical Transactional Email Delivery providers offer monthly subscription packages that vary by volume and features. Monthly services can be as low as $8 a month. Given the volume schemes, these costs can be $.10 to $1 per 1,000 emails sent.
We calculated the “break even” point for about 20 email service packages on the market. Given a typical pre-deliverability rate, those messages that would have not usually been delivered cost $.01 to $.05 to be delivered. If these messages are marketing-related and you experience a typical 3% conversion rate, packages would be justified at even very low average sale values. If your average sale value is under $2.00, we recommend a more refined calculation.
If your company is considering investing in your own mail server, this involves some risk. New servers do not have an established reputation and often have difficulties getting by many ISP and larger email providers.
The Levers: How to Differentiate Transactional Email Delivery Providers
The number of emails sent efficiently without outages determines overall success. Three key functions to ensure email deliverability:
- Email validation
- Reputation management
- Error handling
Transactional Email Delivery providers validate messages with SPF and DKIM. A sender policy framework (SPF) validates the sending entity. (SenderID is another authentication standard that goes slightly beyond SPF by considering the email headers.) Domain Keys Identified Mail (DKIM) uses encrypted keys to validate that the message hasn’t been tampered with or hijacked by another party.
A Transactional Email Delivery provider can protect your reputation by testing outgoing messages for compliance within best practices, providing dedicated IPs and getting domains on whitelist services. They can help you improve message content with CSS and HTML tools. Providers can also work with reputation service providers (those who keep score for ISPs) and determine the best IP address for the your messages. This process considers the types of messages being sent, the sender’s parameters, ISP’s rules and the IP reputation.
Success also depends on error handling. How well does the delivery provider learn from errors and the deliverability results? How do they pass these lessons to the senders? Transactional email delivery providers can work with ISPs to understand what is working and what is not. For instance, they can schedule (or throttle) messages to different domains to understand how deliverability suffers if send requests exceed the specific servers’ thresholds. Transactional Email Delivery providers should also provide the sender with a feedback loop, actionable information specific to their success and any failures. (e.g., What addresses are not valid and should be removed a sender’s list?)
Related Product Categories
Some Transactional Email Delivery providers include marketing features typical of Email Marketing and Marketing Automation solutions; however, not all Marketing Automation and Email Marketing solutions include the benefits of Transactional Email Delivery.
Resources:
- Deliverability.com hosts blog posts from those providing thought leadership within email deliverability.
- The Email Sender and Provider Coalition focuses on email legislation, receiver relations, technology solutions, and public affairs.
- Email Experience Council is the email marketing arm of the Direct Marketing Association. It promotes the use of email as a marketing tool.
- Ombud’s resources on Email Deliverability
