Why is my email-attributed revenue declining?

Why is my email-attributed revenue declining?
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“Why is my email-attributed revenue going down?"

I've heard this question from many brands over the last year despite their time in business being longer and their database being larger.

This leads many business owners to mistakenly believe that email revenue should continuously scale over time, irrespective of other areas of their business perhaps slowing down.

Once you understand how acquisition and retention channels are inextricably tied together, you’ll be able to predict and forecast with more precision the amount of revenue you can generate from email marketing as a channel.

Without further ado, here are the main reasons why you’re seeing a slump:

1: Your Traffic is Down Year-over-Year

As paid media becomes more expensive, many brands have seen a slump in traffic YoY which negatively impacts email-attributed revenue.

In particular, declining traffic is usually the core culprit of flow revenue dropping.

There is a simple explanation for this.

Less in at the top of the funnel = less profit out of the other end.

If 80 people went into your welcome flow in May 2023 compared to 100 in June 2022, it’s inevitable you’ll see a drop in revenue attributed to email (total amount, not %).

We recently identified a traffic problem for a client that was recently hurt by a Google algorithm update that impacted organic traffic to their store by 14% YoY.

This is why you need to be able to think outside of the box as an effective strategist to understand how other channels will impact your performance as a channel marketer and to provide the necessary support to the business.

This brings me to point number 2, which is:

2: Your Paid Advertising Performance is in Decline

If you’re generating conversions less efficiently from paid spend, this will harm your email marketing efforts greatly.

While this factor is strongly linked to the first point, there’s another concerning element at play here: your net active customer base will be in decline.

When this happens, you usually see brands resort to increasing campaign frequency to mask the deficiencies in their business.

This leads me onto...

3: You’ve burnt through your list

Many brands will compensate for poor acquisition by increasing the volume of email sends and discounts to hit revenue targets.

While this tends to work for a period of time, eventually, you have to face reality and fix your acquisition woes.

The more aggressively you ramp up the frequency, the faster you'll hit a point of diminishing returns from both your email & SMS program.

Many years ago, I worked with a fashion brand where the owner was obsessed with using Fashion Nova as the benchmark for how to run an email marketing campaign. They wanted to send out 3-5 campaigns per day to a list of 20,000 customers and were adamant that this would drive marginal growth in revenue from email.

I don’t need to finish how the story ended with this one, but eventually, they ended up with under $200 per send - a pitiful return when you take into account the fees they had to pay us to manage this strategy (not to mention software costs).

They did, of course, start to rely on aggressive discounting to bring forward revenue, which tends to be a sign of a business in distress.

And on the subject of heavy discounting…

4: You’re attracting lower-quality customers

This has more of an impact on LTV than email-attributed revenue, but I've still seen this pattern many times over the years.

Brands start struggling so they resort to heavy discounting to hit revenue targets.

Discounting is the drug in eCommerce that most can't wean themselves off.

It has its time and place, but used excessively, you'll condition customers to only buy at a reduced margin.

If you fall into this trap, it’s very hard to get yourself out of it and often brutal. You can find yourself in more short-term pain to course correct, but it’s often a necessity in order to restore sensible unit economics and build a long-term sustainable business.

… and the solution to all these problems?

Healthy acquisition

No matter which way you cut it, retention is inextricably linked to it. The sooner you face this reality, the better your business will become.

Email can sometimes carry the can for poor acquisition, but not long-term. The only viable solution that is sustainable is to harmonise efforts and work cross-channel to support better business outcomes.

This is challenging, of course, but efforts must be put in by both sides in order to make it work.

In the coming weeks, I’ll be exploring ways in which retention channels can support acquisition efforts in helping you run a more profitable eCommerce business.

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