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What’s the return on investment of using BriteVerify to validate emails as they come into your system? While the answer depends on your situation, the figure can easily reach eye-popping levels of nearly 10,000%.
That’s a bold claim, but we’re going to show our work. Let’s make some reasonable assumptions and then run the numbers.
Assumption 1: 10% Of The Emails Coming Into Your System Are Invalid
Looking at the data across BriteVerify clients, we see that between 7 and 14 percent of emails addresses submitted via a web signup form are initially invalid. The invalid rate climbs even higher for email addresses submitted on a mobile device. Clumsy fingers, anyone?
To keep things simple, we’ll use 10% as the standard invalid rate for our model.
Assumption 2: The Lifetime Value of An Email Address is $10
Arthur Middleton Hughes, vice president of The Database Marketing Institute, has written that “email names, with permission, are worth at least $10 each to any company.”
While your situation may be different, $10 is a good starting number for our purposes.
Assumption 3: The Only Valuable Email is a Valid Email
This one isn’t really an assumption. It’s a plain fact. The ultimate purpose of email marketing, after all, is not to collect an email address. It is to connect with the person who owns the address. That’s not possible when the address is invalid. Emails with typos or syntax errors are essentially duds. For our calculation, we assume that 50% of invalid emails in your database have the potential to be converted into valid emails.
Running the Numbers Shows Clear ROI Case
Let’s see what happens under our assumptions for 5,000 email signups.
5,000 addresses x 10% invalid rate = 500 invalid addresses
500 invalid addresses x 50% potentially valid addresses = 250 potentially valid addresses
250 potentially valid addresses x $10 lifetime value per address = $2,500 in missed lifetime value
Now, let’s see what happens when BriteVerify checks those 5,000 emails before they enter the database, prompting the user to correct any mistakes. This effectively turns the emails that would have been invalid into valid ones.
Here, we’ll assume the user is paying the highest possible verification price – one penny per address. The price drops lower at higher volumes.
5,000 addresses x $0.01 verification cost = $50 total verification cost.
Now that all emails are valid, the user gets to keep the additional $2,500 of lifetime value that was originally missed.
Thus, the net gain for the user is:
$2,500 gross gain – $50 cost = $2,450 net gain
To determine ROI:
$2,450 BriteVerify net gain / $50 BriteVerify cost = 4,900 % BriteVerify ROI
Pushing the Equation To the Extreme
Just for fun, let’s assume that we’ve dramatically overestimated both the number of invalid email addresses coming into our system and the lifetime value of an email. In fact, let’s cut them both down to one-fifth of their original value.
5,000 addresses x 2% invalid rate = 100 invalid addresses
100 invalid addresses x 50% potentially valid addresses = 50 potentially valid addresses
50 potentially valid addresses x $2 lifetime value per address = $100 in missed lifetime value
The BriteVerify cost remains the same:
5,000 addresses x $0.01 verification cost = $50 total verification cost.
The savings for the user are:
$100 – $50 = $50 net gain
To determine ROI:
$50 BriteVerify net gain / $50 BriteVerify cost = 100 % BriteVerify ROI
Clearly, the BriteVerify ROI case remains solid even with sky-high validity rates and low-value email addresses.
Calculate Your Own ROI
Here is the general ROI formula. Plug in your own numbers to find your own ROI.
Number of Email Signups = x
% of Invalid Addresses = y
Lifetime Value of Email = z
0.5xyz – 0.01x / 0.01x = ROI
Notes:
Our model holds acquisition costs constant. You pay the same amount to acquire 5,000 emails with or without BriteVerify – the difference is how many addresses end up being valid.
The acquisition costs wash out when you compare scenarios with and without BriteVerify. Here, we’ll assume acquisition costs are $500.
Without BriteVerify:
$45,000 in lifetime value – $500 acquisition cost = $44,500.
With BriteVerify:
$50,000 in lifetime value – $500 acquisition cost = $49,500
Gain From using BriteVerify:
$49,500 – $44,500 = $5,000
You can plug in any number for the acquisition cost, and the difference between the two scenarios will always be $5,000
Also note that we don’t include the $50 BriteVerify cost in the acquisition cost above – instead, we account for it in the ROI formula itself. We’re effectively saying “BriteVerify’s verification cost is the price of getting from one scenario to the other.”
- No email verification process is perfect. Even with BriteVerify, we might not actually regain all of the lifetime value we were originally missing. This doesn’t really diminish our case, however; even if the gain from BriteVerify were cut in half, the ROI in our original model would be “only” 4,950%.
- Our ROI analysis doesn’t account for the wasted cost of keeping bad emails in your system. We will discuss those costs in a separate post coming soon!