Because online marketing is one of the few industries experiencing growth and prosperity in the present economy, a growing number of entrepreneurs and online service providers are aiming to expand into providing email marketing services. This is an outstanding business opportunity, particularly for businesses who already offer internet- or marketing-related services to their clients. In this article we will briefly review the steps you need to take to succeed as an email marketing service provider.

Your business plan

The first step, of course, is to determine who your target market is and exactly what you will be offering them. There a full sections of library devoted to the topic of how to write a business plan, but the basic are simple:

• Market Analysis
  • Who will your customers be and what are their needs?
  • What is your competition like? What opportunitities exist and what barriers exist to realizing those opportunities? How do your particular strengths and weakness affect your chances of success?
• Product Development
  • In this case you know you intend to provide email marketing service. What does that include? Will you be building up your clients’ email lists for them? Writing advertising copy? Or will you simply be providing access to a web-based email marketing system that you will maintain?
  • You will also want to evaluate your costs, including man-hours, and develop a pricing scheme based on consideration of these figures, how much profit you need to justify your efforts, and what price you think your market will bear for the services you’re offering.
• Sales & Marketing
  • How do you intend to go about promoting your new service? Do you have an existing customer or subscriber base that you can leverage to get the service going?
  • Ordering & fulfillment logistics

Things You’ll Need

• Hardware
  • No matter what type of email marketing service you’ll be running, you will need to invest in a solid server & ISP or a hosting package that is capable of accommodating your projected usage volume.
• Software
  • You will need to buy bulk email marketing software with a sufficient number of user licenses to accommodate your projected initial needs (the order page is here).
• Wetware
  • You will need to effectively market your service. If you have an existing client base and are offering the service to them as a way to add value or expand upon your existing services, then you definitely have a huge advantage here. Otherwise, you will have trouble competing with major service providers like ConstantContact and AWeber unless you find a specific niche or untapped client base. As with any other type of business planning, this is where your ability to exercise some serious ingenuity comes in.

There are three basic types of email marketing services, representing three fundamental approaches to email marketing. This is why it is misleading to lump the different types of products and services together, and why it is so easy to become confused about what works and what doesn’t.

In this article we will break down all of the different types of email marketing service, explain the assumptions that they operate under, and look at the reasons why they are or are not effective.

1. Spamming

When a lot of people think about email marketing, they imagine getting in contact with an email marketing firm that maintains a massive “opt-in” list. They imagine that this firm has a secret ingredient that makes millions of people open to the idea of receiving marketing messages from anyone willing to pay.

This first type of email marketing service is what we refer to as “spam,” and it basically means you are hiring someone to send out junk mail to a random list of email addresses for you. The return on investment with this type of service is going to be extremely low, because the people who are receiving your marketing emails will generally wish that they were not receiving them.

2. Email Advertising

The next type, which we’ll call email advertising, is the much more legitimate and reliable cousin of spamming. This is generally done through real and reputable marketing firms, who will set up advertising contracts to place your marketing messages inside of emails sent by publishers to established mailing lists.

For example, say you subscribe to a magazine that sends you a weekly update by email. You may have noticed that there are advertisements in those emails just as there are advertisements in the magazine itself. This is an email advertisement.

Because the people receiving this type of message are generally doing so by choice, it is much more likely that your sales message will be seen and paid attention to. The effectiveness of your ads will probably be comparable to purchasing space in a printed publication (although may be less costly.) And, of course, the effectiveness will depend on the design of your ad, the value of your offer, and your placement within the email message.

3. Classic Opt-In Email Marketing

Generally when you hear discussions about reputable email marketing practices, it is this type of email marketing that is being referred to. A special, separate email list is maintain specifically and only for your business or marketing campaign, and individuals opt in to receive the messages that you intend for that list. Generally you will build your email list by offering some sort of incentive for signing up, be it information, special offers, or giveaways.

This form of email marketing is highly effective and is growing in popularity among traditional marketing experts, particularly because the troubled economy calls for marketing techniques that require little upfront investment. In fact, opt-in email marketing appears to be getting more effective.

In order to accomplish this type of email marketing, you will need to plan your email campaign, build your opt-in email list, and write effectively.

Often when you hear people talk about email marketing, you will find that attention is focused exclusively on hosted services. Even though it is actually a much more traditional approach to email list management, many people are not even aware that they have the option to use a self-hosted software package instead. In this post I will explore the pros and cons of each approach to help you decide which method will ultimately be more profitable for your needs.

First, it is important to know exactly what we’re talking about when we say “hosted” versus “self-hosted.” A hosted solution is a service that you sign up for and pay a recurring fee. The software that runs the service is invisible to you, and you will usually just go to the provider’s web site and log in to manage your mailing lists. A self-hosted mailing list manager works much the same way, except that the software is installed on your own web site. You essentially are providing the service to yourself.

The benefits of using a hosted email marketing service

The obvious advantage to using a hosted package is that it doesn’t require any kind of technical knowledge or maintenance. You won’t have to install any software or worry about upgrades and patches. All you ever have to do is to log in, create your e-mail lists, and send your mailings. This can be very enticing to people who are intimidated by the idea of having to set things up with their web host, upload files, and make backups.

Why a hosted service may not be the best choice

The major downside to this approach is that you will have to continually pay to use the system. Most email marketing services charge a monthly fee, and that fee tends to scale up along with your number of subscribers. The basic plans tend to start at around $20 a month, and that usually allows you up to 500 subscribers. While that may seem like a lot when you’re first starting out, you may be surprised at how quickly your list will grow if you are actively promoting it to your customers and web visitors. To get your account upgraded to the point where it can handle 2,500 subscribers, you’ll expect to pay about $30 each month.

That means that if you have one mailing list with fewer than 500 subscribers, your yearly e-mail marketing costs will sit at about $240. Once your list goes over 500 subscribers, you’ll be paying $360 a year to maintain it. If you want to send to more than 2,500 subscribers, you will be spending anywhere from $600 to $2400 every year just to maintain your single e-mail list.

The pricing issue gets a lot dicier if you start wanting to have more than one mailing list, because you will often be paying double for every single additional mailing list you want to add. So if you maintain three web businesses and need to maintain separate mailing lists in order to deliver targeted content to different types of customers, just go ahead and multiply all of these numbers by three. Some of the major services also charge you additional monthly fees for the types of features you will expect to see for free in a standalone software package. So if you want to be able to have an archive of your past mailings viewable on the web and to keep a library of images to use in your messages, it may cost you an extra $120 each year.

There is also the problem of vendor lock-in. If you begin using a hosted email marketing service with the idea that you will switch to a standalone email marketing software solution once your subscriber base has grown, you may be surprised to learn that there is usually no way to transfer all of your past messages from the hosted account to your own software. That means that you may be looking at losing years worth of invaluable statistical information about what has worked or not worked in the past. And, of course, once you stop paying, you lose access to everything.

Email marketing software tips the cost/benefit scale

By contrast, you take a look at a self-hosted email marketing software package like ActiveCampaign Email Marketing. It seems more expensive because you pay $229 up front to start when you buy the lite version. But also consider that that price includes up to four separate mailing lists, as well as archiving and statistical features, and image management. So even if you kept all four lists below 500 subscribers, you would still end up paying over $1000 a year to do the same thing on one of the major hosted services. A major benefit of hosting your own email marketing is that you can go over 500 subscribers, over 2,500 subscribers,  over 25,000 or even 250,000 subscribers without paying another dime.

Also, with a software package like ActiveCampaign Email Marketing you get a lot more flexibility for managing your data. If you maintain a forum or a content management system that has been collecting your clients’ contact information for years, you might not like the idea of having to completely scrap that system and replace its forms with proprietary forms generated by your email marketing solution. If you use an email broadcast service, that is what you will have to do. On the other hand, ActiveCampaign Email Marketing lets you sync up your mailing list to an external data source, so that you can keep your web site running the same way it has always run, and it will automatically stay up-to-date with the new information being added there.

It comes down to analyzing your individual needs

So ultimately you really have to look at the way you’re going to use email marketing in your business. If you have a small mailing list, and you just want to send out a mailing or two and then cancel your account, then you will save a lot of money and probably some time as well by simply signing up for a hosted email marketing service. On the other hand, if you plan to use email marketing on an ongoing basis to grow your business, improve client relationships, and increase conversion rates, then you’re going to want to think longer term than that. That means that a dedicated, self-hosted email marketing software package is probably a better choice for you.