For a long time, the world of Email Service Provider (ESP) selection was heavily influenced by a single, powerful factor: price. What was once a battle of innovative solutions and strategic thinking gradually became a race to the bottom, driven by competitive bidding and procurement-led decisions. Today, however, that paradigm has shifted dramatically. The “death of CPM pricing” isn’t merely a cost adjustment; it represents a fundamental change in how businesses should approach their email marketing partnerships, bringing quality and comprehensive solutions back to the forefront.
The Shifting Battleground: From Ideas to Price
Initially, industry professionals believed that winning new clients for email marketing was a contest of who offered the most robust solution. This solution encompassed a powerful platform, skilled people, and groundbreaking creative and strategic ideas. The assumption was that, like in advertising where the best creative idea often won, the best all-around email marketing solution would prevail.
However, this idealistic view quickly met the reality of the market. Remaining rigid on pricing, despite offering what was perceived as a superior solution, often led to lost opportunities. Clients, while acknowledging the quality, were increasingly swayed by more competitive cost structures.
Price Becomes the Predominant Deciding Factor
Regardless of the quality of proposed solutions, many pitches were ultimately lost due to price. Clients would engage in thorough evaluations—reviewing platforms through demos, meeting teams, and listening to strategic proposals—but the final decision for an ESP often boiled down to cost. Procurement departments, tasked with securing the lowest possible sending rate (CPM), viewed top vendors in the ESP industry as largely interchangeable. Hiring the provider with the lowest price simply seemed like the most logical choice. This intense focus on cost inadvertently contributed to a widespread industry trend.
The Downward Spiral of Email Marketing CPM Fees
This period saw a relentless downward spiral in CPMs across the email marketing industry. The difference between the “factory” cost of sending emails and the CPM represented the margins ESPs were making. As pricing paid by senders continued its downward trend, reductions in these factory costs simply could not keep pace.
Consequences of Shrinking Margins
The constant pressure on ESPs to cut their CPM fees had significant repercussions. As margins shrank toward zero, investment back into the email platforms themselves dwindled. This resulted in less innovation and slower development within the industry.
CPM Prices Hit Rock Bottom
Eventually, CPM prices hit an unsustainable floor. When further reductions became impossible, the industry faced a critical turning point. Winning a new client with a bid as low as 65 cents per thousand, for example, highlighted the precarious position ESPs were in, signaling that the era of aggressive price cutting was nearing its end.
The End of an Era: CPM-Driven ESP Selection
The glory days of email marketing CPM, where clients expected to pay dramatically less than they did years prior, have definitively come to an end. With prices reaching rock bottom, and no ESP capable of staying in business sending emails for free, the option of choosing your provider based solely on the lowest price is no longer viable. The market simply cannot sustain further reductions.
The Resurgence of Quality in ESP Selection
Interestingly, the fact that CPMs have hit their floor brings the industry full circle. The selection of an ESP is now becoming much more complex than simply finding the lowest price. This shift is inherently positive, as it encourages a more comprehensive and qualitative evaluation process.
Elevating Marketing’s Role
With price becoming less of a differentiator, the role of procurement in ESP selection will be reduced, while the role of marketing will significantly increase. Qualitative evaluations will replace purely quantitative ones, demanding a thorough examination of the entire solution offered by competing ESPs. Various client stakeholders will need to collectively discuss and agree upon the best fit, evaluating providers based on the quality of their people, their strategic ideas, and their ability to genuinely impact the business.
Positive Outcomes for Your Email Marketing Program
This evolution brings two significant pieces of good news for businesses.
Enhanced Program Performance
First, it means your overall email marketing program is poised to improve faster than ever before. When price drove decisions, innovation often lagged. Now, with quality as the focus, ESPs will be compelled to deliver superior platforms and services, leading to more effective and dynamic email campaigns.
ESPs Evolve into Strategic Partners
Second, ESPs will need to hire more professionals capable of delivering agency-level services, including creative, strategy, and account management. They will also need to invest more time upfront in understanding your specific business needs and how their platform and expertise can genuinely foster growth. This transforms ESPs from mere sending platforms into true strategic partners.
Navigating the New Landscape with Expert Guidance
For businesses operating multi-million dollar email programs, navigating this complex new selection process requires expert guidance. Resources are available to help. Companies like David Daniel’s Relevancy Group offer invaluable assistance. Just as marketers have long utilized search consultants to select advertising agencies, now is the opportune time to consider using specialized email search consultants for your next RFP, especially given that the process of finding an ESP that provides a truly comprehensive solution is far more involved than simply switching platforms.