Is an Email Marketing Price War on the Way?

The pricing scheme for many email marketing service providers—which grows based on the size of your list—is one that feels destined for disruption down the line. A new tool from Microsoft suggests how such a disruption might happen.

You know how I know email marketing isn’t going anywhere anytime soon?

Microsoft, whose email client has infamously been one of the biggest limitations of making good emails, just entered the market.

Earlier this month, Microsoft announced a new email marketing tool called Microsoft Connections as part of its Office 365 Business Premium suite. And while the concept got off to a bit of a rocky start—reports of issues using the newly released Android app are easy to find on its Google Play page—this represents sort of a game-changing move: To put it simply, the best-known maker of business software in the entire industry is suddenly interested in email marketing.

And its model, if it holds up, could be attractive to small-scale marketers as well. Instead of charging by the number of addresses you’re sending to, Microsoft has rolled the app into the premium tier for Office 365. So, rather than paying based on subscribers, you’re paying based on the number of employees using the tool, a price of $15 per month, per head, with discounts for yearly subscriptions. (And they get other perks, too, like, y’know … Microsoft Office.)

Microsoft can do this, of course, because of both its size and its sizable cloud resources through its Azure platform. Email marketing is a giant market for small to mid-sized companies. It’s a small one for a giant company, and the model reflects that.

I wish I could tell you more, but out of the gate, information about Microsoft’s offering is very limited and is still rolling out to its base of premium business users. (I couldn’t even get Connections to install on my iPhone, for what it’s worth.)

But from what I’ve read, nothing about its current setup suggests the sophistication of what’s already on the market. But if Microsoft is serious about the space, it will take the steps to get things into gear.

And if Microsoft does that, it could shake things up within the email marketing space.

Does Email Marketing Punish Success?

Already, we’re seeing more competition within the market. As I pointed out earlier this year, Amazon’s Simple Email Service (SES) and SendGrid, among others, have created an opening in the market for inexpensive sending of email, which stands in contrast to the high costs of competitors like MailChimp, whose prices increase exponentially based on the size of your list. A list of 1,200 users is basically free; a list of 12,000 users will cost you more than $1,500 per year. A list of 120,000 users? That’s nearly $7,000 per year, before you’ve even sent a single email.

As Inc.‘s Geoffrey James pointed out in April, this exponential growth in cost based on the number of subscribers basically sets up a situation like this—where someone will come along and break this model by not going along with it.

“Since the cost to provide email marketing services is a microscopic fraction of what these companies charge, it’s only a matter of time before one of them [breaks rank] and starts charging $20 a month for unlimited emails to unlimited subscribers,” James wrote.

Amazon’s SES has fostered small startups that have helped to break this business model to some degree, but they haven’t necessarily grown to the point where they can take on Campaign Monitor or MailChimp on price alone. (Marketing still means something in the email marketing space, apparently. Who would have guessed?)

But I do think that email providers will notice if Microsoft makes its tool so slick that it can’t be ignored. As Inc.‘s James pointed out earlier this month, that’s not necessarily a given.

More likely, I think they’ll notice if Google or Amazon creates a friendly way to send emails in bulk. There is literally nothing stopping Amazon from taking a tool built on SES, acquiring it, and polishing it up for the masses. They already have all the parts in front of them.

And while I don’t think something like that would be enough to kill the full-service shops—the ones with phone-based customer service, highly trained technical staff that you might actually interact with at some point, knowledge of working with association management systems, and the ability to fix your templates on the fly—I do think it could change the economic picture of sending a marketing email.

At the moment, self-service email marketing tools are priced in such a way that it almost feels like they punish growth—especially for small organizations that go with such providers to save money initially. There’s something ironic about that, and the irony will eventually work itself out within the broader market.

Whether or not Microsoft Connections is the solution to the problem is besides the point. Someone will figure this out.


Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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