How I Lost Thousands on Email Marketing

Growing your customer base by purchasing email lists can turn into expensive failures. I know.
February 12, 2013

As business owners, we're under continuous pressure to meet or exceed expectations from our clients, employees, contractors, vendors and of course our families. Many times, we just don’t have the resources to deliver on everything and we're tempted to take shortcuts. These shortcuts, as I learned recently, can be very expensive mistakes. Here's what happened and how I lost thousands of dollars.

Great Products Need Customers

Toward the end of 2012, I partnered with someone to develop a new product that targeted executives in a specific industry. Based on initial feedback from players in the industry, I was fulfilling both a “need and a want,” and it could prove very successful. The challenge was the timing; it came with an expiration date. I only had a 60-day window to market it before it lost relevance, and I would have to wait until the end of 2013 to offer it again. To make matters more complicated, we only had a few hundred email contacts for companies in the industry. It seemed like a wasted opportunity to market this product to such a limited audience. I wanted bang for my buck!

Cutting Corners—Buying Vs. Building

Email marketing can be a very effective way to reach potential customers. The best email lists are those that are built organically. This means the recipients have a relationship with your company because they're existing customers or want to receive your newsletter or in some way are receptive to your message. Email lists built this way have higher delivery rates, higher open rates and higher click-through rates. These lists can take many months or years to build. This is how I've conducted email marketing for the past 10 years, and I had no intention of changing now. But the temptation to get this product to market fast prevailed over my better judgment.  

I decided to purchase an email list.

What You See ...

There's an entire industry composed of companies that acquire and sell the contact information of employees at companies organized by geography, size, sector, position and more. These companies usually claim the following:

1. The contacts on their lists are verified, meaning they have called or in some other valid way confirmed the accuracy of the information.
2.  The contacts are opt-in, meaning the people on the list have given their consent to receive email communications.
3.  The contacts are timely, meaning the information is recent and active.
4. The contacts will be sold only a few times per year, to ensure recipients won’t be bombarded by offers from numerous list buyers.
5.  The integrity of the list is guaranteed, meaning the seller puts their reputation behind the list to ensure the previous claims are genuine.

After doing some research, I identified an email-list broker that had been in business for some time, appeared to have a good track record and seemed to have access to a list of over 50,000 contacts that met my criteria. The price was $6,500 for this list. The company offered the five criteria above and even sent a sample list of records for our verification. The sample (of course) was perfect. We exchanged over 30 emails and had several conference calls to evaluate the seriousness of the offer and the company. Everything appeared to check out.  

We signed a contract, made payment and begin preparing the delivery infrastructure on our end.

... Isn’t What You Get.

Nothing worked out as planned. After receiving payment, the vendor’s responsiveness declined precipitously. The salesman wouldn’t even return phone calls. The list, which was supposedly undergoing final verification, didn’t arrive on the date indicated in the contract. No one at the company could give me a straight answer.  

When the list was finally delivered 10 days late, there was one word to describe it: disaster. The sectors and geographies promised were not present. The list had not been segmented as promised, and our initial tests of the contacts found that:

1. Many emails were not valid.
2. Much of the contact information was out of date, some of it 10 years old.
3. The contacts had NOT opted-in.

These were the problems we discovered with spot-checking; I was afraid to think what else we would find if we actually used the list. It was evident that the company had conducted a bait-and-switch scheme and was giving us information they had scraped from various sources. It was unusable.

Digging Deeper

Even though the sales team at the vendor wasn't responding, I was able to get the direct phone number of the head of operations, and he seemed genuinely interested in helping. Over the next three weeks, they attempted various times to deliver on the original promise but they never could. They didn’t have the ability to deliver. Period.

As I started doing more research, I realized this was a common problem in the industry. There are vendors that operate under various company names, have mail forwarding addresses and claim to be based in the U.S. but are really based offshore. The list of deceit goes on and on. The number of small-business victims is also significant and there is little to no recourse, since the companies will move to another brand and shell-company as soon as they amass too many complaints.

How We Closed the Book

The company categorically denied my request for a refund. More than once I heard “it's impossible.” This was an expensive learning experience, but I decided that at the very least I would warn other business owners about this company, and I shared my experience and concerns on social media. Potential clients starting contacting me directly and asking me about my experience before buying. I gave it to them, and naturally they didn’t buy. That got their attention. After the estimated value of lost sales—thanks to me—reached about 10 times my refund request amount, the vendor decided to honor my request for a partial refund in the hopes of moving on from the incident.

Not every list purchase will go as badly as this one, but in general the risks are simply too high that you will pay for stale information that was gathered without permission. Using that kind of list will only cost you money and alienate potential customers. There are no shortcuts when it comes to building an email list, so it's best not to look for one.

Mike Periu is the founder of Proximo, a leading provider of training and educational programs in finance, entrepreneurship and information technology. He is a nationally recognized speaker, blogger and writer on small-business finance.

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