Question. What’s more important: A million people on your email list or 200,000 active and engaged recipients? What if you have both?

I’ve touched on this before, but in today’s world of email marketing, focusing on the size of your list is very old school. In the world of physical direct mail marketing, if you have a house list of a million addresses you know your message is getting delivered to pretty much all of them (and that the vast majority ignore it no matter how many you send – Hello, American Express? Yeah, I’m talking about you.). Many email marketers (or the executives above them) confuse the size of a list with its relative value. This is unfortunate since it will drive said marketers to sources of new addresses that are less than perfect. It will make them focus on quantity over quality and approach address acquisition the same way building contractors look for day laborers.

What counts in email marketing is engaged people. It’s just the opposite of direct mail. If someone signs up to receive your email but then never opens or stops opening or becomes undeliverable, who cares if they’re on your list? If you have to report a metric, report how many actual people look at each message you send them and then how many take some kind of action. Sending vast numbers of messages, the overwhelming majority of which are never opened, does little except drive down the cost of each send.

If I ran the world, besides making everyone wear color-coded jumpsuits, this is how I’d change the way many approach email marketing:

1. Consider the source. Do not make the cost of acquisition the most important part of your list-building strategy. That will lead to poor quality addresses since the cheapest ways to acquire names is usually the one that brings you the broadest audience. I don’t care what you sell, chance are a random sample of the general population does not represent your target audience.
2. Know their value. Before you can decide what an acceptable acquisition cost is, you need to figure out (or guesstimate) what an engaged customer is worth to you. Is it $10 in incremental sales a year? Is it $100? $1,000? OK, what’s an acceptable investment to try to get those sales?
3. Size does not matter. Never report the gross size of the list to anyone. It’s worthless. Report how many customers you engaged instead.
4. These are real people. If they asked to receive your emails, and assuming you got them on your list in a way that ensures they’re interested in what you sell or represent, then they’re on your side from the beginning. Stay relevant and they will reward you. If they sign up only to receive a one time bonus or thinking they’ll get something you can’t deliver, you will be punished. People can tell when they’re being treated like a commodity. By cheapening them, you will end up cheapening your own brand.
5. Practice good hygiene. When you develop the plan to build your list, develop the rules that clean it off at the same time. What’s the definition of an engaged person? How long will you allow them to stay inactive before you either try to reengage them or drop them? It’s better to establish these rules and expectations up front before you build your list than it is afterwards when you have to explain why you made it smaller.

Evan Williams nicely summarizes the problem of using pageviews as a common metric:

Pageviews were never a great measure of popularity. A simple javascript form validation can easily cut down on pageviews (and save users time), while a useless frameset can pump up your numbers. But with the proliferation of Ajax, RSS, and widgets, pageviews are even more silly to pay much attention to—even as we’re all obsessed with them.

From his blog, via cuene (while trying not to look like we’re brown-nosing).