Five inconvenient truths about the state of e-mail marketing

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There has been speculation about social networks slowly destroying the viability of e-mail as a marketing channel. I don't believe it. I think the e-mail marketing industry is quite capable of doing it to ourselves without external help. As a marketing channel, e-mail produces more ROI than any other. This hides several fundamental issues inherent in the e-mail ecosystem.

Here are five inconvenient truths about the state of e-mail marketing:
 
E-mail marketing is in a vicious cycle of degradation


Inbox clutter is finally taking a toll on e-mail performance. The ROI for every dollar invested in e-mail marketing has been decreasing steadily: $57.25 in 2005, $51.45 in 2006, $48.29 in 2007 and $45.65 in 2008. A large majority, 94%, of marketers now use e-mail marketing. and 97% of the consumers use the channel. New subscriptions have slowed as consumers have signed up with most merchants they intend to sign up with. Marketers with consistent reporting mechanisms are beginning to see flattening or declining response "rates," and some are compensating by sending more e-mail.

E-mail marketing still grossly lacks relevance

Based on my experience with open rates, out of the 420 billion commercial e-mails that will be sent in the US in 2008, up to 360 billion just pollute cyberspace. If a consumer takes an average of five seconds to read the subject line and delete an e-mail, we are talking about a collective wastage of 11,407 human years.  Demographic segmentation should be table stakes and it isn't. Marketers who aren't targeting at least based on behavior should rethink their strategy.

The "who" and the "what" problem

Marketers want to make it all about the brand while consumers care more about the offer. We like to think that consumers have given us blanket permission to message. Having come from the era of push marketing, we wonder what there is to complain about permission marketing. Consumers largely care what the e-mail is about, not who sent it. In retail for example, a consumer looking to buy a Wii for Christmas, is likely more loyal to the product than to a retailer who markets it.

The size of "inactives" in the e-mail database

There is a white elephant in the room. Large business-to-consumer e-mail marketers should attempt a simple exercise. Find the number of people in the e-mail database who have never opened, clicked or replied to messages except to unsubscribe. For most companies it will range from 20%-70%, which means that the number of e-mail subscribers that we think we have is practically off by a long shot.

The disconnect between marketers, ESPs and ISPs
 
Mr. Pay for Performance is a foreigner in e-mail land. E-mail service providers (ESPs) get paid by volume to send e-mail, not to show results. Most marketers aren't interested in incenting ESPs to perform because the channel makes an obscene amount of money. And if we want more money, we send more. While we are on the topic of money, the consumers' gatekeeper, the Internet service provider, isn't getting any. No wonder the search ecosystem has gotten better and e-mail hasn't!
 
Now, let's be doers not whiners. Here is my two cents. Identify your inactive subscribers now. Message to them differently and purge them from your database if necessary. Ask your consumers what they want to hear and use the power of technology to send them only what they ask for.  Employ at least behavioral targeting. If your ESP can't do that, find one that can. And pay them for performance.
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