The Fall, Rise of E-Mail Response Rates

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Just as e-mail marketing has achieved a reputation as one of the most efficient and effective marketing tools - an essential channel for engaging potential customers and cultivating existing customer relationships - some critics claim the medium is showing signs of maturity.


Some analysts even predict e-mail marketing will reach saturation levels soon, flooding each consumer's inbox with thousands of messages a year. With saturation will come falling response rates, they predict, a trend some marketers and researchers already have observed.


But I think slumping response rates will be temporary, an inevitable consequence of many marketers' hasty efforts to achieve the high returns promised by this powerful new marketing tool. Response rates will rise again, but only for marketers that devise e-mail campaigns with attention to the fundamentals of direct marketing and that leverage the technology's full capabilities in order to precisely target prospects with the most relevant and compelling offers.


The best of times. Since its inception,


e-mail marketing has boasted response rates ranging from 5 percent to 15 percent, far better than online banner ad click-throughs and traditional direct mail response rates.


With such impressive rates, it's no wonder marketers have raced to add e-mail marketing to their tool sets. Drawn by the medium's high return on investment, short time to market and quick response time, 65 percent of companies already have allocated 1 percent to 5 percent of their marketing budgets for e-mail marketing, Jupiter Communications, New York, said in an April report. These figures are even more significant considering e-mail's comparatively low out-of-pocket costs, according to Jupiter.


The worst of times. Marketers will continue to jump on the e-mail marketing bandwagon, and the volume of e-mail messages will expand, researchers predict. By 2004, the average household will receive nine e-mail marketing messages a day, according to Forrester Research, Cambridge, MA. Consumers will receive an average of 1,612 e-mail marketing messages a year by 2005, according to Jupiter.


The sheer number of e-mail messages consumers receive will contribute to a decline in response rates. Just as consumers toss direct mail pieces in the trash without opening them, consumers increasingly will delete e-mail messages unopened.


Rates will dip, too, in response to e-mail campaigns that are poorly targeted or that lack relevant, compelling offers. In their haste to try e-mail marketing, companies should not forget the lessons of direct marketing, nor fail to understand the medium's unique rules of engagement.


Permission-based e-mail marketing, where consumers receive messages only on topics they have requested, is not immune to the effects of the crowded inbox. Many marketers, impressed with the medium's potential, are sending messages tangentially related to consumers' specified interests, risking the trust of customers who can quickly opt out of any e-mail relationship with marketers.


E-mail saturation and misuse of the medium may already have affected response rates. According to Geoff Ramsey, a co-founder and managing partner at eMarketer, New York, a provider of Internet statistics, they now average 5.3 percent. Though this remains substantially above the averages for direct mail and banner ads, Ramsey's research suggests we are at the low end of the historical range for e-mail.


Better days ahead. Depressed response rates won't last for everyone. As marketers begin to thoroughly exploit the unique targeting and tracking capabilities of e-mail marketing, while honing their messages to reach the right customer with the right offer, response rates will rebound.


For e-mail marketing to fulfill its potential, however, marketers must commit to the basic principles of direct marketing as they roll out campaigns. Direct marketers know that an offer's relevance to its intended audience is a critical component in driving the response rate. Using permission e-mail, marketers can powerfully apply direct marketing principles to target prospects with relevant offers more precisely than ever before. Marketers must prove the value of e-mail marketing by providing compelling offers not available offline, and they must adhere to strict interpretations of permission by providing information about products and services that truly match consumer interests.


This laser-sharp targeting will come about as marketers develop more focused permission e-mail lists, as well as better ways to use them. For example, an online electronics retailer selling business-related products recently achieved a much higher response rate by using advanced list selection. The retailer mailed a campaign to the intersection of people who had indicated an interest in two separate topics - business and electronics - and generated a 19.4 percent response.


More robust database technology and more sophisticated data mining and tracking tools are converging, permitting marketers to better understand who their customers are, what their interests are and what offers they respond to. Marketers will use that information to target individuals with pinpoint accuracy and to tailor specific messages to their interests. Sophisticated e-mail marketing databases and best practices are already giving the competitive advantage to some marketers. According to Forrester, companies using the expertise of e-mail service bureaus rather than keeping their e-mail marketing inhouse get purchase rates that are four times higher.


To improve the response of any one campaign, marketers will exploit the learning capabilities of the technology. E-mail's relatively low implementation costs permit marketers to test a variety of offers through small, tactical e-mailings; determine the most effective strategy; and then quickly deploy this strategy on a large scale.


E-mail messages also are becoming more compelling with technology innovations such as rich media, streaming audio and video, and shop-within-e-mail. Exciting new possibilities will emerge as a greater proportion of Internet users have high-speed connections, permitting marketers to engage customers with broadband applications such as product demonstrations and interactivity.


Finally, the industry is beginning to embrace best practices, such as adhering to strict permission standards, that promote the most effective e-mail marketing practices. As a result, marketers will devise better-targeted campaigns with the most persuasive messaging.


The power of the medium. How marketers currently use or misuse e-mail marketing is not a reflection of its power or its potential. Rather, marketers that adopt the medium's emerging best practices and that take full advantage of the technology's tracking and modeling capabilities will be rewarded with response rates that continue to outperform other marketing media.


Tony Priore is senior vice president of marketing at yesmail.com, Chicago, an e-mail marketing service and technology provider. He is also co-author of the book "E-mail Marketing: Using E-mail to Reach Your Target Audience and Build Customer Relationships."
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