DM News' Essential Guide to E-mail Marketing: E-Mail Marketing Still Leads In Customer Retention

“I believe we focus too much on the 5 percent that may be responding and not enough time looking at the 95 percent that are not.”

E-mail marketing has yielded its place in the spotlight to search engine marketing. Issues like phishing, spam, deliverability and declining open rates work against it. But there is little doubt that e-mail still is the leading customer retention tool in the marketer’s online shed. Like targeted direct mail, e-mail is here to stay as a channel and as a tactic.

Executive editor Mickey Alam Khan discusses e-mail marketing issues and best practices with David Daniels, research director at tech consultancy JupiterResearch, New York.

Q: Where is e-mail marketing today?

A: E-mail marketing is still in its infancy. While the channel is saturated and its adoption is common now as a mainstream marketing tactic, the intelligent adoption of the channel is still quite low. For example, just 31 percent of marketers use previous click-through behavior to target subscribers in follow-up mailings, indicating that the majority of marketers continue to blast their clients regardless of the clients’ engagement with that e-mail.

Q: Is it still the preferred online marketing tactic, or has it lost ground to search?

A: Search has replaced e-mail as an acquisition tool. However, e-mail marketing is still a dominant direct response medium. While more will be spent on search than e-mail over the next few years, the growth of e-mail is still healthy. The tools really serve different needs, as e-mail is uniquely qualified to execute personalized communications that are efficient and effective. If any medium is nipping at the heels of e-mail it is RSS, as it presents a similar opportunity to deliver personalized communications to subscribers.

Q: E-mail as a customer acquisition tool doesn’t seem to have worked, right?

A: Correct, e-mail itself is no longer a viable acquisition tool. Several things work well [for acquisition]. One is paid search, where that paid search listing is driving the user to a landing page that promotes a subscription to an e-mail offer. While that approach can work in some instances, it is really co-registration that has become a driving force in e-mail acquisition. A study we did last February found that 68 percent of marketers using co-registration had opt-in rates over 5 percent as compared to 55 percent of marketers that attained the same performance who were only using their own Web site registration.

Companies should also be thinking about their Web sites and leverage unused site real estate to promote subscriptions to e-mail offerings. Several companies have put their e-mail opt-in form at the footer of every page of their Web site, and the growth of their lists has been tremendous.

Q: What’s the total expenditure on

e-mail marketing for this year and next?

A: We anticipate spending this year will total $2.3 billion, growing to $2.9 billion in 2006 and $3.2 billion in 2008.

Q: How difficult is it to build an e-mail house file?

A: It is incredibly difficult to build a clean e-mail house file. One of the things that has gotten harder over the last few years is e-mail address churn, which marketers consistently list as their second-largest challenge.

This year has been especially challenging as it is the last great year of broadband adoption in the United States, causing more people than ever to switch Internet service providers. While broadband growth will continue, we are passing critical mass here in the U.S., which will slow the absolute numbers of people switching ISPs, which in turn should slow e-mail address churn.

Companies really must determine what an e-mail address is worth to them and determine the appropriate action based on its value – for example, extending the talk time in the call center to verify customer e-mail addresses or mailing postcards.

Q: Are the e-mail lists out there reliable? Marketers seem reluctant to rent out lists that worked.

A: List rental is a tricky thing, and I tend to hear more bad than good about the performance of these lists. Because address turnover has been peaking out this year, as well as the concerns around the implications of appearing like a spammer, we find that the majority of marketers have dismissed list rental. Only 18 percent of e-mail marketers employ list rental as an acquisition tactic.

Q: What are some of the best tactics to build an e-mail file?

A: Promote e-mail opt-in across the site, in your search results, everywhere. It should be an active part of your marketing plan across channels.

Q: How has e-mail evolved?

A: It has gotten easier, with many applications to do things like dynamic content and marry behavioral data from site analytics packages to e-mail segmentation. The tools are evolving, but we still find that most marketers haven’t kept step to take advantage of all of these features. Only about half of marketers test – A/B testing – their mailings on a regular basis, and a recent JupiterResearch survey found only 10 percent of marketers were running abandonment campaigns to target cart/application abandoners.

The challenge for most large companies is using all of the data that they have, as systems for the most part are still not integrated to deliver that holistic view of the customer. This and constrained marketing resources will prevent marketers from doing more with the evolving toolset.

Q: Have the roles of product, offer and creative message evolved this year?

A: Relevancy is king. Our recent JupiterResearch report, “The ROI of

E-Mail Relevance,” found almost an equal number of consumers purchase from retailer e-mails that have discounted shipping offers as did those that purchased from the e-mail because it contained a product they were already considering. Leveraging site behavior and timing e-mails to that post-site activity can radically improve the top and bottom line of e-mail marketing performance.

Q: Have consumer attitudes to e-mail changed or stabilized?

A: As a share of e-mail they receive, consumers cite that they are receiving less spam and slightly more opt-in permission e-mail. However, there is still confusion from consumers related to the proper way to opt out, as 18 percent believe using the “This is spam” button is the proper way to unsubscribe from something they have opted into.

Q: What about deliverability issues?

A: Delivery issues persist. Overall, we find that 13 percent of the legitimate e-mail is not getting delivered. There are simple things marketers need to be doing to improve their delivery disposition at the top ISPs. Many of those things, including publishing identity records and properly processing bounces, can be achieved by working with an e-mail service provider, or if the marketer is working inhouse it should be working with a delivery service provider such as Return Path or Piper Software.

Q: Is spam still the big consumer bugbear, or has phishing replaced it?

A: The lines of phishing and spam are blurring. This won’t be fully addressed until there is a relatively universal e-mail identity and reputation system in place. We’ll start to see the pieces of that system fall into place by the end of the year, but I believe the overarching solution is still a year or so off.

Q: What response rates are you seeing in terms of open and click-throughs? Are they up or down?

A: We won’t have trend data on ’05 until November, but anecdotally we’re seeing open rates are down but click-through rates are consistent. The open rate issue is in part because of the image-rendering issue present in many of the spam-filtering approaches. We’ve seen click-through rates double and triple for campaigns that leverage site behavior and those that are triggered by tying into some sort of lifecycle.

Q: Any marketers across industry sectors you admire for their e-mail practices?

A: Many are doing things well. Hewlett-Packard has a complex customer segmentation strategy that considers the customers’ attitudes and behavior to craft very relevant messages.

Other marketers that leverage automation like Petco have shown that triggered campaigns not only deliver higher response rates but also keep staffing levels lean. Wells Fargo in the financial services vertical is also doing some interesting things across channel and utilizes a variety of lifecycle marketing techniques to delivery the right message at the right time to the right person.

Q: Any best practices you would recommend?

A: Start actually using your response behavior. It is so easy in many e-mail applications to identify openers and clickers, but take that extra step to target the non-openers and clickers. Try sending them messages at a different time, with different creative. I believe we focus too much on the 5 percent that may be responding and not enough time looking at the 95 percent that are not.

Q: What is JupiterResearch’s prognosis for e-mail marketing?

A: No other marketing tool is as cost efficient and effective as e-mail, and despite the bumps of spam and delivery over the last few years, we’re confident that the channel will be stronger because of it.

Once the identity and reputation services are adopted across the industry, we believe we’ll see more offline and print marketing move online. It is imperative, however, that marketers redouble their efforts to make their mailings as relevant as possible, as broadcast mailings simply will no longer deliver the return that they once did.

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