The following article comes from the upcoming book “What Works (and What Doesn’t Work) in Database Marketing” (McGraw Hill), which is scheduled to be published in January. It continues the June 3 column “Finding the Value of an E-Mail Name.”
In a previous column I described how to determine the value of an e-mail name, beginning with using e-mail for regular promotions, last-minute items, low-cost promotions and newsletters. In this article I will complete the analysis, adding other uses for e-mail names.
Every database marketer likes to devise retention messages, such as birthday cards, anniversary cards, season’s greetings, thank-you messages, customer surveys, service reminders and quarterly savings summaries. The value of these messages is not in the response, since none is requested or expected. The value is that they keep customers from defecting by building profitable relationships with them. The profit comes from the increased retention and lifetime value.
Let’s say that the average customer lifetime value is $111 after three years. If we were to send eight retention e-mail messages per year in addition to regular communications, it might increase visits per year by 10 percent and the spending rate per visit by an average of $5. This could push the lifetime value to $172 in the third year. These e-mails could cost about 4 cents each. With 200,000 customers, the increase in LTV from $111 to $172 would be worth more than $12 million in additional profit, after deducting the cost of the e-mails. You could not have done this with direct mail or phone calls. The cost would have been prohibitive.
So what was the value of the e-mail name (with permission to use it) used to increase retention? Based on this profit increase, each e-mail is worth about $3.68. Increases in retention and lifetime value are much tougher to measure than other direct marketing factors. You need to have control groups that do not get the retention messages and see whether there is a difference in the retention rate and lifetime value over time.
E-mail and direct mail have a different effect on the customer. Direct mail is probably more effective in building retention. A thank-you letter printed and mailed means more than a thank-you e-mail. The same might be true of birthday cards and other retention messages. But it is a lot easier to get management to spring for $8,000 for e-mail birthday cards than for $100,000 for direct mail ones. The probability is that the e-mails will be used more widely as people see the value in them. So e-mail probably will be the clear winner in retention messages.
Follow-up messages. This is an area where e-mail wins in a walk. When people order something, you follow up with an e-mail confirmation. When the product is about to be shipped, you e-mail the notice with the tracking number. When the product arrives, you send an e-mail survey: did it arrive OK, and was it to your liking? Here again, the e-mail wins. The value is measured in customer retention and increased lifetime value.
You may be able to send only four direct mail follow-up messages per year, but you can send 12 e-mails or more depending on transactions. The effect on retention and lifetime value from each message would be the same to the customer.
Because of the cost of follow-up messages by direct mail, few companies send such messages. A better comparison than e-mail versus direct mail for follow-up messages would be to test e-mail versus no follow-up at all. The boost in retention can be measured over a year and can be substantial. In the typical situation, an e-mail name could be worth more than $9 when used for follow-up messages.
Viral marketing. This is an interesting concept that works only in certain product situations. You can get some customers so excited about some product that they will write to their friends about it.
You send an interesting e-mail about an event or product to your customers, inviting them to communicate with other customers by entering their names on a microsite. This site, connected to your database, records the names and suggests messages to be sent to the names (“Harry and I are going to Hawaii in November. Would you consider joining us there? We are staying at the Maui Marriott. It is a terrific deal and would be lots of fun to get together again”). When the customer clicks OK, the messages are sent.
One e-mail results in the capture of more names and ultimately thousands of other e-mails, all promoting your product. Viral marketing is unique to e-mail marketing. It cannot be done effectively by mail or phone.
Viral marketing can be used for inexpensive items or for expensive ones. The beauty of this technique is that you not only sell product to your customers, you sell to people you don’t know and you gain their e-mails (with permission) as well.
Of course, not every company can use every one of these marketing methods, but your company certainly can use at least half of them. I have not included the rental value of e-mails, which in some cases can be substantial. We can say with some confidence that e-mail names, with permission, are worth at least $10 each to any company. To my knowledge, few companies know with any precision what e-mails are worth to them.
What does that number dictate to you in terms of marketing strategy? You must collect e-mails and get permission to use them. How do you do that? By every means at your disposal:
· Telemarketers must be compensated for capturing these names.
· Every form should be revised to include a space for the e-mails. Don’t wait for the forms to run out. Junk them and print new ones.
· Run contests in which to enter you go on the Web to a microsite and enter your e-mail with permission to use it.
· Be creative. You get $10 per year for every e-mail captured. Lenscrafters gives $10 for each e-mail name provided by customers. n