Is E-Mail Right For Your Business?

Marketers across industries are aware of the explosion of e-mail as a marketing venue.

Perhaps you are already a seasoned veteran in the space, sending successful promotions and newsletters. Perhaps you're just starting out or are somewhere in between.

E-mail has become the darling of many marketers because of response as well as the great P.R. that has been generated about it as a direct response vehicle. Nevertheless, “marketer beware” are words to live by since e-mail is not for every company.

First, as I mentioned last month, there's the acquisitions side of e-mail, the attempt to glean new prospects, leads and customers through the rental of outside opt-in lists managed by third-party vendors and list owners. This can be expensive for many companies, even though list costs have fallen in the past few months — likely because they were overpriced to begin with. You now can rent some decent lists for close to the cost of offline direct mail lists.

However, on a cost-per-acquisition basis, acquiring new names for your database in this manner can be less than cost-effective, primarily because of the difference in response. It is hard, if not impossible, to generate a paid conversion — that is, to turn a stranger into a paid customer — with an acquisitions e-mail. Two-step or lead generation e-mails with follow-up paid efforts tend to work better. But then, of course, you're talking about more money for the additional deployment charges. And even then, the time-to-convert can be longer with e-mail than with direct mail. You may not break even for a year or more. For some companies, this is satisfactory. For others, it would be detrimental to business.

Therefore, for many companies, e-mail use has focused on retention — that is, to build a house-managed e-mail list and try to convert members, one by one, into paid customers. Once they're there, let the retention efforts begin.

Last month's column addressed e-mail lead conversion. Though it is probably more effective, empirically speaking, than acquisitions marketing, the pros and cons that come with converting (turning strangers to customers) and retaining (cross-selling and upselling customers) through the e-mail medium are not for every company. It can be expensive to implement if you're to do it right.

By “right,” I mean that you need a strong database hosting solution that offers segmentation, tracking and reporting capabilities, not to mention a host of other “should-haves” if you're to succeed. Also, there is nothing worse than a homespun-looking e-mail. So many companies think they're hot stuff if they send an HTML-based newsletter, though they have no concept of layout or design. Again, to do it right, you need a designer with experience (and savvy) in the medium or you need to outsource this vital function.

Outsourcing raises a whole other can of worms. And pricey worms they can be. For an effective full-service solution with a team versed in e-mail marketing, you can estimate a minimum of $3 to $5 per house e-mail address for a very small (1,000 subscribers) managed list. If your list is larger, however (hundreds of thousands to millions of subscribers), that number can drop to as low as 3 to 15 cents per e-mail address. That can include copy, design, deployment, strategy and offer development.

To justify that kind of cost, you need to determine whether a regular series of e-mail messages will help your business and be worth the expense. Whether you base success on return on investment, revenue-over-cost or plain old sales volume, just make sure it's a positive whole number.

To help decide whether your business can benefit before you install a robust inhouse solution or hire an outsourced full-service vendor, the following is a checklist of the types of businesses that can benefit (and have benefited) from a regular series of e-mail communications:

· Companies that offer disposable products. These are products that are regularly used and purchased again with little time between purchases. Included are cosmetics, food products, toiletries, low-cost restaurants, etc.

· Companies that offer regularly developed content. Included are publishers of magazines, newsletters, trade publications, online magazines, etc.

· Companies that market regularly through direct mail (catalogers, sweepstakes companies, publications, etc.)

· Businesses that have large e-mail lists along with frequently updated information that needs to be communicated regularly, such as a stock or investment list.

· Restaurants (fast food and sit down) that offer special deals (buy one, get one free; holiday specials; $20.02 off your bill for 2002, etc.).

· Business-to-consumer or business-to-business companies with a strong online presence that offer continuous relevant and newsworthy information, in their respective industries, to share with their list members. The goal is revenue, of course, and this comes in the form of ad revenue or sales that are driven by the content.

· Large companies that regularly rent outside direct mail lists for acquisition purposes, and which then try to convert, cross-sell and upsell those new list members with a regular series of follow-up campaigns.

There are probably quite a few other niche categories that I am missing. However, this list represents business types that have the most e-mail potential.

Who, more often than not, shouldn't market with e-mail?

For the most part, the wannabes that should consider putting more of their money into other channels include companies that offer high-ticket items with a typical sales cycle that can encompass multiple years, or even months for some. Also, companies that cannot make a direct mail program work for them should think twice before venturing into e-mail. There are many similarities between the two media. The last group — and we've seen plenty of these types of businesses attempt to market with e-mail in the past year — would include small BTB companies with low-margin offerings that do not have access to industry content for their members/subscribers. Again, there are probably more, but these are the types of companies we've seen fail miserably marketing with e-mail.

So the lesson for the day is to plan very carefully. Analyze your business and your competitors to see what they are doing. If you can, test e-mail before launching an entire program built around it. Start small, build your database slowly, and within a short time you'll know if it is a viable channel for your business

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