"We've taken an amazingly powerful marketing medium and we turned it into spam," says Mark Patron.
It's a surprisingly rueful comment on the current state of email marketing. As chief executive of online marketing and solutions company Redeye, Patron is a passionate believer that email can be (and is) a hugely effective tool. But - and this is a very big 'but' - he argues that too many companies are still sending out bulk emails without giving any thought at all to the reaction of the recipients.
It's not hard to see why. As Patron sees it, the relatively low cost of sending emails in bulk has fuelled a tendency to use the medium as a blunt instrument. Messages are sent en masse and even if a small percentage of recipients respond positively, the exercise can be chalked up as profitable. In purely budgetary terms, bulk email is easy to justify and it does get results.
But the bigger picture is more worrying. Those who don't respond to email marketing are part of a silent and largely forgotten majority. Some will hit the delete key without opening the message, while others will say 'this isn't for me' and unsubscribe. Either way, it's lost business and a wasted opportunity. More damagingly, an increasing number of consumers will report marketing messages as spam to their ISPs, with the result that further communications are blocked. "Increasing numbers of emails are simply not getting into Hotmail," says Patron
Bryan Black, managing director of email marketing company Email Reaction, agrees that deliverability has become a real issue. "ISPs are in the driving seat and they create the rules on spam on a daily basis," he says. "You can spend a lot of time working on the content for an email campaign and then find that it isn't getting to a large percentage of the audience because it has been blocked by the ISP. And if that happens to be Hotmail, you're talking about 40 per cent of UK email traffic."
The upshot is that email marketers face a two-fold challenge. First, you can no longer assume mail will make it into the customer inbox. Then you face apathy and antipathy from consumers, many of whom will regard any unsolicited mail as a violation of their online privacy. "You have to remember that marketers and consumers have a very different view of what constitutes spam," says Skip Fedura, head of email at interactive and marketing agency Ogilvyone. "Marketers tend to define spam as email that breaks the law or breaches regulatory guidelines. But to consumers spam is any mail message they don't want."
The irony is that email isn't terribly effective as a customer acquisition tool - the traditional role of spam. However, once a relationship has been established, it can be a potent medium through which to reinforce customer service, highlight offers and reignite interest over the lifetime of a relationship. The question is, how do you overcome initial consumer resistance?
One obvious answer is to step back from the bulk mail mindset and tailor a wider range of email messages to a number of tightly focused customer groups. Or, to put it another way, you segment your audience according to their interests and behaviour. Then you target messages to these sub-groups rather than to the customer base as a whole. "Traditionally, email marketing has been carried out on a 'broadcast' model characterised by the same message going to everyone," says Mike Weston of email marketing solutions company Silverpop. "But what you should be doing is having a conversation with the consumer based around what is relevant to the individual."
It's a message that hasn't been lost on progressive email marketers. "These days, it's not uncommon to see companies dividing their customer base up into 100 or even 200 email segments," says Patron. And it's a strategy that appears to bear fruit. Greater relevancy means higher open and click-through rates and, ultimately, improved sales. According to figures published by business intelligence company Jupiter Research in its 2007 Road to Relevance report, targeted email can produce a five-fold increase in revenue.
Which begs a question. If relevancy is the new black, why isn't everyone doing it? Well, according to Fedura, the survival of the bulk email is partly attributable to the complexity that is inevitably associated with adopting a more personalised approach.
"The technology is there to not simply segment the audience into groups but to create personalised emails that are tailored to individuals," he says. "But segmenting your audience isn't easy. To do it successfully, you have to have data that you can rely upon. But you also have to understand the levers that drive the interests of your consumers." In other words, you have to both collect the data and use it effectively.
The data that feeds into a relevancy strategy can be collected in a number of ways. First of all, there is the basic information customers give you when they register with a web site or make a transaction - name, address, email details, etc. Then there is the data that can be had from behaviour: the products the consumer buys; the links he or she clicks on in a newsletter; the parts of a web site that are visited regularly or ignored. To that, you can add demographic data. Last, it's possible to make some pretty accurate assumptions about the consumer's future buying patterns by combining a range of information and applying predictive modelling tools.
In theory, all this can be combined to create a 360-degree view of the customer that can be applied to create targetable email segments. But in practice, it is a pretty sizeable elephant to consume in one sitting. The problem with segmentation is that you have a huge amount of information but a very limited idea of how to translate that into effective customer groupings.
What you can do is to start with just a few segments and build from there. That was the approach taken by Virgin Games, an online betting and gaming business that was launched some three years ago. "When we started, we divided our consumers into just two segments," says head of strategy, Ross Sleight. "Now we have between 150 and 200 segments based on what games our customers play, their frequency and levels of play and their demographics.
Where you start should reflect the priorities of the business. In the case of Virgin Games, the first segments were aimed at two crucial groups of customers. "In online gaming you have VIPs, the people who spend a lot of time and money playing," says Sleight. "It's very important that you look after your VIPs and they were the first segment we focused on. Then we created a segment for those who had used Virgin Games but subsequently dropped out. We wanted to know why they were leaving and how to get them back."
Creating segments is as much an art as a science. And, as Fedura stresses, the information that customers volunteer about themselves is not always 100 per cent accurate. He cites the example of US wine merchant Wine.com. A customer survey indicated that a significant number of the site's visitors were interested in fine wines in the $50-plus price bracket. "But when you analysed the behavioural information, very few of them had spent more than $10 on a single bottle," he says. The company responded by creating newsletters for this group that featured perhaps one or two $50 dollar bottles and a number of $15 wines, giving aspirational but low-spending consumers a more affordable route through which to trade up.
Profiling is only one part of the equation. One advantage email has over postal services is that marketers can respond almost instantly to events or behavioural triggers. At its most basic, this could mean taking action when a potential customer abandons a shopping cart or fails to return to a web site for a number of weeks or months. The beauty of email is that it provides a means to prod the consumer and reactivate interest. This can be a highly effective strategy, but it's not without its pitfalls.
Simone Barratt, managing director of e-dialog, cites the examples of emails sent in response to abandoned shopping carts. "You can offer incentives such as 10 per cent discounts to those who return to complete the purchase, but you have to be careful not to encourage certain kinds of behaviour," she says. "For instance, you don't want to teach the consumer that abandoning a purchase is a fast track to a cheaper deal. And consumers learn very quickly."
The other great pitfall of reactivation emails is simply that you will annoy the customer. Yes, if a customer has not visited a site or opened one of your marketing messages for weeks or months, you can put rules in place that will generate an email designed to reignite interest. But if he or she still doesn't respond, the best course is probably to drop them off the list.
Arguably, events-based emails are at their more effective when used to reinforce an existing relationship between the company and loyal customers. For instance, the calendar is potentially powerful tool, particularly if you collect information on customer dates of birth, as Sleight says. "We have given our customers cash to play games on their birthdays."
Virgin Holidays customers receive a follow-up email when they return from their trips. The company's email communications are handled by eCRM specialist Underwired and, as managing director, Felix Velarde, explains, the welcome back messages not only create good will, they also provide an opportunity to collect more data. "We always offer customers the option of filling in a questionnaire," he says. In this way, email creates an ongoing feedback loop.
The technology can be daunting. All companies keep a customer database with the prerequisites of name, address, email address and purchase records, but, to use email effectively, you also require tools to track the delivery of the message (did it arrive and was it opened?) and web analytics software to monitor behaviour when the consumer clinks from the e-newsletter through to a web site landing page. All this information has to be brought together on to a single platform that will enable marketer to create segments and automate email campaigns based on that information. The key, says Black, is providing tools that will enable marketers to access the data and create the segments easily and intuitively. "Our approach is to provide a very visual system," he says. "The segments are presented as blocks on the screen. It's rather like looking at Venn diagrams."
So how do you know if you're getting it right? According to Velarde, you need to look beyond the click-through rate. "It's important to assess the actual value of the campaign," he says. That means not looking not just at the initial response to the email but the number of conversions - the revenue raised.
But how do you know if your email is indeed relevant? E-dialog has been pushing a system that creates a relevancy benchmark score based on six criteria: segmentation, personalisation, lifecycle management, trigger, interactivity and testing. The idea is that if you're scoring highly on all these points, you're doing pretty well in the relevancy stakes. "Up until now there has been no KPI for relevancy," says Barratt. "But we think this is something the whole industry should adopt."
As specialists in the field consistently point out, the real secret of making an email marketing campaign work is to create the most relevant emails you can and then continually test the response. If a campaign isn't working, change tack. If it is working, hone your strategy further. Email relevancy can be the key medium for communicating with customers through the lifetime of a relationship. But getting the right message across at the right time takes both effort and investment.
HEINZ TARGETS NEW MOTHERS THROUGH EVERY STAGE
Founded in 1959 to promote Heinz baby foods to young mothers, Bounty has evolved into the UK's biggest parenting club. And while its late 50s/early 60s origins can be detected in the small army of "Bounty ladies" who visit hospitals and take samples to new parents, today the organisation aims to provide information and contacts, as well as promoting products to a membership of around 600,000.
The internet now provides the main point of contact between Bounty and its members, and email plays an important role. And as chief executive, Andrew Thomas, explains, email segmentation is crucial. "We segment our audience into ante-natal, post-natal, toddlers and older children," he says. "And this segmentation is very important. It is pointless offering a TENs machine (electronic pain relief) to a mother after she has given birth."
The company has also mounted email campaigns that reflect the lifestyle of new mothers over a period of months and years. For instance, the first Christmas after a birth is often marked by the purchase of a digital camera. Thus in the post-Christmas period, Bounty sends members emails offering discounted photo prints. "We have an open rate of 70 per cent and a conversion rate of 50 per cent on these promotions," says Thomas. Further down the line, educational promotions have proved popular. "After 18 months, we know mothers are thinking of returning to work," says Thomas. "We work with advertisers offering retraining."
Bounty has an extensive database but the segmentation process has been gradual. "You start out with rudimentary data, then you begin to segment the audiences," says Thomas. "Our members get more relevant content and we can market more successfully."
HOW TO USE EMAIL EFFECTIVELY
P Start small. Use the information you have to create a limited number of customer segments and target tailored mail messages accordingly.
P Build on your information. As customers respond to your emails, use the information to create new and more precise segments.
P Test and test again. The segmentation of your consumer base is always going to involve assumptions. Those assumptions should be tested on an ongoing basis.
P Build profiles from a broad base of information. In addition to the information customers volunteer about themselves, you can extend their profiles using behavioural data and demographic information extrapolated from post codes. Predictive modelling tools provide an indication of cross- and up-sell opportunities.
P Experiment with subject headers. This is a tricky area. The header that encourages the biggest response in terms of open rates may not generate a high rate of conversions. Conversely, a very specific header may prompt a relatively small percentage of recipients to open, but those that do may be more inclined to click through to a landing page and make purchases.
P Work with ISPs. Internet service providers often take a stricter line than legislators on what does and does not constitute spam. It pays to give assurances that your mail campaigns conform to best practice. Consider joining the Good Mail initiative. Mail carrying the Good Mail stamp will not be blocked by ISPs.
P Take note of those who don't respond to mail messages. If customers don't respond to mailshots, consider targeting offers to reactivate their interests. However, if there is still no response, drop them from the list. Smaller lists can be better lists.