Email marketing: opportunity and risk

OTOi, Executive Team | One to One Interactive
April 30, 2003

Email marketing continues to grow rapidly and, according to Forrester Research, is becoming the number 2 preferred channel for direct marketing. Unfortunately, marketers have not approached the channel with the same rigor as other forms of direct marketing and this has led to disappointment and disillusionment both for marketers and customers. In this article, we'll review 4 areas marketers should re-consider as they implement e-mail marketing: permission, strategy, governance and technology.

Email offers the opportunity to communicate quickly and efficiently with customers and prospects; to improve products and services through faster direct customer feedback; to sell products and services quickly; and to optimize communications in near real time.

With this opportunity come the risks of damaging customer relationships through confusing or excessive communication, damaging the brand through conflicting messages and experiences across the company, legal liability from inadequate permission or privacy standards, and direct and indirect competitive pressure from other companies that are using email effectively and establishing increasingly higher expectations as to how email should be used in the stream of commerce.

Permission

Global email volume stands at 30 billion e-mails per day. It is estimated that up to 40% of this could be considered Unsolicited Commercial Email ("UCE") or Spam.

Therein lies the first definitional problem. Spam by what standard? Spam is susceptible to two definitions. The first is the user definition. Most email users today would say that any email that they didn't want to get is Spam. Those of us who keep up with the regulatory and industry material on this subject would say that Spam (or "UCE") is any email that is sent without the permission of the recipient.

There are varying schools of thought on this latter definition — some jurisdictions (like California) require explicit permission for the specific communication and the requirement that unsubscribe options are included in the communication. Others require that there only be a pre-existing commercial relationship (also subject to definition).

As marketers we have a choice to make – which definition do we use?

At One to One Interactive, we favor the definition of our customer/prospect. While a lot goes into adhering to that higher standard, a lot comes out of it as well, such as real, revenue producing relationships.

Forrester Research Analyst Jim Nail believes that the Spam problem will be solved within the next 18-24 months by a combination of technology, legislation, litigation and self-regulation.

Technology solutions at the desktop, as well as systems- level for filtering email include Brightmail and MXlogic. Bonded sender programs that let subscribers know an email can be trusted include Vanquish, trustE and Iron Port Systems. Email programs like Outlook and Lotus Notes will also see increasingly sophisticated email filtering capability. Together these technologies will help users reduce the clutter of Spam in their inboxes.

As states provide remedies for UCE, litigation will become an increasingly potent form of deterrent for Spammers who are within US jurisdiction. However, many of the most virulent Spammers actually have offshore bases of operations that make it difficult to stop them. Voluntary cooperation among ISPs, agencies and technology companies (like the industry group JAMSpam) by using white lists and black lists will help keep a lid on the problem. White lists are informal lists of ISPs that can be trusted and black lists are ISPs that have become known as Spam originators.

Legislation continues to be handled at the state level with about 28 states now having adopted legislation targeting UCE (see http://www.cauce.org or http://www.spamlaws.com/state/index.html). However, the CAN-SPAM bill has been reintroduced into the US Senate that would pre-empt State Legislation and define unsolicited email by a lack of either affirmative or implied consent. Affirmative consent would mean that an individual expressly requested the email whereas implied consent would allow for email to be sent to individuals from a company as long as there had been a transaction between them in the previous 3 years and the recipient was offered a clear chance to opt-out of future e-mails.

Litigation is becoming increasingly effective in the battle against Spam. AOL has won at least one lawsuit recently, receiving damages of $7 million dollars and has recently filed another lawsuit. AOL and Yahoo appear to be the most aggressive of the service providers in using the new legislation to sue spammers. Both companies have invested in making it easier for their members to report Spam. Yahoo created a Spam Sweepstakes where Yahoo members were entered in the sweepstakes when they reported Spam. As companies with resources take on Spammers, the rest of us will benefit from reduced spam.

Strategy

Forrester Research has concluded that major marketers now see email as the number 2 most effective channel (after the telephone) for direct communication. Unfortunately, marketers do not fully leverage the capabilities of the channel, instead applying primitive strategies and tactics. Here, we survey approaches to acquisition, retention and emerging email strategies.

Acquisition

If you don't have a relationship with a customer, email is a valid channel to begin one. While email should not be relied on as the single or most cost-effective way to initiate a dialogue with a prospect, there are definite conditions for when it should be part of an integrated campaign. If you already have a properly permissioned email address, email, when properly executed, is the most cost- effective and efficient means of communicating with prospects and customers.

Many marketers rely on 3rd party collected lists for acquisition email. It is now becoming de-rigueur for marketers to require the use of permissioned email lists for acquisition email programs. While never a recommended practice, the potential liability of using anything less than permission-based lists is becoming too high. To insure the highest quality of response, marketers should examine the list owner for means and methods of permission to insure that the lists are recently and properly permissioned.

To further improve response, marketers should apply a rigorous direct marketing approach to email. Because email appears to be so easy (everyone does email everyday) many marketers who are not trained or equipped with experience in the rigors of direct marketing tackle the problem and are then disappointed when they don't see immediate results. This contributes to the burn out of even permissioned lists as people are bombarded with ever larger numbers of general and vague promotional offers.

Because email is direct marketing, it should be treated with the same rigorous testing and measurement as other forms of direct marketing (e.g. direct mail and telemarketing). This includes the testing of, among other things, offers, messaging, creative, placement, and day-part effectiveness. Unfortunately, many marketers continue to "batch and blast", rather than use the initial communication as a way to develop an ongoing permissioned dialogue with a prospect. An approach that creates a dialogue takes more planning, but it also yields much better results (see Forrester Report Effective Email Marketing by Shar VanBoskirk, August 2001). Further, having a data platform to capture, analyze and report data is necessary. Without such a platform, continuous optimization is not possible.

Testing also allows the marketer to improve returns over time. When e-mails are specific and personalized, prospects and customers are more likely to open them and take action. Getting a prospect to take any action in the first email is difficult. Having more realistic expectations, and taking an approach that focuses on creating an initial and ongoing dialogue rather than expecting immediate transactional results, the marketer is likely to see better overall results. Such a strategy will deliver rich customer profiles over time that can be developed and allow marketers to deliver specific and personally relevant communications that result in a relationship. Converting these relationships into marketing ROI over time requires patience and discipline – two important character traits for the direct marketer.

Retention

Once a marketer has a permissioned email relationship with a prospect or customer, email is by far the most cost-effective method of dialogue. Whether email generates the most returns, however, will depend on the marketer's skills and how the customer is treated (see Ten Email Best Practices to Live By from the Forrester TechStrategy Brief by Jim Nail in this edition of the Insider for more on this).

In order to avoid being grouped with Spam (using either definition) it is critical that marketers take the time to develop a detailed profile that recognizes the official, as well as the personal, nature of the relationship with a customer. For example, a CFO may oversee a company that buys many products from you. It does not follow, however, that the CFO necessarily wants to hear about those products. While it would be appropriate to communicate, with permission, about these products, it would be far better to also allow the CFO to define the topical areas of interest about which he would like more information. It might well be that he is interested in more than your current suite of products, and by not developing a profile, you would miss that fact.

Content and frequency should be customized based on the users' preferences and profiles as much as possible. Further, the content of such communications should be as specific as possible. For example, many companies collect permission like this: "Check here to receive special offers and promotions," or some other equally vague and generic approach. To drive to the point of sale, communication preferences must be much more specific to the needs of the individual, based on their position, role and area of interest. For example, Wells Fargo Mortgages collects permission from prospects on their website based on desired refinance interest rates. When a particular rate is available Wells Fargo has permission to send that person an email notifying him that his desired rate is available. Further, Wells Fargo proactively messages these permissioned users every quarter to determine whether they still want to be a member of the list. Many marketers think that if they somehow just get more permissioned members, their "batch and blast" tactics will somehow power though and work. Sheer numbers are irrelevant. Knowing what your users want, how they want it and when they want is far more important. Your ability to communicate precisely the way a customer desires will directly impact your ability to generate results.

HP has developed a best practices approach for allowing their customers to customize the information they want delivered. While the profiling process can take some effort, particularly if you have a lot of products, this insures that subscribers receive the information that is of the most business value to them.
Go to http://www.hp.com/united-states/subscribe/gateway/?jumpid=go/subscribe-gate1 to learn more.

Emerging

Ajay Segal of Avant Marketer ( http://www.avantmarketer.com) has an interesting point of view regarding email marketing. He predicts that email as we know it today will become useless. He points to three emerging practices that will allow marketers to continue to use email effectively. These are the eNewsletter, Request Marketing and the Micro-Campaign.

eNewsletter

The eNewsletter (like the One To One Insider) is a subscription based and tailored communication. Unlike random email communication, the eNewsletter is of greater value because it is delivered at the user's request and is anticipated by the subscriber with (presumably) content that is of value to the user. The eNewsletter is effective for the enterprise because it can and should be customized by the to deliver content that is of specific relevance to the user based on his profile and relationship with the company.

eNewsletters have evolved from the monthly text only email to providing an opportunity for marketers to deliver branded communications pieces that are dynamically generated and customized to the subscriber's profile. The eNewsletter technology available today also provides the marketer with click stream data that should be combined with other customer intelligence to create a rich customer profile. The profile can be used to further customize communications as well as to guide sales and marketing activities as subscribers indicate interest in topical areas.

Request Marketing

The concept of request marketing was introduced by Jakob Nielsen in 2000. The concept is simple – if you enable users to achieve their goals and decide what they want to do in the web communication stream, they will reward you by doing things that are beneficial for you. The HP example above is a good example of Request Marketing at work in a newsletter context – the idea is to allow customers to be as specific as possible in making their communications preferences known. Another example of this approach is Amazon.com's author and DVD notification alerts that let you know whenever an author you sign up for publishes another book or a DVD you're interested in is released.

Another example of request marketing is used by Forrester Research. Forrester allows their clients to customize a personal research update by topic area. When new research is available, Forrester sends e-mails to its clients with links to the research.

The Micro-campaign

This concept leverages the advances in technology that allow for automated campaign generation at the individual recipient level. Technology now makes it possible to run measurable campaigns at the level of a single user. The Micro-campaign concept involves the acquisition of an email address through transactional media, such as an Enliven banner. After viewing the advertising unit, the viewer signs up for information on the product and is sent an immediate email that is tailored and personalized. This approach insures that you are sending information to a user as close in time as possible to their communicated interest, increasing the likelihood that they will take favorable action.

Governance

Perhaps the single most challenging area for marketers today is in the area of governance. Because email has such comparatively low overhead, business units have few hurdles to entering the channel. The obvious problem here is that when five to ten separate divisions communicate with the same customers, messaging and brand is at great risk. Furthermore, customers are simply not interested in receiving that many communications from the company. Because this is an organizational problem, it is even more difficult. Many companies have simply not figured out how to organize their companies to handle this dynamic form of communication.

The solution is often a corporate level initiative that doesn't necessarily have to control the whole program (even though this is often what happens) but should require strict adherence to policies, and perhaps even technology to make it possible for communications to be coordinated, like the HP example above.

Some companies go so far as to actually turn off email because they aren't able to get all the business units to agree on a common approach and infrastructure. This is tragic, but not an uncommon result of trying to align the interests and processes of Fortune 1000 organizations whose business units are used to a high level of autonomy. According to sources, HP has or is in the process of creating a governance model that insures that customers only get the information they have requested – meaning that anyone at HP has to go through a central authority to get permission for an email marketing program. This insures that HP subscribers receive consistent and branded communications. American Express follows a similar model. A central marketing group is responsible for monitoring email traffic to cardholders to insure that they are not bombarded with offers from the many different American Express divisions.

Important to solving this problem is having a user-perspective. By creating communications that meet specific user needs, companies like HP, IBM and American Express, who coordinate customer messaging at a central point, significantly improve the likelihood that their messages will be read and acted upon.

Technology

Because technology is the enabling root cause of the email phenomenon, it has an important role to play. How marketers use and control technology is far more important than the technology itself. Technologies (like Unica, Kana, E.piphany, Chordiant and Aprimo) continue to emerge that can empower marketers to manage communications automatically, with ever narrower segments with richer feedback and analytics than ever before possible.

To do the kind of email marketing I've suggested requires some pretty significant functional capability. And there are a few ways to accomplish this task. Fully in house to fully outsourced solutions are available to the marketer. Marketers can outsource email to a services firm (like One To One) who will provide end-to-end strategy, creative, messaging, transmission, reporting, and optimization - or the marketer can chop up this process and divvy the pieces among a combination of in-house, agency or transmission vendors (like Responsys or DartMail) resources. Forrester's Eric Schmitt suggests that there are few cases where it makes sense for marketers to bring email in house (see Forrester Report, Bringing Email Marketing In-House? Think Again. by Eric Schmitt, April 2002).

One solution to the problem created by the massive investment in CRM solutions like Siebel that don't offer very functional or integrated e-mail marketing capability, is the use of a lightly attached marketing datamart. In this scenario, a marketing executive identifies the actionable data desired for measurement and optimization of behavior and then pulls that data from the more densely populated CRM system into a more agile and responsive system for decision support and management reporting. One To One has developed a platform in partnership with CentrPort, a leading provider of ASP-based data collection and transformation products. This platform provides marketers with the ability to measure media campaigns across multiple channels such as email, phone and direct mail in order to generate a single view of customer interactions available through a web browser.

Conclusion

Getting email right will require taking the right approach in each area. The right technology in the hands of an organization with the right communications strategy, governance model and permission/privacy model will deliver increasing returns on investment to the business and handsomely reward the marketers with the discipline, vision and sheer tenacity to make it happen.

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