Posted: 11/2001

E Channel

Cyber Cash or Virtual Trash?
By Josh Long

California-based long distance reseller Working Assets began e-mailing certain customers to remind them why they signed up with the company: The telecom provider donates a portion of its revenue to non-profit groups.

As a result of the e-mail campaign — targeting customers likely to defect — the company increased its retention rate by 15 percent to 20 percent, according to Forrester Research Inc. analyst Shar VanBoskirk.

Working Assets declined comment, but its reported success underscores the advantages of e-mail marketing.

While e-mail marketing was once limited to catalogers and dot-com companies, more traditional companies have embraced it. Such companies include brick-and-mortar retailers, financial services companies and telecom providers, says VanBoskirk. More companies are using e-mail to promote services and products, slash operational costs, and retain and acquire customers. Acquiring new customers is proving to be the most difficult task because, like traditional direct mail pieces, much e-mail is tossed in the virtual garbage before being read.

When it Works

Michael Tchong, editor of Iconocast, an Internet media company that tracks the marketing field online and offline, says an e-mail marketing campaign can result in response rates of between 3 percent and 10 percent, compared with direct mail marketing, which averages response rates of about 2 percent. Tchong says response rates depend on the quality of the list, quality of the offer, customer awareness and the relationship between the company and the person receiving the information.

Still, he says an e-mail campaign is cheaper than a direct mail campaign. If you wanted to send out 500,000 separate messages, it might cost $50,000 in an e-mail campaign; duplicating the effort in a direct mail campaign would cost $200,000, he says. The main reason: postage and paper costs.

Not everyone is so confident in the success of e-mail, particularly during acquisition campaigns.

Jupiter Media Metrix analyst Jared Blank says direct mail campaigns are more effective in soliciting the response of customers than an e-mail campaign. If a company shoots out 1,000 messages to people via e-mail and direct mail, the response rate to direct mail will be much higher, he says. As a consequence, Blank says, direct mail is a less expensive way to acquire a customer.

However, Blank defends e-mail marketing, because it allows a company to refine a marketing campaign after receiving most of the responses typically within two days. In contrast, a company typically won’t find out how successful its direct mail campaign is for at least two weeks, he says.

He and many other marketing experts say that e-mails are a great way for a company to maintain a relationship with its customers.

Get Personal

Perhaps e-mail’s greatest asset — its ability to directly reach a customer for as little as a penny — is its “greatest challenge,” says VanBoskirk. Experts say companies can abuse e-mail by sending too many irrelevant messages to people, which in turn threatens to alienate subscribers. Companies must honor the relationship, not abuse it, says VanBoskirk.

Blank says it is increasingly difficult to acquire customers through e-mail. He predicts it will become more challenging to recruit new customers through e-mail because Americans are receiving so many messages soliciting their business.

Experts warn that randomly sending e-mails is a bad idea. Nobody likes junk mail.

“People don’t want to listen to you if you are just intruding on them,” says Karen Leland, co-founder of Sausalito, Calif.-based Sterling Consulting Group Inc., who wrote Online Customer Service For Dummies with her partner Keith Bailey. “I think there is place for more personalized e-mails.”

Nearly 80 percent of e-mail users trash unsolicited commercial e-mail without reading it, but 48 percent are curious to read permission e-mail, according to a report IMT Strategies Inc. issued

in September.

Companies seeking qualified leads on new business often buy lists that contain personal information on people who have opted to receive e-mails from companies. If a company is blasting off an e-mail to a potential customer or current subscriber, it better be relevant to them, say experts.

“By being more targeted and more relevant to customers the click-through rates” phenomenally increase compared to a vanilla e-mail campaign, according to Kerri Connolly, director of strategic services at San Mateo, Calif.-based Digital Impact Inc., an online direct marketing company focusing on marketing and acquisition.

Smart e-marketers will evaluate how and why customers made purchases before firing off additional e-mails, VanBoskirk says.

Companies could improve their relationship with customers by asking them what products and services interest them. For instance, a long distance provider may send an e-mail to certain individuals based on their specific calling patterns, says Blank.

Leland likens this to sending her e-mails about food and cookery books at her request.

More companies are asking their customers what they would like to hear about via e-mail or e-mail newsletter, says Connolly.

Experts say an e-mail newsletter can be a great way to cultivate a more personal relationship with customers, resulting in higher retention rates. In gauging a subscriber’s interests, companies might ask customers if they would like to receive information on general areas of interest, such as sports and travel, or specific areas pertaining to the company’s products and services.

Experts say e-mail can be more than just an acquisition and retention tool. It can save money on operations, says Digital Impact’s Connolly. Through e-mail, carriers can encourage their subscribers to access information via the web, resulting in less phone traffic at call centers, she says. For a customer who may have just purchased DSL, the service provider might encourage its new subscriber via e-mail to access a DSL Q&A on the carrier’s web site, she says.

Kick It Up a Notch

But whether a carrier is sending an e-mail for the first time to a potential customer, promoting a new product or encouraging a subscriber to access a web site, no strategy is going to be successful unless the e-mail user bothers to take a close look at the message.

As a result technology is playing a large role in the evolution of e-mail marketing strategies.

Companies increasingly are customizing content and spicing up presentations. Telecommunications companies are replacing standard text messages with flashier content, including video and sound, to provide an experience more akin to a television commercial than to a newspaper advertisement, which is a “more engaging approach,” says Blank.

Some providers are incorporating rich media, which includes moving pictures

and sound.

“The obvious advantage of rich media … is has a much more compelling representation of the message and the brand and as a result it has a much higher convergence,” says Russ Gillam, CEO of LA-based Dynamics Direct Inc. Plus, says Gillam, bandwidth is not an issue: the company can deliver rich media to customers with a 28.8 or 56K modem.

Gillam says Dynamics Direct has worked with AT&T, Sprint Corp. and MCI Worldcom Inc. Asked how successful their campaigns have proven, Gillam declined to discuss specific campaigns. Although he says the companies keep coming back for additional business.

However, Forrester’s VanBoskirk warns the format of a message “does not create relevancy” to the customer. “I think it is really less the format of the message [than] the message, context and relevancy of the promotion,” she says.

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