The religion of relevancy

May 01, 2008 9:30 PM  By

Marketers embracing customized e-mails

Direct marketers tend to think in terms of tonnage. How big is the list? How large is the universe of names? Increasingly, though, many are realizing the tonnage DM philosophy is antithetical to what is required for a successful e-mail program.

According to a recent study by trade group Shop.org, 42% of online retailers said they send customized e-mails based on customer behavior or purchase data, and 73% of those rated the tactic as “very effective.”

A somewhat higher 58% said they segment e-mail files based on stated preferences and purchase data. Of those, 67% rated the tactic as very effective.

This is a far cry from last September when Shop.org reported that just 28% of online retailers surveyed said they sent e-mails based on customer behavior or purchase data, and 24% rated it as an effective tactic.

Marketers are apparently getting religion: Call it the religion of relevancy.

“Slowly but surely, I think we’re seeing the tide shift,” says Rick Buck, director of ISP relations for e-mail service provider e-Dialog. “More of our clients are starting to hear the message of relevance and optimize the ability to use e-mail by sending unique messages to appropriate people on the database. It’s not global yet. Not all of our clients are doing it, but more and more of them are moving in that direction.”

It wasn’t all that long ago that the tonnage philosophy of marketing was just fine for e-mail. The blasts went out. The orders came in. And heck, even if the response was a fraction of a print campaign, the ROI was astronomical. So why change anything?

Today, the reasons to abandon tonnage e-mail marketing are many, as marketers are apparently discovering.

For one thing, merchants are seeing response rates to broadcast campaigns plummet, says Scott Olrich, chief marketing officer of e-mail software-on-demand provider Responsys. Moreover, it’s getting harder and harder for multichannel merchants to grow their e-mail files, he says. Plummeting response rates plus diminishing file growth equals fewer dollars through the door.

“You can still make money with broadcast e-mails, but you’re making less and less of it,” says Olrich. “List growth used to make up for people disengaging from marketers’ e-mail programs, but now list-growth has stopped and they’ve got customers who are disengaging because they’ve been sending broadcast campaigns. Those are the forces at work here.”

Achieving relevance

Okay, so once a marketer has gotten the religion of relevance, how do they go about delivering it?

According to Olrich, companies are increasingly considering the idea of preference centers where people can choose the types and/or frequency of e-mail communications they want to receive. But as much as the consumers-are-in-control mantra has taken root in marketing circles, most merchants aren’t quite ready to give up complete control, he says.

“They think that if they offer a preference center to their customers and allow them to select what they want to receive, they won’t select anything,” he says. “If you give them 10 choices and they select only two, the marketer is thinking: ‘I’ve just prohibited myself from marketing all these other things to my customers.”

Olrich recommends getting over this hurdle by asking people what their preferences are but not promising to send e-mails based only on those preferences.

“Ask people what they’re preferences are, but if you’re a very targeted marketer, don’t say: ‘I’m only going to send you information on these particular areas.’ Ask, ‘What are the areas that you would prefer to receive information on?” says Olrich. “That way, I can determine what you like, but I can still send you marketing in other areas.”

In a recent survey of Responsys’ clients, e-mails targeted by behavior or preferences achieved conversion rates as much as 64% higher than broadcast e-mails sent by the same clients, Olrich says.

“Clearly, the ROI is there,” he says.

The cost of bad e-mail

Marketers are also increasingly learning that though e-mail campaigns are relatively inexpensive to produce and mail, bad e-mail marketing exacts a price that simply is not worth it.

“People are always talking about how e-mail is so cheap, but think about the costs of a bad e-mail,” says Olrich.

Multiple studies over the years have shown that people will open e-mail based mostly on who is in the “from” line and whether or not that sender has delivered value to them in the past.

“If you’re sending communications and people are not engaged with your program anymore, they’re not going to respond, and they’re not going to help increase revenue from your program. More important, they’re disengaged, they’re not clicking, they’re not responding, they’re not converting,” says Olrich. “You can feel good about yourself that you’re sending e-mail out to your entire list, but the bottom lines is there are fewer and fewer people engaged,” he adds.

Olrich is also a big proponent of so-called lifecycle marketing, or communicating with customers based on their interactions with the merchant. “If you can, as much as possible try to automate using event triggers. For example, if they’re interested in one product, then send them an offer on another they’re likely to be interested in,” he says.

Amazon.com is a classic example of this type of marketing, says Olrich. The online merchant of seemingly everything sends sporadic e-mails to customers touting products they are likely be interested in based on their past purchases.

“They don’t just say, ‘Okay, we’re going to send you an e-mail every Friday,’ ” says Olrich.

Don’t forget the welcome

One of the most straightforward tactics a marketer can employ to be more relevant to customers is to implement a “welcome” strategy, says Loren McDonald, vice president of industry relations for e-mail service provider Silverpop.

“When they first begin the relationship, they’re at a different stage with the company. They probably haven’t purchased anything before,” he says. “So there’s an opportunity to try to give them an incentive to purchase early and move them into the next stage.”

As a result, people who just signed on to a multichannel merchant’s e-mail program should not be getting the same messages as those who have been on the file for a number of years and who are comfortable and familiar with the brand, says McDonald.

“They should get a special program that brings them up to speed and gets them familiar with the brand,” he says. “It’s also a chance for the marketer to understand these people and track what initial subscribers’ preferences are, what they like and what they click on, so the marketer can start to build some profiles around these people and get them into another stage.”

Also, much of consumers’ behavior is predictable enough that triggered campaigns are fairly easy to design up front, says McDonald.

For example, there is always going to be a segment of campaign recipients who click on a message but don’t buy.

“You can predict that, so in advance of that you can create a follow-on trigger-based e-mail that would automatically extend the discount, or offer free shipping or a buy one-get one free,” says McDonald.

“Those people are motivated to buy. They’ve already shown some interest. I guarantee that by putting that kind of program in place, it will out pull sending just another general broadcast e-mail.”

As an example of a marketer failing to move the customer into another stage when it was time, McDonald recounts the tale of how he recently bought a refrigerated wine cellar from a merchant from whom he’d been receiving catalogs for 15 years, and, whom he’d been receiving e-mails for one or two years.

The wine cellar McDonald purchased is one of the most expensive items the merchant offers, he says. Previously, he had made only minor purchases. As a result, the wine-cellar purchase should have put him in a high-value segment of the merchant’s database, he says.

It didn’t: “After I purchased the cellar, I received a basic order confirmation along with an average nine e-mails a month, none of which acknowledged this significant purchase,” he says.

Among the types of follow-up e-mails McDonald says the wine merchant could have sent are a customer service message asking if everything arrived okay, with an upsell such as an extended warranty pitch; a product replenishment e-mail reminding him that the unit’s filters need to be replaced annually; or simple cross-sell messages offering related items like wine books, glasses and decanters.

Olrich contends that multichannel merchants no longer have any excuse not to segment their files based on behavior.

“With e-mail you have dynamic content, so it’s very easy to execute a segmentation strategy,” he says. “If you’re working with any of the leading e-mail service providers, they have those capabilities. So there’s no reason why you shouldn’t be doing segmentation and there’s no reason you shouldn’t be delivering dynamic content.”

E-Dialog’s Buck agrees: “We all do it. We all do it differently, some of us do it better ,some of us do it worse, but the bottom line is [no matter which of the top e-mail service providers a marketer is using], there is a tool set available that will allow them to get smarter about this stuff.”

The dangers of mailing inactive names

Another reason for the shift away from tonnage e-mail marketing is that merchants are increasingly getting wise to the fact that great danger lurks in the inactive portions of an e-mail file.

“That’s where your complainers are, that’s where your spam traps are and that’s where your undeliverables are,” says Buck. “And from a good old fashioned direct marketing 101 point of view, those are the people who aren’t responding, so if you remove them after you’ve done some logical, systematic reaching out to those people to say ‘move up or move out,’ then move ‘em out.”

Removing non-responders is also a case of simple marketing arithmetic, says Buck.

“If we get those people out of the database, the math changes,” he says. “You’re now mailing to fewer people who aren’t going to respond, and you’re mailing to more people who are likely to respond, so your opens, clicks and conversions all go up.”

Also, even if the addresses have been fully opted in, the segment of the file of people who haven’t clicked on anything for months on end is the most likely segment to contain people who will hit the “report spam” button.

Spam complaints are the top metric Internet service providers use when determining whether or not to block incoming e-mail or divert it to their subscribers’ spam folders. If enough people complain, it doesn’t matter how many levels of permission the marketer has obtained, there will be delivery troubles.

Also, Internet service providers such as Yahoo, Microsoft Hotmail and AOL turn abandoned e-mail addresses into spam traps. The reason: Spammers are notorious for having dirty lists. The more spam traps a marketer hits, the more that marketer begins to look like a Viagra spammer. How many spam-trap hits is too many and which addresses are the traps? Only those on the ISPs’ anti-spam teams know, and they aren’t telling because, if they do, spammers will be armed with crucial information to help them scam their way past the ISPs’ spam filters.

What to do with inactive addresses

Responsys’s Olrich says his clients will typically flag e-mail addresses that have been inactive for 180 to 360 days, depending on the client.

“They won’t necessarily eliminate it from the database, but they’ll stop mailing to it, and they won’t see any decrease in conversions,” he says.

It may be helpful to think of the inactive portion of an e-mail file the way trade magazine publishers think of their subscriber files, Olrich adds.

“If you’re getting a free magazine, they want to know if you’re engaged, so you have to renew every year,” he says. “The same principle can be applied to e-mail.”

For instance, Olrich says, “If I haven’t been active or engaged and haven’t click in a particular time window, you can send an e-mail saying ‘please renew,’ or ‘we’re not going to send you e-mail from X, Y or Z brand unless you renew.’ ”

Most multichannel merchants will, of course, recognize this tactic as the good old last-chance catalog.

Olrich does not recommend erasing the customer names that still fail to respond from the database, however. “If they come back to the site and do something — even though they’re not getting e-mail from me — as a marketer, I’m going to want to know that,” he says.

“We just put a flag in the database so we know we’re not sending mail to them.”

Amazon.com is a classic example of lifecycle marketing. In asking for customer e-mail preferences, the site states: “We want to stay in touch, but only in ways that you find helpful. Select from the options below and click Save when you are finished. …” Customers can also choose to receive no e-mail.