This past holiday season, West Marine scored a 16% conversion rate — about eight times its typical rate — with an e-mail campaign that delivered digitized versions of its catalog to 250,000 opt-in customers.
But while the Watsonville, CA-based boating supplies marketer directed the campaign, it didn’t actually send the e-mails. West Marine delivered PDF files of the catalog to New York-based online marketing firm DoubleClick, which converted the files to create the digital catalogs and sent the e-mails.
Indeed, about three-quarters of catalogers use third parties to execute their e-mail marketing campaigns, estimates Tom Detmer, president of the e-marketing services group at Experian, an information solutions company with U.S. headquarters in Orange, CA.
As a rule of thumb, catalogers running 15 or more e-mail campaigns a month can justify the expense of employing an inhouse campaign management specialist, says DoubleClick vice president Court Cunningham.
Along the same lines, Detmer says that catalogers spending more than $1 million on outsourcing should analyze the costs of bringing the process inhouse: “They might have enough scale.”
Just as very large catalogers may be able to afford handling e-mail campaigns entirely inhouse, so might very small catalogers, says Steve Emory, president/CEO of Eagle E-Mail, an e-mail marketing firm in Willow Grove, PA. Companies that send fewer than 100 e-mails a day typically can manage the program themselves, he says.
Fresno, CA-based Bouquet of Fruit, a small marketer of fresh fruits, not only decided to handle its e-mail campaigns inhouse, but it also chose to use an e-mail application it developed inhouse. President Stephen Paul says he wanted the level of control that comes with handling e-mail promotions internally. While Paul won’t say how many e-mails he sends, he notes that they typically go out before major holidays and to promote the company’s summer selection.
A minority of marketers license or buy a service provider’s software to run on their own systems. Double Click’s Cunningham estimates that about 20% of his company’s customers have chosen this option, but he says that could grow to 30% as catalogers decide to tie their e-mail applications into other systems, such as customer relationship management applications.
LexJet Corp., a Sarasota, FL-based direct marketer of digital printing supplies, is working with Burlington, MA-based Revenio on its e-mail marketing program. LexJet initiated an e-mail program in October targeting photographers moving from analog to digital photography. While Revenio currently hosts the software, LexJet may bring it inhouse later this year, says Steve O’Dea, LexJet’s director of Web development. O’Dea then could integrate the software with other applications, such as LexJet’s order entry system.
The software needed to run e-mail programs inhouse can cost as little as a few hundred dollars — or as much as several hundred thousand dollars. According to Detmer, a company with fewer than 50,000 names in its database could probably use Microsoft Outlook to send its e-mails. Outlook costs $109; it can also be purchased as part of MS Office, versions of which cost $150-$550.
On the higher end, DoubleClick’s software starts at about $35,000 for businesses with about 50,000 names in their database and can run up to $600,000. The more expensive packages offer greater segmentation and tracking capabilities.
Not every marketer wants to be bothered with buying and maintaining e-mail software. Multichannel wine marketer Geerlings & Wade is a case in point. It decided to outsource the execution of its e-mail campaigns so that it could “focus on high-level strategy,” says director of e-business Karen Iannone. “We prefer not to focus our internal resources on minor, albeit important, details such as making sure customer X gets our HTML version vs. our text version.”
The Canton, MA-based marketer launched a comprehensive e-mail initiative about a year ago, Iannone says. Each month, Geerlings & Wade sends out more than 100,000 e-mails to its most valuable customers. By testing the offers and creative copy, and by segmenting customers by purchase history, Geerlings & Wade has seen conversion rates improve by as much as 50%, Iannone says.
The prices for hiring an e-mail service provider have declined during the past year. Typically, catalogers pay a setup fee, along with a charge for each e-mail sent. Setup fees can run into the tens of thousands of dollars. But John Rizzi, president/CEO of e-Dialog, a Lexington, MA-based provider of e-mail marketing services, says the typical cost per e-mail is 0.5 cents-1 cent. The fewer e-mails a cataloger sends and the more complex they are, the higher the cost per e-mail.
Self-service or full
Should you decide to work with a service provider, you’ll need to choose between what often are referred to as self-service and full-service models. The self-service model has become the most popular way to go, say some insiders. Typically, the cataloger retains responsibility for handling the campaigns and managing the mailing lists.
“Most companies have their own marketing department but don’t have their own post offices. This is the same thing,” says Josh Mailman, president of M4Internet, a provider of e-mail solutions in Foster City, CA.
The flexibility of the self-service model appeals to Carly Glassmeyer, e-commerce marketing manager with Sur La Table, a Seattle-based kitchen products marketer. “You can launch the campaign when you want. If we have an event in Kirkland, WA, tomorrow, we can upload a program and launch it,” she explains.
For a typical campaign, Glassmeyer and her colleagues create the e-mail promotion and develop the list of customers who will receive it, using the service provider’s software. Then Glassmeyer electronically sends the campaign to the provider, which sends the e-mails through its servers.
The full-service model, as its name indicates, requires the e-mail solutions provider to handle more of the tasks involved with executing the e-mail campaign. For instance, the service provider, rather than the cataloger, may determine which customers will receive which promotion.
Cynthia Clotzman, vice president of Santa Monica, CA-based marketing communications firm The Phelps Group, advises against relying too heavily on e-mail providers to handle your customer list. “They may not notice things in the data that you would,” she says.
For instance, you might know, based on history, the general response rate that a certain type of mailing should generate. A real-time report indicating that response to the latest such mailing is off by 50% would likely lead you to search for an error in the mailing — but a third-party provider may not pick up on the response shortfall in time.
On the other hand, e-mail firms can provide an independent, objective look at your customer list, argues David Kleinberg, senior vice president of marketing with Digital Impact, an online direct marketing solutions provider in San Mateo, CA. For example, one of Kleinberg’s clients had segmented its customer list only by demographic traits, such as income or gender. Kleinberg’s team found that customers who had recently responded to e-mails were the most likely to purchase again. By targeting these most recent respondents, the company was able to achieve a 25% jump in its conversion rate.
For all the benefits of working with a service provider, keep in mind that it’s not a decision you should make lightly. Once you start work with an e-mail service firm, you are embarking on a huge commitment to the partnership, notes Tony Gasparich, vice president of Internet for West Marine. To get the most out of the relationship, you have to share your strategies and the particulars of your industry with the service provider. “It’s not something you whimsically change,” Gasparich says.
How to Choose an E-mail Service Provider
Boating supplies cataloger/retailer West Marine used to work with a service provider that sometimes sent out e-mails after the offers contained in them had expired, recalls vice president of Internet Tony Gasparich. Not only are such promotions ineffective and a waste of resources, but they often alienate customers as well.
West Marine’s experience underscores the importance of carefully vetting service providers before making a decision. Among the things to consider:
- ABILITY TO EXECUTE
The firm should have effectively run similar campaigns. “Probe for success stories with other clients,” advises Karen Iannone, director of e-business with Geerlings & Wade, a direct marketer of wines. “How did the firm help them achieve their revenue goals?” For instance, e-Dialog, the e-mail firm working with Geerlings & Wade, previously worked with the National Football League, successfully growing its e-mail campaign from its inception. This experience applied to Geerlings & Wade’s campaign, which would follow a similar path.
- STATE-OF-THE-ART TECHNOLOGY
You want to know that the firm is continually improving its technical capabilities. For example, it should be able to work with the major e-mail platforms available and to segment customers with the specificity your business requires, says Ed Henrich, vice president of strategic development at YesMail, an e-mail marketing solutions firm in Chicago.
- REPORTING CAPABILITIES
“Ask if you can get what you need to make marketing decisions,” says Josh Mailman, president of e-mail solutions provider M4Internet. For instance, can you compare the conversion rates generated by one offer against another?
- SUPERLATIVE SECURITY
Ask how your data will be protected, in transit and in storage. Ask for documentation showing that the e-mail provider’s security processes are audited annually by an independent party.
- KNOWLEDGE OF PRIVACY ISSUES
“We rely on our service provider to be leaders in the business in terms of the legal side of e-mailing,” says Geerlings & Wade’s Iannone. E-mail firms need to stay on top of changes in legislation.
- FINANCIAL STABILITY
You want assurance that the firm will be still around in the future. As much as possible, review its financial statements. Also, request a clause in your contract that says you can obtain the software if the firm goes under, says Cynthia Clotzman, vice president with The Phelps Group, a marketing firm in San Mateo, CA.
- ONGOING COMMUNICATION
To tap into your vendor’s expertise, you need regular contact with the firm. For instance, e-Dialog suggested to Iannone that Geerlings & Wade personalize the subject lines of its e-mails. That idea boosted the e-mail “open rates” 5%-10%, she says. Iannone talks with her counterpart at e-Dialog several times a day.
- PROVEN PROCEDURES
The firm should have clear, logical processes for testing e-mails before they go out and for changing an e-mail campaign. For example, the company should be able to state how it reviews e-mails for typos and faulty links before they’re sent to customers. — KK