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IQ News: Analysis - Got E-mail?

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IMarketers find direct e-mail campaigns lead to better response rates and true blue customers.
an age where information is omnipresent, disenchanted consumers have honed the ability to tune out the glut of advertising. The big-budget campaigns and marketing ploys that clog airwaves and stuff mailboxes are doing more to alienate rather than attract customers.
But what if marketers could do a better job finding the customers who really matter to them--the ones who eagerly look for the latest cell phone deal or the newest computer updates? The ascension of the Internet as a viable advertising medium married to the upswing of permission marketing offers this promise. To cut through the clutter, more and more marketers are launching opt-in e-mail crusades to generate and retain a consumer base. This permission-based model enables companies to deliver personalized, relevant and anticipated content to individuals who signal interest in their particular product, service or subject matter.
Rather than broadcasting a mass marketing message to millions, many of whom are not qualified leads, permission marketing only addresses consumers who volunteer to receive the pitch. These volunteers or "hand raisers" opt in to the e-mail campaign a number of ways--signing up on a company's Web site or one of the company's partner sites, filling out an offline request form or offering their e-mail address to a catalog or phone marketer.

PEOPLE POWER
More importantly, permission marketing places the power in the hands of the consumer, who can opt out of a campaign at any time with the click of a mouse. According to e-mail marketers, consumers can end the e-mails by clicking on the "opt out" feature located on the header or footer of the marketing message.
With opt-in e-mail, consumers invite companies to court them electronically. Once the courting begins, however, companies look to take the relationship to the next level, turning prospective individuals into loyal, life-long customers. They attempt to do this by offering consumers information and incentives to drive traffic to their e-tail sites or bricks-and-mortar stores in hopes of the eventual consummation of the relationship--a transaction.
This opt-in online surge has prompted growth in e-mail marketing budgets and given birth to a host of list owners and e-mail marketing services. According to Cambridge, Mass.-based research firm Forrester Research, by 2004, U.S. marketers will send 200 billion e-mails generating a $1.6 billion opportunity for e-mail list owners and $3.2 billion for e-mail marketing services outsourcers.

IT'S THE RELATIONSHIP, STUPID
Quickly, e-mail is developing into as pervasive a medium as television or radio. It has become a ubiquitous part of most people's lives. Almost as routine as brushing one's teeth, checking e-mail has worked its way into the daily routine of millions. Eager to exploit its boundless opportunities, many marketers have enlisted the services of companies created for just this purpose, each approaching the task in a unique way.
"One of our goals is to build customer relationships, not only to send merchandise offers," says Pankaj Srivastava, manager of relationship marketing at Chipshot.com. The Sunnyvale, Calif., online golf shop uses Responsys.com, an e-mail marketing service, to promote customer retention. Responsys provides a Web-hosted application that is designed to personalize interaction with opt-in audiences. The downloadable software enables businesses to create, launch and monitor marketing campaigns on the Internet. For instance, says Srivastava, "If you're better at your short game than your long game, we might send you an e-mail with a tip to improve your [long] game. Then, we'll suggest a product based upon that game." Consumers who choose to receive information from the Chipshot site reveal their game's strengths and weaknesses, so the site can tailor offers especially for them.

YOUR HEART'S DESIRE
Similar to 18-month-old Responsys, Palo Alto, Calif.-based ClickAction also provides Web-based e-mail marketing technology. Born out of last year's merger between e-mail marketing firm MarketHome and e-tools provider mySoftware.com, the service integrates with legacy databases, giving marketers the ability to conduct permission-based e-mail campaigns, collect and profile customer data and access real-time results.
"ClickAction has helped me stay in touch a lot better with my customers," says Kevin Jackson, a representative from igogolf.com, an electronic mail order golf store and ClickAction client. "It allows me to give them information that they desire, when they desire it. It lets me split my customers up into categories so that I may convey knowledge that they request."

RETENTION TOOL
Like Chipshot.com and igogolf.com, many companies use e-mail marketing as a customer retention tool. According to Forrester, marketers report high conversion rates from e-mail sent to a company's in-house list of customers and prospects. On average, marketers receive clickthrough rates of 10 percent on in-house lists. Of those clickthroughs, 2.5 percent make a purchase.
Anand Jagannathan, co-founder, president and CEO of Palo Alto, Calif.-based Responsys confirms the finding. "The best producing lists are the ones from [our clients'] own Web sites."
Bigfoot Interactive, another e-marketing services company, also preaches customer retention. "Retention and loyalty are key drivers of this business," says Jim Hoffman, CEO of Bigfoot. The 3-year-old company, based in New York, offers strategic e-mail consulting, creative design, database builds, e-mail delivery and software technologies for companies looking to build online customer relationships. Bigfoot's client list includes MCI WorldCom, Clinton, Miss.; Borders.com, Ann Arbor, Mich.; and Prodigy, White Plains, N.Y. "There is a need to leverage this new opportunity, but companies don't have the resources within," so they go elsewhere to find them, Hoffman says.
In a January 2000 Forrester survey of 50 e-mail marketing managers, 57 percent say they outsourced the delivery of their e-mail marketing campaigns and 51 percent outsourced list management. The survey also indicates that marketers who outsource the delivery and list management of their e-mail have higher conversion rates than those who keep e-mail in-house, 64 percent versus 36 percent.
In its report The Email Marketing Dialogue, Forrester says, "Outsourcers increase response rates by creating detailed, sales-oriented reporting systems that allow marketers to create more valuable segmentation strategies." In many cases, companies that specialize in e-mail marketing carry the reporting and segmenting mechanisms, plus the expertise that in-house direct marketing departments lack.

JOB SHARE
Direct market strategist Ryan Minor agrees. Minor, who heads
e-mail marketing at Allaire Corporation, an e-business platform provider, farms out some duties to list broker yesmail.com. Cambridge, Mass.-based Allaire tries to entice Web developers, IT managers and marketing managers with its Web software and services. However, the technology company refuses to broadcast a blanket message to all three segments. Instead, it tailors a different message and incentive for each audience.
"If you are hands on, you're going to want to download the software," explains Minor. "If you're in a more managerial position, you're going to want to know why your company should download the software." Allaire delivers copy to yesmail.com, who then transmits it to the rented lists.
Contrary to many companies, Allaire outsources e-mail marketing for lead generation, while it keeps customer retention efforts in-house. "Our audience is Web-savvy, so it's a perfect marketing tool to reach them through the Web," Minor says.
List services, such as Vernon Hills, Ill.-based YesMail and New York City-based NetCreations lend e-mail addresses to marketers looking to drum up business from qualified consumers. "For instance, a bride-to-be may opt-in to find out more about cruises for the honeymoon. So, she might receive targeted e-mails from Victorian or Caribbean cruise lines," explains Tony Priori, vice president of marketing for YesMail, a list provider for clients such as computer company Hewlett-Packard, Palo Alto, Calif. and Internet superstore Buy.com, Aliso Viejo, Calif.

NO JUNK
Unlike companies that swap the addresses of unsuspecting targets, YesMail and NetCreations obtain permission from people who sign up on their partner sites to receive offers or information about specific areas of interest, such as technology or travel. "We will not do anything that doesn't revolve around explicit permission from the consumer," Priori confirms. "The last thing you want is someone junking up your inbox without your permission."
To ensure a permission-based business, NetCreations offers consumers a double-opt-in feature. After an individual fills out an interest form on one of NetCreations' 200 partner sites, the service sends an e-mail to that individual, who then has to confirm that they signed up for the service. NetCreations boasts a database of more than 6 million consumers and a client list ranging from "small mom-and-pop shops" to large companies, such as retailer J. Crew, Lynchburg, Va., and media and marketing company Ziff-Davis, New York. "It's a better, faster and cheaper way to hit their target on the Web," says Rosalind Resnick, chairman and CEO of NetCreations.

MONEY SAVER
Forrester Research backs Resnick's claims. In its January 2000 analysis, Forrester reports that the high cost of direct mail and inefficiency of traditional media like TV and radio ads have forced marketers to focus on alternative advertising. The report states "Email eliminates postage, paper and printing that account for 60 percent of direct mail's expense. While mailing a catalog costs 50 cents to $1, even highly personalized email costs at most 5 cents to 10 cents to deliver."
MotherNature.com, an online retailer of vitamins, supplements and minerals, assembles its e-mail newsletter and sends it out to its member base at a fraction of what it would cost via direct mail. Using Responsys' software, "we can write 30 different articles and come up with 2,500 different combinations based on targeting criteria and what the consumer wants," says Wendy Cebula, director of retention marketing for the Concord, Mass. health products site.

TOO GOOD TO BE TRUE?
Due to economics, efficiency and ease, e-mail marketing's popularity has soared. However, marketers worry that inevitably its growth will lead to its demise. Just like other ad vehicles, the opt-in e-mail boom eventually could overwhelm consumers and reduce the medium's effectiveness. To combat the decline, marketers must reject sending spam to unsuspecting recipients. Instead, they should continue to deliver content and product offerings that are personalized, relevant and anticipated. n

Company Cost Clients Comments

E-Mailboxes etc.
The following list, compiled by Forrester Research, represents only a few of the players in the exploding opt-in e-mail market. As the industry continues to grow, so too will the supply of list brokers and e-marketing services trying to win business from companies moving online. What businesses can expect for their money differs with each company. List brokers usually rent lists and send e-mails on a cost-per-address or CPM basis. While other e-mail marketing services offer full-service shops, which include e-mail consulting, creative design, database builds, e-mail delivery and software technologies.--AM