In its second-largest acquisition, Amazon buys the company for $970 million.
Blockbuster brings movie customers to its stores with an e-mail newsletter.
In spite of the number of commercial e-mail messages that arrive in consumers’ inboxes every year, e-mail marketing is still a work in progress. Analysts constantly urge marketers to apply the same time-tested techniques to e-mail marketing that they apply to direct mail. Just as direct marketers test envelopes and wording, consultants urge e-mail marketers to test subject lines. Direct marketers test content and offers with A/B splits, so should e-mail marketers, consultants say. Ditto for response rates.
Blockbuster Inc. took those admonitions to heart last year when it began considering an e-mail newsletter to drive movie rentals. “We really wanted to determine the long-term value of e-mail as a marketing channel and ensure, before we went any farther with it, that it could drive a return on investment,” says Michelle Malish, director of CRM programs for Blockbuster.
The results: E-mail newsletters worked well enough that they are now part of the regular marketing mix for Blockbuster. “From the results of the six-month program, we decided to turn e-mail into a full-blown channel,” Malish says. “It delivered a positive return even higher than direct mail.” Blockbuster began integrating e-mail into its regular marketing in the fourth quarter.
Variable vs. regular
Blockbuster’s e-mail strategy is particularly interesting because it is oriented to driving offline traffic. Many retailers who use e-mail profess to be channel agnostic when it comes to how customers respond to the e-mails. But Blockbuster can’t afford to be channel agnostic since, at the moment, it has only the one channel of 8,500 stores worldwide for video rentals. “Using e-mail to promote offline sales is somewhat unusual, although it is becoming increasingly common as retailers get a better understanding of the relationship between offline and online channels,” says Jared Blank, analyst at Jupiter Research Inc. who follows the e-mail marketing business.
With its e-mail agency Quris Inc., Blockbuster tested e-mail marketing from a number of perspectives. For one thing, marketing managers wanted to know if customers would respond better to regular e-mail newsletters or to variable frequency newsletters. It told half its base it would send newsletters about what’s new at Blockbuster every two weeks and the other half that it would send newsletters on a varying schedule, although no more than two or three a month. It included a discount coupon in the newsletters as a tracking mechanism.
Blockbuster liked the idea of variable frequency because it would allow greater ability to respond to events. “We wondered if we could get that flexibility and not impact response rates,” Malish says. Six months later, it found that not only did variable frequency not harm response rates, it actually produced higher response rates than regular frequency. Since the result goes counter to most marketers’ experience and expectations, the company is at a loss to explain the preference for variable frequency. “Maybe it was the surprise factor that got them to respond better,” Malish says.
Blank notes that a best practice in the marketing industry is regular frequency. In this case, he says, higher response rates to varied frequency may have been the result of events in the store triggering greater interest among users.
Blockbuster also wanted to test whether customers would go through several steps to obtain a coupon. It offered a coupon that appeared in the newsletter and a coupon that required a click-through. In either case, customers would print out the coupon and redeem it at a Blockbuster store. The results were a surprise to anyone who thinks consumers need to face as few steps as possible before they’ll take an action. The click-through coupons generated a slightly higher response rate.
Such results are not surprising, Blank says. “You get better qualified traffic,” he says. “People who really want the coupon will be more likely to click through and more likely to redeem it,” he says.
One factor to take into account when deciding whether to present the coupon in the e-mail message itself or to require a click-through is if the retailer can use the additional space in the newsletter to present information that would result in customers taking further action. Marketing managers believed that the value of presenting additional information in the coupon space and the difference in redemption rates weren’t large enough to warrant making the customers take an extra step to obtain the coupon, Malish says. Thus Blockbuster presents the coupon within the newsletter.
One of the problems that offline merchants face in creating an e-mail marketing program is that of collecting e-mail addresses, Blank notes. “It’s hard for an offline retailer because so many e-mail addresses are collected online,” Blank says. “It’s often much harder to collect e-mail addresses in stores than management expects because it requires a change in behavior of clerks.”
One of the best approaches, he says, is education from the top down. “Management should explain why they want e-mail addresses, that it’s not just another routine activity like mopping the floor at closing time-there’s a real business reason,” he says. Further, that explanation should extend to the customer as well, as there is usually a disparity in the perceived value of giving and getting an e-mail address, he says. “Customers don’t think they’re getting much out of giving their e-mail address, so the store needs to make the benefits clear,” Blank says.
Blockbuster obtained e-mail addresses through new customer applications at stores, direct mail promotions that encouraged customers to go online to sign up, and various online promotions including partnerships and sponsorships that encouraged prospective customers to register with their e-mail addresses. It segments the list based on the age of the e-mail address, how long it has been in Blockbuster’s database and the e-mail addressee’s frequency and recency of store visits.