February 13, 2009, 12:00 AM

Cultivate good customers and e-mail ROI will grow, authors say

The authors of a new book on e-mail marketing say retailers drive away many of their best customers by sending irrelevant messages. Send relevant e-mails and they will open them and buy, say the authors, both executives at e-mail vendor e-Dialog.

Sending an e-mail is so cheap you might as well send every e-mail to every customer, right? Dead wrong, say the authors of a new book entitled, “Successful E-mail Marketing Strategies: From Hunting to Farming.”

They argue that bombarding consumers with e-mail blasts is akin to hunting, in that the marketer is setting traps, hoping to capture new customers. Instead, marketers should adopt a strategy more analogous to farming, cultivating their best customers by sending them relevant e-mails and using e-mails to build a relationship, say the authors, Arthur Middleton Hughes and Arthur Sweetser. Hughes is senior strategist and Sweetser chief marketing officer at e-Dialog, an e-mail service provider that was acquired last year by e-commerce technology provider GSI Commerce Inc.

At one major retailer an e-Dialog analysis found that 1% of the customers on the list accounted for 50% of the revenue from e-mail marketing, Sweetser says. But the retailer was not marketing to those customers differently. And that’s not atypical, he says. “Maybe 10% of our e-commerce retailers have messaging tailor to prior purchase and loyal customers,” Sweetser says.

For many retailers, only 10% of the individuals on their e-mail lists ever make a purchase, Hughes says. “The 10% who do should be treated like kings,” he says. “They’re the ones keeping the company going.” That includes sending them relevant e-mail, sending birthday greetings and thank-you notes, and encouraging interaction by inviting them to review products they’ve bought.

Relevance is key, says Hughes, who notes that his wife unsubscribed from e-mails from Macy’s-a store she likes to shop at-because she was getting five e-mails a week from the department store chain, most of them irrelevant. He says sending relevant e-mail starts with building a database with information about customers. That can include information the retailer can gather itself-based on purchase history and short surveys-and data from outside companies that collect consumer information.

Once a retailer knows something about a consumer, Hughes says it’s easier to send that individual e-mails relevant to him, and avoid sending messages that will only annoy him. “If he lives in a high-rise don’t tell him about lawnmowers. If he’s 60 years old don’t tell him about baby food,” Hughes says. “A database is a bunch of information that helps you build long-term relationships.”

The authors also advise marketers to determine the lifetime value of customers, information that can help a retailer decide, for instance, how much to spend to acquire new names for an e-mail list. For e-Dialog’s retailer clients, the average value of an e-mail address is $20 in sales per year, Sweetser says.

In determining customer value, marketers should remember to factor in the offline impact of e-mail. Hughes and Sweetser say that e-mail generates $4 in store sales for every dollar of web sales. And just e-mailing customers to tell them they have a catalog can make a difference-housewares cataloger Miles Kimball found in a test that customers who received an e-mail telling them a catalog was coming bought 18% more than customers who did not receive that e-mail. “The e-mail just said, ‘Look in your mailbox,’” Hughes says. “That shows that e-mail can work in conjunction with direct mail to boost sales, and that’s particularly important right now.”

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