To rise above the spam, retailers are turning to a host of new email marketing technologies
By Peter Lucas
Every day Liz and Tom Sublewski find one or more email marketing messages in their respective e-mail boxes at home or work. More often than not, they delete the messages before opening them, and of those they open, they delete the majority after reading the first sentence.
The couple receives 20 messages a week between them and even more during peak shopping seasons. They regularly buy merchandise online and expect to receive many permission-based and non-permission-based email marketing messages. But they are selective about what they read. “We receive a lot of spam and once I recognize it, I hit the delete button without viewing it,” says Liz Sublewski.
U.S. marketers will send 209 billion emails in 2004, up from a projected 16.8 billion this year, according to Cambridge, Mass.-based Forrester Research Inc. Creating campaigns that overcome the apathy of consumers like the Sublewskis is a major challenge facing Internet retailers.
“There is only going to be more clutter,” declares Cathleen Santous, a senior market analyst for eMarketer, a New York-based e-commerce research firm. “It won’t be enough just to get a click-through, more emphasis is going to have to be put on achieving the goals of the campaign and that means getting recipients to buy.”
Keeping track
To help Internet retailers increase buy ratios from email marketing campaigns, software vendors and application service providers are delivering applications that generate more detailed buying data and meld text, images and audio.
These new tools are expected to give Internet retailers the ability to customize each message in a campaign, make the messages more enticing and provide proactive customer service by automatically sending messages that update customers on the status of their order or of a future auction or sale.
The new generation of programs can also compile customer buying profiles and personal preferences, track the percentage of messages that translate into sales and recommend frequency rates for individual names on a mailing list based on click-through patterns.
Additionally, email marketing programs can detect the technological capability of individual recipients. This capability is key, since some consumers do not have email programs that enable their computers to translate the rich media capabilities of email marketing applications into a readable format. Nor do all hardware platforms that can run email applications, such as personal digital assistants and web-enabled cell phones, have the ability to reproduce graphics and audio.
“Email marketers have to be experts in personalization and technology today,” insists William Park, chairman and CEO of Digital Impact Inc., a San Mateo, Calif.-based ASP for email marketing services. “The primary obstacle for the marketer is creating the best message to be viewed in the right media format.”
The increasing sophistication of email marketing applications has brought Internet retailers to understand that delivering the message in a format that can be viewed by the customer is a key building block for healthy click-through and purchase ratios.
Born to run a program
Programs that detect whether consumers can receive graphically rich HTML email documents send a message back to a server on which the graphics for the email are kept. Graphics for HTML email messages are kept separately on a server because unlike text, they cannot be embedded in an email message. When an HTML-based email message containing graphics is opened by an email program that can read HTML, coding within the message notifies the server to instantly download the graphics to that email. If the recipient’s email program cannot read HTML-based messages, no message to download graphics is sent to the server and the message appears as plain text. “Graphics have to reside outside the email message, but text does not because it resides within the email message,” says Kate Leahy, director of marketing for New York-based Bigfoot Interactive, an email marketing ASP and agency.
Once Internet retailers know the format in which to send each customer a message they can focus on personalizing content. “The technology is out there to get at different levels of information about the customer so you can create more targeted campaigns,” says Steve Rudman, vice president of relationship marketing for Pasadena, Calif.-based Ticketmaster.com. “The more customization, the more relevant your campaign.”
Ticketmaster, which attracted 3.5 million visitors during July, works with Lexington, Mass.-based e-Dialog Inc. to create targeted email campaigns. In 1999, Ticketmaster created a three-part campaign aimed at retaining customers and selling products associated with rocker Bruce Springsteen. The campaign targeted customers who purchased tickets to Springsteen’s 15 shows at the New Jersey Meadowlands. About 14,000 people bought tickets online. Ticketmaster frequently runs promotional tie-ins with performers to whose shows it sells tickets.
Phase one of the campaign sent a thank you note to each customer. Phase two, sent a few days before each show, was a message promoting links to sites where ticket holders could purchase Springsteen CDs, as well as links for directions to the arena from their home address and a seating chart. The final phase of the campaign sent a message to ticket holders within three days after the show they attended and provided the list of songs played during that show (Springsteen changes his set list for each show). The message included links to buy the CD for each song on the list and a promotion for a tour T-shirt available only to concertgoers who bought tickets online.
The campaign, which was customized to Ticketmaster’s specifications but did not require customized software, proved highly successful. Of the 49% of customers who clicked through the final message, 20% made a purchase. In comparison, email marketers average a 10% click-through rate on in-house lists and a 2.5% conversion-to-buy rate, according to Forrester Research. Ticketmaster declines to reveal the cost of the campaign or the return on investment.
“We want to create promotions that are highly relevant to customers so they look forward to future mailings from us,” explains Rudman. “By building these types of promotions with artists, we can effectively communicate with fans of the artist and keep them coming back to our site to get ticket information about future events.”
Don’t let ‘em go
Due to the high cost of attracting new customers via email marketing campaigns, retention is fast becoming the focus of many email marketing strategies. It costs Internet retailers about $286 to generate a single sale from acquisition campaigns built around list rentals, compared with $2 for retention campaigns built around in-house lists, according to Forrester Research.
Such economic advantages are not lost on Internet retailers. “The cost of using email just to get people to visit the site is high, especially during high clutter periods when the toss rate goes up,” says Robert Levitan, CEO of New York-based Flooz.com, which markets an alternative online currency delivered via email and is accepted by select merchants. “Email is suited to building the lifetime value of existing customers.”
To boost customer retention, Flooz.com’s email marketing application identifies whether Flooz account holders have activated their account, inquired about a merchant partner and the remaining value in their account. That data is then used to segment customers and create personalized messages based on customer behavior and buying preferences.
“We can send mail to someone we know who likes books and that we know has money in their account with a message saying we just signed a new bookstore chain, and by the way here’s an incentive if you buy now,” adds Levitan. “We can also track click streams to measure which percentage convert to sales to determine the value of that campaign and that customer.”
Flooz uses Digital Impact’s Email Exchange Network, which tags each email with a URL that is recorded by the network when the message is opened and which tracks click streams and purchase data on a real-time basis. Digital Impact analyzes the data according to client specifications. Once the data is crunched, it is sent back to the client and entered into a customer database used to develop email campaigns. On average, clients pay a minimum of $10,000 per month to use the network, according to Forrester Research. While that may seem pricey, Digital Impact says users pay less than $1 per customer response through the network.
The growing emphasis on personalization has Internet retailers paying closer attention to mailing frequency. While many customers on in-house mailing lists have given the e-retailer permission to market to them via email, bombarding them with messages can seriously damage the customer relationship.
Turn down the volume
“Since the ability to track whether a customer has opened an HTML message exists, retailers need to listen closely to individual customer click-through rates to understand whether they are over marketing to a customer,” says Bigfoot’s Leahy. “When messages go unopened, you turn down the frequency. This lets the customer have a sense of control and shows that the marketer respects what they are saying through their response rate.”
Bigfoot’s Generation E Network reports the number of messages sent to and opened by each email address in a specific campaign. The data is supplied to clients who scour it for trends and then determine the next step. “The network can automatically adjust frequency based on behavior patterns, but since understanding frequency involves analytics, we prefer human intelligence,” says Leahy. “Unopened messages may not be a symptom of the frequency, as much as the focus of the messages previously sent. Automation does not necessarily reveal that.”
Egghead.com is putting the frequency theory to practice with its auction notification service. Although the Menlo Park, Calif., Internet-based software retailer holds daily auctions, it sends no more than two auction notices a week to customers. The notices are usually for items in which customers have expressed interest.
“Quality is a key factor,” says Barry Peters, vice president of marketing for Egghead.com. “We know these messages will get read, so we want to make them as relevant as possible.”
Despite taking care not to irritate customers with unwanted email, some customers do opt out of email marketing databases. That has prompted Egghead.com to search for ways to use the analytical capabilities of email marketing applications to figure out the value of customers that ask to be removed from a mailing list, based on their responses to prior campaigns.
“It takes a lot of digging to figure out the value of an unsubscriber, because we can’t characterize them,” says Peters, who will not say how the company intends to achieve that goal and what it might cost to implement such a program. “It could be they are disenchanted with email marketing or that they have gotten what they need from us through previous campaigns and no longer have a use for this service.”
One way to keep consumers from opting off email lists is to make responding to the message easy. The most obvious method is to include a reply key, rather than a link to a web site. “When people open their email they are not necessarily looking for a web site to visit,” argues John Rizzi, president of e-Dialog. Rizzi adds the inclusion of reply buttons can boost response rates as much as six fold. “When email is sent to a customer, show you know them, build the piece to their preferences,” he adds. “Don’t waste their time. It is easier to opt off an email list than in any other marketing medium.”
Performance pricing
Analyst Santous predicts opt-in email volume will reach 61.1 million messages by year’s end, up from 40.1 million in 1999. Email marketers will have to place a higher premium on the return on investment from their campaigns.
“As email clutter grows, performance pricing will become more prevalent,” says Santous. “It will no longer be enough to pay for getting the message delivered and opened. Users will pay based on whether the goals of the campaign are achieved.”
San Francisco-based Post Communications, a Netcentives company, is one vendor offering pay-for-performance pricing. Client prices are set according to the value of each customer name in a client database. “It is to our benefit then to increase the value of each name in that database,” says Post Communications President Cheryl Vedoe. “Performance pricing models are becoming part of the marketplace.”
With the emphasis on performance pricing expected to grow, precision marketing will become more critical, according to email marketing experts. “The key to email marketing, which is still in its infancy, is to create meaningful dialog with customers in a responsible way,” says Rizzi. “Precision email is delightful to read, and getting customers to read your email is the first step to generating incremental sales.”
Peter Lucas is a Chicago-based freelance business writer. | 
