The Pressure Is On Emailers: Do It Right or Don’t Do It

Guide to E-Commerce Technology

Like the dot-com era itself, e-mail marketing emerged on the business scene several years ago as a fast ticket to fast fortunes. With the Internet offering a free and unprecedented reach to just about any marketing target in homes as well as businesses, e-mail quickly took hold in the minds of marketers as a direct-to-customer tool with a cost-efficiency ratio too good to pass up.

Almost everyone agrees today that too many marketers got the message. By simply playing the numbers game, purveyors of everything from polo shirts to pornography

realized that enough e-mail messages at relatively little cost were bound to produce sales. Now Jupiter Research Inc. reports that the average U.S. e-mail subscriber received more than 2,200 unsolicited e-mail messages last year and will receive more than 3,600 in 2007 if current trends continue.

The result: Plummeting response rates, growing consumer ire and the tarnishing of an entire industry. “It’s been too easy, due to low cost of e-mail, to not apply the same kind of marketing discipline that’s usually a matter of survival,” says Dave Lewis, vice president of deliverability management and ISP relations for e-mail service provider Digital Impact Inc.

For many retailers, running an effective e-mail marketing campaign has become a highly complex affair. They struggle to make their messages stand out above the fray, to find ways to pass through the bulk mail trap of increasingly effective spam filters, and, most important, to avoid annoying customers and prospects with unwanted mail.

Smart and shifty

And marketers aren’t the only ones concerned about protecting e-mail recipients from barrages of unwanted mail. Major Internet service providers like AOL and Yahoo report blocking huge amounts of spam from subscribers’ inboxes, diverting some into bulk mail folders. Yahoo reports it filtered out five times more spam in February than during the same month a year ago and AOL reports blocking as many as 1 billion messages in a single day. In addition, AOL is suing some mailers it believes to be spammers.

The spam crisis has also led to an ambitious new crop of anti-spam legislation. More than 25 states have introduced more than 70 anti-spam bills so far this year in a broad effort to take legislation beyond anti-spam laws already enacted in 27 states. In a sign of how crucial anti-spam legislative efforts have become to marketers, the Direct Marketing Association, a group usually against government regulation of marketing, has called for a federal anti-spam law to provide for a consistent—and tougher—nationwide effort against marketers who e-mail spam.

“The fact is it will take a long time to eradicate spam,” says Kevin Noonan, executive director of the Association of Interactive Marketing, a unit of the DMA. “Spammers are pretty smart and shifty, and they know how to get around the rules.”

The overabundance of spam and the growing efforts to block e-mail are pushing some merchants away from using e-mail as a marketing tool and toward other forms of advertising and promotions. “We’re cutting back on e-mail marketing in favor of Internet search, which has been more effective,” says Peter Cobb, vice president of business development of eBags Inc., which operates eBags.com.

EBags is not alone. A recent survey of 200 retailers by Chicago-based consultants the E-Tailing Group Inc. found that only 27% are e-mailing as frequently as weekly, while 34% are mailing twice monthly. “More retailers are going to twice a month, where we might have seen them on a weekly schedule a year ago,” says E-Tailing president Lauren Freedman.

Forcing improvements

Concerns about spam are forcing retailers to become better marketers. They’ve learned the hard reality that e-mail is no longer a free ride, that they have to constantly try harder to make it an effective means of reaching customers and prospects. As a result, successful e-mail marketers, experts say, are following a dual strategy of sending only permission-based e-mail and developing message content that recipients are likely to find attractive. A central point of this strategy is to build permission-based lists, then continuously engage customers with pertinent messages, reminding them why they signed up to receive e-mail marketing messages in the first place—and making it more likely that customers will respond to e-mail over the long term.

But that’s not an easy task to pull off. It requires constantly figuring out better ways to capture and record permissions, as well as checking the accuracy of e-mail addresses and thinking up new ways to engage customers through e-mail messages that they truly want to open. “You have to remember this is still retailing and you have to sell something,” Freedman says. “You have to engage the customer.”

The key to successful e-mail marketing that keeps customers engaged and clicking, experts say, is to find the right methods that produce better click rates and sales conversion rates for the particular retail audience being targeted. In an ironic twist, the very characteristic of e-mail marketing that led to abuses to begin with is what makes it possible to refine an e-mail marketing campaign—its low cost. “You can’t lose by doing a lot of testing,” says Freedman. “By establishing control groups, you can test different e-mail marketing formats. It’s a pretty cost-effective way to test what works.”

For example, she says, Amazon.com Inc. and Toys R Us Inc. have recently sent e-mail messages with a combination of full-price and discounted offers. This lets them test how customers respond to different offers without hitting them with too many messages. “We see more retailers focusing more on multi-purpose e-mail—more content on fewer messages,” she says.

Constant reminder

Others focus on opt-in e-mail only. Novator Systems Ltd., which manages several retail web sites, including FTD.com and Warner Bros.’ WBShop.com, sends e-mail only to customers who have requested to receive it by accepting offers at the sites. Its most popular and effective e-mail marketing is a reminder service, under which customers choose to receive alerts about anniversaries, birthdays and other dates for which they need to buy gifts. And that kind of e-mail marketing, people like to receive. “In one day, the e-mail conversion rate at one of our sites went from an average 3%-5% to 28% as the result of a reminder service,” says CEO Mark Fox.

Just because customers have signed up to receive certain e-mails, though, doesn’t mean the retailer doesn’t have to continuously manage the list, experts say. “People forget,” Lewis says. “You have to constantly remind consumers why they signed up for e-mail in the first place.”

Another approach that retailers report customers responding to is e-mail promotions tied to specific buying behavior. “We’ve learned how customers responded to swimwear or sleepwear in the past, and then by segmenting our e-mail list based on purchasing behavior, we get a better response rate,” says Ken Weil, vice president of new media for Victoria’s Secret and the head of VictoriasSecret.com. “E-mail marketing is more effective for us now than it was a year ago. As we get smarter about how to approach our customers with e-mail, they respond better.”

Victoria’s Secret, which maintains a list of 6 million e-mail addresses, uses a hosted e-mail service from Digital Impact. It delivers huge amounts of e-mail customized to different groups of customers by shopping behavior, Weil says. “So it’s segmented to the right people at the right time,” he says.

Still others tie an e-mail promotion to specific products that customers have purchased. Hewlett-Packard Co., for instance, designs e-mail campaigns around the lifecycles of sold products. “If they sell you a printer, they know when it needs a cartridge, so they send out an e-mail message or newsletter based on what you bought, when you bought it and when you’ll need accessories for it,” says Lewis of Digital Impact, HP’s e-mail service provider.

Going 1 on 1

Developing a one-to-one relationship not only increases the chances that customers will open the e-mail and respond, but also is valuable in fighting the new spam filters that Internet service providers have implemented, experts say. While ISPs such as Yahoo and AOL won’t reveal what they base their spam-blocking on, for fear that spammers will learn ways to circumvent it, they are open to legitimate marketers who feel they have been unfairly labeled as spammers.

But retailers have to prove that they are not just dumping e-mail into random consumers’ mailboxes. “When spam became a problem and e-mail delivery portals began to address the issue, at first they did things crudely, and just said that anyone sending a lot of e-mail is bad,” says Weil of Victoria’s Secret. “In our case, they didn’t understand that the mail was from us for our customers.”

Armed with records of customers who had opted in to receive its e-mail, Victoria’s Secret took its case directly to ISPs. “We helped them to understand that we’re not part of the spam issue,” Weil adds, “but we had to go one on one, working closely with AOL and others.”

Yahoo uses an in-house-developed SpamGuard filtering system that automatically detects and then filters inbound spam into a Yahoo Mail subscriber’s personal bulk mail folder. Yahoo systematically places in the bulk folder certain types of e-mail widely recognized as spam, but it considers direct appeals from marketers who contend their e-mail is being unnecessarily blocked. In that case, it helps a marketer to have records of opt-in requests from customers.

Yahoo also encourages marketers to work directly with their customers to make sure customers are not inadvertently customizing filters to their inbox that block e-mail they’ve requested. Yahoo allows a user of its free e-mail service to create up to 15 customized filters to direct mail into personal folders. Subscribers to the Yahoo Mail Plus fee-based service can create up to 50 customized filters.

Yahoo e-mail users can also report suspected spam to SpamGuard by clicking on links to identify certain messages as spam. “The feedback we receive from these links plays an integral role in our continuous improvements to the SpamGuard system,” a Yahoo spokeswoman says. “Users are able to customize their spam-fighting efforts by blocking addresses, setting up customized filters and blocking HTML messages.”

Atomized problem

Yahoo says it constantly upgrades its SpamGuard system to deal with the unceasing efforts of spammers to get around its filter, such as by adding jumbled words and letters to their messages so as to make key words less noticeable to filters. “Our team is constantly monitoring the various techniques spammers are employing,” the spokeswoman says.

But if retailers can work with ISPs to help them define spam, they’re up against another challenge when it comes to consumer-operated spam filters. For instance, Cloudmark, a San Francisco-based anti-spam software company, reports having signed up more than 300,000 users of its SpamNet system, which attaches to a user’s Microsoft Outlook application. SpamNet, which is available for free in its beta version at Cloudmark.com, enables users to click on e-mail they consider spam to have it permanently blocked not only from their own inboxes but also from the inboxes of other SpamNet users.

Using data collected through SpamNet, Cloudmark recently introduced SpamNet Beta 9, a version designed to block what’s known as ScrambleSpam, which uses large amounts of randomly jumbled characters to get through filters designed to block key words and phrases.

A number of virus software providers also are developing anti-spam software. Peter Firstbrook, analyst with researchers Meta Group Inc., reports that Trend Micro Inc., Network Associates Technology Inc. and Symantec Corp. are the leading contenders to have anti-spam modules within a year. Other software makers developing anti-spam applications include Computer Associates International Inc. and U.K.-based Sophos plc.

One way that some marketers address both system-controlled and consumer-controlled spam blocking is to have their own address appear in the “from” box, so consumers know the exact source. “That allows them to get into more domains, such as dot-edu, because they have an address name relevant to their business,” says Lewis of Digital Impact, which uses its clients’ IP addresses when sending out their e-mail.

Retailers and other legitimate marketers may be trying to hone their messages to make them more appealing and not subject to spam filters, but the spam damage has been done and a backlash against e-mail marketing is developing. Nowhere is that more apparent than in statehouses. Already, 27 states have anti-spam legislation. Almost the entire balance of states is considering some form of spam regulation and some of those with laws already are looking at toughening them.

$11,000 fine

The chorus from the states is getting shrill enough that the DMA is actively promoting federal legislation. States’ legislative efforts are too inconsistent in their rules and their required labels, making nationwide enforcement difficult to accomplish, the DMA says. For example, one state may require commercial e-mail messages to be labeled “ADVT,” while another requires “ADVST.” That makes it more difficult for marketers to conform to all states’ rules for nationwide marketing campaigns, but it can also be counterproductive, the DMA contends, because anyone could block all marketing messages by customizing an inbox filter to block the required advertising labels while letting in spammers who don’t use the labels. “That would only stop the legitimate marketers from getting through,” a DMA spokesman says.

That’s why the DMA is pushing for tougher federal legislation that would require consistent labeling, such as providing an opt-out button or a physical mail address that recipients can use to file a complaint with an e-mail sender, as well as a fine of $11,000 per violation.

Although federal anti-spam bills have been submitted in recent years, none has reached a vote in either house of Congress. But at least one piece of anti-spam legislation is expected to be introduced this year, by Oregon senators Ron Wyden, a Republican, and Gordon Smith, a Democratic. A spokeswoman for Wyden says the senators plan to submit their legislation early enough to have time for full consideration in this year’s Congressional session.

But even if federal anti-spam law is enacted, no one expects it to completely solve the spam problem or even attempt to rectify all the issues retailers face in effectively using e-mail as a marketing tool. “I don’t think anyone should view federal or state legislation as a silver bullet against spam,” says a DMA spokesman. “We’re finding, more and more, that we have to take a multi-prong approach to deal with this. Legislation is one piece, another is self-regulation and another is technology.”

JamSpam

Among the self-regulatory efforts, the DMA and its interactive division, the Association for Interactive Marketing, are circulating a list of best practices. The list covers practices such as never falsifying a sender’s domain name and never falsifying a subject line, always offering an opt-out button and sending e-mail only to recipients who have granted permission (see page 20).

Further, the DMA’s E-Mail Preference Service, which is mandatory and free for DMA members and available for an annual fee of $465 to non-members, assists marketers in removing from their e-mail lists addresses of consumers who have said they do not want to receive e-mail advertising messages. Consumers file such requests with the DMA, which elicits the help of government consumer agencies to publicize the service.

On the tech front, the DMA and several retail- and Internet-related organizations, including the Association for Interactive Marketing and the Internet Engineering Task Force, are participating in the so-called JamSpam effort to come up with new ways of thwarting spam. One effort may be a new e-mail transport protocol that would enable users to opt-out of e-mail simply by clicking a menu item in their computer’s e-mail management system, such as Microsoft Outlook, instead of having to open up the spam message to find the opt-out link.

Another effort is to develop more sophisticated spam filters that could better tell the difference between spam and permission-based e-mail. A third is to find more effective methods of establishing and distributing “white lists” of authorized e-mailings that retailers send to Internet service providers, so that the ISPs won’t unnecessarily filter out those messages.

Despite the many challenges facing e-mail marketing, it’s not going away. It’s as much a part of the marketing and promotional landscape now as direct mail, TV and radio commercials and print ads. But, like those media, e-mail marketing is growing up and retailers need to evolve as the medium evolves. “We continue to develop and expand our e-mail program,” says Weil of Victoria’s Secret. “If you create highly effective e-mails that people want, it will be productive.”

paul@verticalwebmedia.com

Six ways to avoid being a spamster

The Council for Responsible Email of the Association for Interactive Media, a unit of the Direct Marketing Association, offers the following guidelines as a way to ensure that a marketer doesn’t inadvertently end up accused of sending spam:

1. Don’t falsify the sender’s domain name or use a non-responsive IP address without implied permission from the recipient or transferred permission from the marketer.
2. Don’t falsify the subject line to mislead readers about the content of the e-mail message.
3. Include an option for the recipient to unsubscribe from future messages from that sender, list owner or list manager, and include valid and responsive contact information of the sender, list manager, or list owner.
4. Tell respondents who provide an e-mail address how the address will be used for marketing purposes.
5. Don’t harvest e-mail addresses from chat rooms or other such venues with the intent to send bulk unsolicited commercial e-mail without consumers’ knowledge or consent.
6. Don’t send bulk unsolicited commercial e-mail to an e-mail address without a prior business or personal relationship. Business or personal relationship is defined as any previous correspondence, transaction activity, customer service activity, personalized marketing message, third-party permission use, or proven offline contact.