E-Mail Marketing Survey

On the surface, e-mail marketing has a lot of strikes against it. There`s the controversy over spam and the new regulations against it. There`s the widely held belief that legitimate e-mail promotions are lost in a blizzard of illegitimate e-blasting and are therefore less effective than they once were. And a new Internet Retailer survey of e-retailers shows that the overwhelming majority online merchants--71% to be exact--attribute less than 10% of their retail web sales to the e-mail marketing they do.

Nonetheless, that same survey shows that 68% of e-retailers are doing more e-mail marketing this year than the year before and the majority of those surveyed believe e-mail marketing is as or more effective than other forms of web site marketing. The explanation for this dichotomy appears to be found in the fact that e-mail is seen as an extremely effective way of communicating with online shoppers, even if that communication does not result in a sale that can be attributed to an online sale. Furthermore, the low cost of e-mail marketing makes it an extremely "effective" sales generator measured in terms of return on investment, if not in absolute sales.

The survey is the second in a new series of web-based surveys on e-retailing that Internet Retailer is conducting in partnership with Web Surveyor, which provides the web-based survey solution used to conduct the surveys and tally the answers of all respondents. Participation in the e-mail marketing survey was offered in the first week of March to all 32,000 opt-in subscribers of IRNewsLink, Internet Retailer`s daily e-mail newsletter. Fully 355 subscribers, or slightly more than 1% of IRN`s subscriber base, spent the three minutes necessary to answer the survey`s 15 questions and submit them. All individual responses to Internet Retailer`s e-retail surveys are strictly confidential and are not distributed; only the summary results are published.

Those responding to the survey on e-mail marketing proportionately represent a broad cross section of the web-based retailing industry--and least on the basis of size--and as such the survey fairly reflects the prevailing attitudes on e-mail marketing held by all online merchants. Slightly more than 13% of respondents operate retail sites with more than $25 million in annual sales, 25% have annual online sales between $4 and $25 million, 17% between $1 and $3 million and the remaining 45% have web sales of under $1 million.

Despite the fact that their promotional e-mails must rise above an ever growing amount of spam to get noticed and despite their belief that e-mail marketing generates a small percentage of their online sales, the majority of those surveyed are stepping up their e-mail marketing this year for two related reasons: their retail web businesses and Internet customer bases are growing and e-mail offers perhaps the best means for communicating with online shoppers. Fully 38% of respondents who are expanding their e-mail marketing say they are doing so in response to the growth of their online retail businesses, and nearly the same percentage attribute their e-mail marketing expansion as an effort to establish a closer relationship with online shoppers.

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The commitment to expanding e-mail marketing varies depending on the size of e-retail businesses that respondents oversee. Clearly, larger e-retailers are ramping up their e-mail programs faster than the smaller online merchants. For example, 82% of online merchants with annual web sales in excess of $25 million report they are expanding their e-mail marketing programs this year. That figure drops to about 60% for e-retailers with web sales under $3 million. And the number one reason provided by the bigger e-retailers for expanding e-mail marketing programs is the rapid growth of their retail web operations. By comparison, 46% of merchants with online sales under $1 million say their expansion of e-mail marketing is an effort to stay in closer touch with customers--making that easily the primary reason small e-retailers cite for their expansion of e-mail marketing.

Just as significant as the two main reasons given by e-retailers for the growth of their e-mail marketing programs are the reasons that are rarely cited for e-mail expansion. Only 2% of respondents who are e-mailing more this year give as their reason the desire to get noticed above the spam, and another 2% say they are e-mailing more because they are attempting to overcome declining response rates. And only 9% who are e-mailing more this year say they are doing so because e-mail is more effective than other methods of marketing their retail web sites.

The growth of spam and the legal risks of spamming are affecting those 13% of survey respondents who report that they have cut back their e-mail marketing this year. Among that group, about a third explain their e-mail cutbacks as a response to declining e-mail response rates that they attribute directly to the growth of spamming. And another 24% of those cutting back e-mail marketing this year report doing so out of fears of the legal risks associated with spamming.

Other key findings from the survey include the following:

• E-mail is as or more effective than other forms of marketing retail web sites, but the measure of effectiveness is not necessarily online sales. E-mail appears to be seen by e-retailers as an extremely effective way of maintaining a relationship with their web-based customers. A striking 49% of respondents say e-mail marketing is more effective than other forms of marketing of web sites; only 27% say it`s less effective.
• E-Mail marketing is not a significant web sales generator for most e-retailers. The perception of e-retailers that e-mail marketing is highly effective would seem to indicate that their e-mail marketing programs contribute a high percentage of their online sales. Curiously, the respondents to the survey say otherwise. Fully 57% report that e-mail marketing accounts for less than 10% of their online sales, while just under 10% say it accounts for 25% of web sales. By comparison, about one-third of all respondents to last month`s Internet Retailer survey on search engine marketing attributed 30% or more of their web sales to SEM.
• Will more e-mailing improve online sales? E-mail`s contribution to online sales does increase fairly significantly for e-retailers who mail much more frequently than most. For example, online merchants who blast more than one e-mail a week to their customers attribute more of their sales to e-mail marketing. Fully 56% of this group report that e-mail marketing generates between 10% and 25% of their web-based retail sales. That percentage response declines steadily for e-retailing groups which mail less frequently and drops all the way down to 15% for online merchants which e-mail their customers less than once a month. These results, however, are not compelling enough to contradict the overall perception that e-mailing appears to be more effective in maintaining relationships with customers through communication than it is a direct generator of sales, and they suggest that more frequent e-mail marketing probably will not achieve for e-retailers the sales generation they get from SEM.
• The perceived effectiveness of e-mail marketing may be related to its cost. In addition to e-mail`s effectiveness in enhancing customer relationships, another factor may well explain the dichotomy between the high overall effectiveness rating given to e-mail marketing and its perceived low sales generating potential: it`s cheap to undertake. E-retailers can spend thousands on SEM, but e-mails can be sent out for next to nothing. In fact, 71% of respondents say they spend less than 10% of the marketing budgets of their e-retail business on e-mail marketing.
• Higher e-mailing frequency is linked to higher response rates. Nearly 45% of respondents report that they send promotional e-mails out at the rate of only one per month or less. Yet, e-retailers who blast promotional messages more frequently than that also report much higher response rates (percentage of e-mail messages that are clicked on by recipients) than less frequent mailers. For example, nearly 40% of e-retailers who send out more than one e-mail promotion per week report response rates of 5% or more. By comparison, only 18% of online merchants who use e-mail marketing less than once a month hit response rates of 5% or higher. However, the most effective e-mailing frequency may be two to three times per month. Exactly half of survey respondents in that group say they experience e-mail response rates of 5% or higher.
• Higher response rates also mean higher conversion rates. E-retailers who mail more frequently and thereby achieve higher response rates also report higher conversion rates (the percentage of opened e-mail promotions that generate a sale). Nearly 75% of respondents who report response rates of less than 1% also report conversion rates of under 2%. Conversely, more than 70% of e-retailers who report response rates in excess of 3% to their e-mail campaigns also report conversion rates of 3% or higher. Thus, while other marketing methods may generate more overall web sales, the key to maximizing the sales potential of e-mail marketing appears to be doing it more frequently.
• l Response rates are increasing, not declining. It might stand to reason that the growth in both legitimate and illegal e-mail marketing is leading to a general deterioration in response rates to e-mail programs. According to respondents to the survey, the opposite is true. Almost 45% of respondents to the survey say the response rates to their e-mail marketing campaigns are climbing; only 16% report a downward trend. The rest say response rates are holding steady. Furthermore, the trend in improving response rates is evident across all e-mail frequency groupings--from the more than weekly to the less than monthly.
• Most e-retailers mail strictly to in-house e-mail lists. The low cost of e-mail marketing is in part the result that e-retailers rarely rent lists from outside brokers or list owners, preferring instead to mail exclusively to the in-house e-mail lists consisting of their own customers. An overwhelming majority (88%) of respondents say they do not use outside lists in the e-mail marketing of their retail web sites, and this percentage did not vary significantly according to the size of the respondent`s online business. The renting of lists that takes place in the b2b marketing world appears not to be a factor in the retail e-commerce industry.

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