Amazon not only sold $2.5 billion worth of goods, it introduced Prime members to new services. How should rivals compete in 2017?
New levels of detail allow retailers to target their e-mails ever more finely.
Computer retailer Hewlett-Packard Co., hoping to increase customer loyalty and repeat purchases among business customers, in late 2001 set out to develop personalized e-mail. Using information from its product registration database, it started sending personalized e-mail messages to customers. Later, using customer information generated by the e-mail, it added account specific e-newsletters and web portals.
Now HP is reaping the rewards. Average revenue per business customer has increased by more than 300% and customers -receiving account-specific e-newsletters are 1.5 to 3 times more likely to click on a link than those receiving non-targeted e-newsletters.
Doubling open rates
Personalization on the consumer side has brought similar results. A recent product-specific demand -generation campaign produced a 200% improvement in click-through rates and an 1,100% increase in direct revenue, HP says.
HP isn`t the only retailer to experience success with targeted e-mail. At OfficeMax Inc., personalized e-mail campaigns produced three to seven times the revenue of broad, unpersonalized campaigns.
With personalized e-mail, OfficeMax`s open rates nearly doubled, click-through rates were 50% higher and conversions were 20% higher than with unpersonalized e-mail, says Mike Hotz, manager of e-mail marketing for OfficeMax small business. "People who see content that`s relevant are more likely to open that next e-mail," he says.
HP`s and OfficeMax`s results with personalized e-mail are not unique. A JupiterResearch survey of 250 e-mail marketers found that personalized campaigns overwhelmingly outperform broadcast mailings. For example, nearly twice as many marketers using targeted lifecycle campaigns--such as birthday or product replenishment messages--achieved conversion rates of 5% or more compared with marketers pushing simple limited time offers.
But while retailers using -personalized e-mail campaigns are attaining improved results, many still haven`t gotten the message, Jupiter says. Few marketers rank relevance as a top-three e-mail marketing goal, even though 60% of consumers who make immediate purchases from e-mail messages did so because the messages contained products they were already considering, Jupiter reports in its May study "The ROI of E-mail Relevance."
Jupiter`s survey found that 24% of marketers don`t use any personalization, and of those that do, 84% only personalize salutations. Only 11% used contextually relevant messages driven by segmentation, -triggering and targeting of -content. Small and large companies are equally -uninterested: 36% of -companies with annual revenues of less than $1 million and 25% of companies with revenues of $50 -million or more don`t -personalize e-mail.
And only 33% of the larger companies took personalization beyond the salutation, Jupiter says. "If you just change a name, you`re not doing anything more than sending an e-mail," says Chuck Davis, vice president of solutions and services at e-mail marketing services provider BlueHornet Networks Inc.
The backbone of HP`s personalization campaigns is a database that it built in a step-by-step process, says Stephanie Acker-Moy, vice president of Internet and marketing services. Using customer information from product registration, HP offered to send updates on recently acquired products in exchange for customers subscribing to an e-newsletter, Acker-Moy says. "With newsletters, people were willing to give us more information about themselves," she says. "We also saw what people clicked on and what promotions and which content they were interested in."
Based on that customer response, HP expanded the content of the e-newsletter to include solution information, rather than just promotions, then added personalized web portals to go along with the newsletters. The web sites then became a vehicle to get more e-mail sign ups.
On the consumer side, HP also uses the product-registration database as a step-off point for -personalization. "At the onset, we already know quite a bit about our -customers," says Wendy Cole, e-marketing manager for HP`s imaging and printing group. "We know what product they own, what model they own, and how long they`ve owned it."
In addition, HP uses a profile database hosted by e-mail provider Yesmail as well as self-reported information gleaned from periodic e-mail surveys of customers and information from HPShopping.com, she says. Surveys typically ask about printing and purchasing behavior, channel preference and satisfaction with HP`s services.
An engaged audience
HP uses the surveys for trend -analysis and gets response rates in the double-digits, indicating an engaged audience, Cole says. "We`re able to overlay that with profile characteristics that enable us to home in for targeting purposes," she says.
HP online activity centers-- portals that offer ideas for using computers--also help create customer profiles. For example, customers who own digital cameras would register for an online print project involving digital photography, Cole says. "We could really tailor the messaging in the offers to that audience," she says.
OfficeMax uses personalized e-mail promotions for both consumer and business. OfficeMax, an e-Dialog Inc. client, looks at a number of factors, including when a customer made a purchase, the frequency of purchases and the types of products purchased. It also checks whether a customer has purchased in one or multiple categories and tracks browsing behavior.
"If a customer bought a product that has common accessories that go with it, we`ll pitch those accessories," Hotz says. "We`re not wasting their time with things they`re not interested in."
Hotz says the costs of personalizing an e-mail campaign are -significantly higher, in large part due to higher labor costs. Although there is no staff dedicated to the targeted campaigns, OfficeMax draws on the expertise of employees. Six members of the e-commerce merchandising staff provide product feed information; two designers produce the templates and design special offers; and an IT staff member handles the data feeds, Hotz says.
A staff analyst and OfficeMax`s e-Dialog account manager work on segmentation for personalizing the messages. Hotz and a member of his staff oversee quality assurance.
Jupiter`s study confirmed OfficeMax`s experience. For instance, salary costs associated with lifecycle campaigns are 2.5 times what they are for plain vanilla mailings; the same goes for campaigns triggered by web site analytics data.
Better open rates
The expense can pay off, however. Simple e-mail messages have open rates of 20%, click-through rates of 9.5% and conversion rates of 1.1%. Lifecycle campaigns produce -average open rates of 26%, click rates of 14% and conversion rates of 2.8%. Other campaigns perform equally well (see chart).