October 31, 2006, 12:00 AM

Hitting the Inbox

How transactional e-mail can strengthen customer ties and increase sales.

The all important holiday season is upon us, but it could be a joy-less time for retailers relying on their HTML marketing e-mails to drive sales. With filtering, blocking and image/link suppression being pervasive across the major ISPs, Internet retailers may have a hard time getting their marketing messages seen and read by customers. And getting those messages through is more important than ever as they try to generate sales in a slowing economy. Already, the National Retail Foundation has projected that retail sales growth this holiday season will slip to a meager 5%.

Getting past the clutter
With many retailers relying on holiday buying for a large part of their annual revenue, the stakes are high. E-mail marketing remains one of the most cost-effective ways to reach customers, but filtering and other ISP tactics to combat spam are making it increasingly difficult to get the marketing message to the inbox. And even if the messages make it to the inbox, they can easily get lost among all the clutter from spam and competing offers. Recent studies by Epsilon Interactive and Goodmail provide even more discouraging news. The former found that 65% of users receive e-mails with images suppressed and the latter that 59% of users delete messages that have blocked images or links.

With this challenging environment, marketers need to look at ways to supplement their regular e-mail marketing efforts. The good news is that many retailers already have one form of e-mail communication that is able to cut through all the clutter-the transactional e-mail. These service-based communications have the highest open and click-through rates of any type of e-mail, yet they’re seldom used to deliver relevant marketing messages. In fact, JupiterResearch estimates that less than 1% of e-mail marketing funds are being spent industrywide on transactional e-mail.

The promise
Before looking at why more companies haven’t adopted marketing through transactional e-mail, I’d like to talk about why they should. For starters, JupiterResearch predicts that the average online retailer could generate an extra $500,000 annually by improving the delivery and cross-selling abilities of transactional e-mail. That’s a significant amount and additional revenue is just one reason to overhaul transactional e-mail capabilities.

Most Internet retailers’ transactional messages are generated by interactions with their web sites. Whether customers have bought a product, signed up for a newsletter or simply changed a password, they’ve been interacting with the brand in all its HTML-enabled glory.

And most online retailers have a sophisticated e-commerce engine in place to serve relevant offers or information throughout the session based on customers’ preferences, purchases or click behaviors. However, once customers take an action that causes a transactional e-mail to be generated, that highly personalized experience comes to a screeching stop. The generic, plain-text transactional e-mail that most Internet retailers send out is a jarring disconnect from the one-to-one interaction they’ve tried so hard to create during the web session itself.

But more than that, this disconnect robs retailers of the opportunity to reach beyond the web session with the kind of personal messaging and branding that will drive customers back to a site to transact more. And it’s an opportunity that shouldn’t go unrealized, since retailers probably already have the customer data and messaging logic to take full advantage of it.

Not just a pretty face
The reasons for doing so are obvious. Service-based communications are delivered at a higher rate and are much more likely to be opened and read than straight e-mail marketing messages. After all, they’re about transactions that customers have completed and want to hear about. So retailers who can leverage those transactions to trigger relevant marketing messages are more likely to find customers who are in the market and will be responsive to offers, especially since they’ve just demonstrated trust in the brand by taking the action that prompted the transactional e-mail in the first place.

Of course, this takes more than slapping a pretty face (HTML) on a plain text, transactional e-mail. While that might help the brand, it won’t fill the company coffers. And it certainly shouldn’t become the equivalent of statement inserts for e-mail that only adds to the clutter. The objective should be to extend the highly personalized experience at a web site into the transactional e-mail that flows from it-and to do so in targeted ways that both enhance the brand and generate incremental sales.

Transactional e-mail myths
So with all the advantages of using transactional e-mail, why are so few Internet retailers taking advantage of it? Slow adoption can be attributed to misconceptions around CAN-SPAM compliance, technical requirements and cost. Yet, the truth of the matter is that none of these considerations poses a significant barrier to entry for most companies-large or small. With the right approach, retailers can begin leveraging transactional e-mail immediately and cost-effectively.

Concerns about violating CAN-SPAM, the first myth, can be readily alleviated by taking a closer look at what the Act does and doesn’t allow. It does allow retailers to add marketing messages to transactional e-mail; however, it doesn’t allow them to change the focus from the transaction. Thankfully, there’s a lot of latitude in between to use transactional e-mail effectively for delivering relevant cross-sell and upsell offers.

The FTC’s regulations focus on two aspects of the message: the subject line and content placement. If the subject line is free of marketing and makes the initial content clearly focused on the transaction, the message has satisfied the major provisions. While it’s a good idea to get legal counsel, the rule of thumb is to maintain the relevancy of the message. In doing so, keep to the spirit of the law and keep customers from confusing it with a disposable marketing e-mail.

The second myth is that transforming transactional e-mail into a marketing tool requires extensive IT resources and infrastructure investment. While that might be true if you build your own system from scratch, there are cost-effective commercial in-house solutions that can easily tie into e-commerce systems and CRM databases.

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