E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
There’s more e-mail than ever, and marketers need new strategies and tools
It seems retailers and consumers both are troubled by marketing e-mails, but for very different reasons.
“Everyone is sending out e-mail, and more of it-the level of noise in e-mail marketing is rising, and as a result, the response rate is dropping,” says Adam Sarner, an analyst who specializes in e-mail marketing at research and consulting firm Gartner Inc.
It doesn’t take much to push many customers over the edge when it comes to the volume of e-mail messages received from a particular sender. Annoyed customers are not happy customers, and unhappy customers tend not to browse or buy from merchants inundating them with e-mails. What’s more, these customers may ultimately choose to opt out.
Generally, the number of customers in retailers’ e-mail lists is not growing and may be on the decline, says Scott Olrich, chief marketing officer at Responsys Inc., an e-mail marketing services vendor. “Retailers are realizing their lists are not growing anymore and response rates have decreased. Consequently it is more difficult to hit targets, especially as some of the other marketing channels like print are becoming more costly,” Olrich says.
To combat these problems, e-mail marketing experts and vendors point to the need for greater segmentation of e-mail lists to target distinct groups of customers with messages they’re more likely to want and reduce the number of e-mails sent to customers.
“For years marketers have known they needed to segment lists to send more relevant messages,” Olrich says. “Driven by decreasing response rates, they’ve been making progress in segmenting over the last 12 months.”
While retailers are becoming savvy with e-mail marketing, customers are becoming even more savvy. Customers know a batch-and-blast e-mail message when they see one; consequently, the effectiveness of broadly written and sent e-mails has weakened, says Julie M. Katz, e-mail marketing analyst at Forrester Research Inc.
“This is where segmentation comes into play, where you can target groups of people more relevantly, like with a subject line that speaks to them,” she says. “This requires lots and lots of testing, and thinking very specifically for different customer groups.”
Showing different customers different subject lines, images, products or calls to action can make e-mail messages more applicable and thus more effective. Figuring out how to do so is both an art and a science that requires the ability to sift through and understand reams of data.
“Segmenting, trying to devise unique segments, and looking at which groups of consumers really behave differently is a really big project,” Katz says. “Retailers need some sophisticated data-brains to understand the massive amount of information collected through e-mail programs or transactional databases. Some retailers rely on e-mail service providers to help them mine the data and understand which segments are going to be most lucrative to go after and talk to in a different way. Some have very sophisticated data folks on staff.”
While experts say the need for segmentation is greater than ever, some think not much will change in the year ahead. They see the volume of marketing e-mails continuing to increase as competition in online retailing increases. If retailers are going to continue to raise the number of messages they send out, experts say, they need to at least think differently about the kinds of messages they send to reverse the trend of declining response rates.
“E-retailers should develop more triggered programs, more lifecycle messaging programs, more messages that are speaking to their customers’ needs before the customer knows they have a particular need,” Katz says. “For example, e-retailers can build a program that is presented during registration, or can be used later, that asks customers to enter birthdays of family and friends for gift-giving. They then can send e-mail reminders so the customer doesn’t have to worry about remembering. A program like this keeps an e-retailer top of mind and helps the customer look really good to gift recipients.”
Retailers also can take advantage of transactions to trigger special e-mail messages. Instead of sending out a purely promotional e-mail, a retailer can send out relevant information and requests in or after transactional e-mails in an attempt to set itself apart from competitors.
“We have one client, a large florist, that sends messages to confirm receipt of orders and at the same time ask if customers want to track when an order is delivered, sending delivery confirmations via e-mail and mobile phone,” Olrich explains. “This is not a cross-sell, it’s creating a service experience to differentiate themselves from other brands.”
The florist follows up the transactional e-mail with an e-mail asking customers to rate the level of service. If a customer rates service a 9 or 10, the retailer sends her a code for 15% off her next purchase. If she gives a rating of 8 or lower, the retailer sends a survey to discover where it went wrong.
While some retailers are using e-mails to survey customers, others are including customers’ opinions right from the start. A new trend in e-mail marketing is emerging: Using customer reviews to bolster marketing copy in an attempt to increase sales.
Customer reviews are fast becoming a mainstay of Internet retailing and are a popular Web 2.0 feature among online shoppers. Many shoppers seek out and rely on the opinions of their peers when making a buying decision, eschewing marketing copy for what they perceive to be more objective information. E-mail marketers can leverage customer reviews, creating an altogether different promotional message.
“A customer sees a product with positive customer reviews as almost pre-approved, it’s almost guaranteed to be good. People like to hear stories from other consumers who have used a product, and that is where reviews come into play, information from real people instead of a marketer who is trained to like a product,” Katz says. “More consumers are using ratings and reviews, and e-retailers can increase revenue gained through e-mail marketing by using customer reviews.”
Organizations that tap into the power of ratings and reviews are showing a type of transparency customers can appreciate, says Matthew Seeley, CEO of Experian CheetahMail, an e-mail marketing firm. “Anything a marketer can do to build a sense of community and elevate the customer voice will be incredibly powerful,” he adds.