This Is Not A Regular Post — It’s A Welcome Post

My daily email from the Center For Media Research informed me that:

The Email Experience Council and the Direct Marketing Association announced the release of its second annual Retail Welcome Email Subscription Benchmark Study, examining the welcome emails of 118 top online retailers.

The report says that in 2006, only 66% of major online retailers sent welcome emails. With 72% sending welcome emails this year, it appears that more retailers are recognizing the value of these critical emails.

The DMA’s EVP and COO, says “… welcome emails have significantly higher open rates than regular emails…”

My take: What’s a regular email? Did he mean a marketing (sales-oriented) email? If so, then DUH! No big surprise there. If not, then what did he mean?

Let’s see here. When I think about the “regular” emails I get, there’s that daily email from my boss berating me about my substandard work performance. Come to think about it, I don’t open those very often. Maybe if he sent me “welcome” emails I would read them.

And why is it “only” 66%? I don’t have a PhD in math, but I think that 66% = two-thirds. I’m pretty sure that’s well over a majority.

Did it occur to the EEC/DMA that perhaps online retailers were doing a better job of capturing customer email addresses? Or that customers were more willing to provide email addresses? And that these are the reasons welcome emails are on the rise (in contrast to “more retailers recognizing the value”)?

And have they heard about a statistical concept called margin of error? With 118 respondents, the margin of error in the study is about 7 percentage points. Which means that, at a 90% confidence level, this year’s result falls between 65% and 79%. In other words, potentially unchanged from last year.

Why is this so research-worthy? Must be a group of vendors competing in some newly-formed “welcome email” space.

Welcome to my blog!

Technorati Tags: , , , ,

The Boy Who Cried Wolf

According to a Pew Internet & American Life Project study, the volume of email spam is growing, although fewer people say it’s a “big problem” for them. The study found, however, that:

Spam continues to degrade the integrity of email. 55% of email users have lost trust in email because of spam.”

My take: The “lost trust” claim is a case of over-reacting.

Did consumers “lose trust” in mail because of direct mail? Did we “lose trust” in the telephone because of telemarketing? Did we “lose trust” in the television when advertising cut 30-minute programs down to 23 minutes? Are we losing trust in the mobile channel with the advent of cellphone advertising? No.

Arguably, spam has impacted the effectiveness of email as a marketing tool. But that’s not what the study is reporting — it’s looking at the consumer’s perspective. And they could care less if it’s an effective marketing channel.

What we need here is context:

  • Has email lost trust relative to other communication channels?
  • Has this lost trust resulted in behavioral changes?
  • Are the 55% different (demographically, behaviorally) from the 45%?

The Pew study found, in fact, that the percentage of Internet users using email in 2007 was unchanged from the 2003 level. And that the percentage of email users who said that spam made them less trusting of mail declined from a high of 62% in 2004.

Email’s loss of integrity? Just a case of the Pew who cried wolf.

Technorati Tags: , , , , ,

Loyalty Programs: Another Key To Retailers’ Online Success

According to Larry Freed, CEO of ForeSee Results, there were three drivers of retailers’ online success this past holiday season: 1) free shipping; 2) product reviews; and 3) promotional emails.

He missed one: Rewards programs.

According to research that Epsilon has done on the influences of consumers’ holiday season purchases, consumers that are members of retailers’ loyalty programs were not only unusually loyal to those firms, but were avid shoppers on their Web sites.

Some of the relevant data points:

  • 57% of loyalty program members said that program membership influenced which firms they purchased from. And among those with income greater than $50k, half said that they used their loyalty cards frequently or with every purchase.
  • 84% of the loyalty program members of the electronic firms we asked about purchased from those firms this past holiday season. Other types of retailers, like department stores and booksellers, saw impressive loyalty from their reward program members, as well.
  • 32% of consumers who belong to three or more retailers’ reward programs shopped at all of the firms whose program they’re enrolled in.
  • 63% of the consumers that belong to rewards programs shopped online this past holiday season. In contrast, of the consumers that don’t belong to any loyalty programs, just 35% shopped online.

One last point for retailers to keep in mind: While many of these valuable customers purchased online, direct mail was cited as a bigger influence on where they shopped than interactive media like banner ads on Web sites.

I’ll be publishing a white paper on this research shortly, and will update this post when it’s available on the Epsilon site.

Update: Get the white paper here.

Technorati tags: , , , ,

What’s The Value Of An Email Address?

In response to a post about how to calculate the value of an email address, Benry comments that the value can’t be determined simply by looking at email marketing campaign results, because

We use email to market to people, but also to support communication or to enable sales staff to converse with [customers] in the manner best suited to their needs.”

Good point, Benry. But, no offense, it’s a good answer to a question that should never have been asked.

Asking “what’s the value of an email address?” is like a baker trying to figure out the ROI on flour. She can’t do that. She can compute an ROI on the finished product — the cake — but not on the individual components of the cake.

An email address is like flour — it’s raw material. If we’re going to compute the “return on customer” (SM rights to Peppers and Rogers), then we can’t compute a return on all the individual elements that go into “making” that customer. That’s what an email address is — something that (presumably) helps us create a loyal, profitable customer.

What it means: Marketing is wasting its time trying to quantify the value of an email address.

The “value” is in determining: 1) who the best customers and prospects were; 2) the best offer to make to them; and 3) the best way to reach them; and 4) their email address if email is the best way to reach them. Step #5 is execution (the firm still has to invest in running the campaign). If you didn’t invest in all five steps, there would be no “value” to that email address.

What should Marketing do?

1) Distinguish between cost and value. There is no inherent value or ROI of an email address (or a blog for that matter). The ROI comes from the utilization of the asset (in this case the email address). Which is not to say that marketers shouldn’t focus on the cost and quality of that email address. How much should the firm invest in acquiring email addresses? Which email addresses are higher quality than others? These are the questions marketers should address. But to answer them, marketers are going to have to….

2) Define who the firm’s best customers and prospects are. Plenty of marketing departments have customer segmentation approaches, but few really identify who, across the segments are the best customers (current and potential). And even among the firms that have done this, few have been able to drive those definitions down to the investment allocation level. When you show senior execs who the most valuable customers and prospects are — and that the best way to reach them is through email — then they’ll be more likely to invest in acquiring their email addresses.

3) Talk about opportunity costs. Running into senior execs’ offices with calculations on the value of an email address doesn’t improve Marketing’s reputation or its desire to be more strategic. Marketing needs to show that the relevant metric here isn’t ROI, but opportunity cost. What is the opportunity cost of not acquiring email addresses? What would we do with that money that could help produce a better return on our investment? This is how Marketing shifts the focus from the micro to the macro, and becomes more strategic to the firm.

Technorati tags: , ,

You Can’t Compete On Analytics If You Don’t Use It

In a 2005 Harvard Business Review article (get free summary report here), Tom Davenport described the emergence of a:

New form of competition based on the extensive use of analytics, data, and fact-based decision making. Instead of serving all customers, [companies] serve optimal customers. Instead of throwing money at business problems, they optimize their use of capital. Companies that strive to optimize their business performance using a data-intensive approach are competing on analytics.”

So it was a little disturbing to see in Alterian‘s latest annual survey of marketers that 70% of respondents said they apply basic or no analysis to any of their email campaigns.

I couldn’t agree more with David Eldridge, Alterian’s CEO, who said the results point to “tremendous opportunities for marketers to use email and online marketing techniques linked with traditional direct marketing tactics to establish competitive advantages and serve customers better than ever.”

Email’s Impact On Customer Loyalty

email_engagement4.jpg

Relevance is the mantra for today’s email marketers. But it shouldn’t be the only consideration.

The emotional level of the interaction or transaction that an email message pertains to is an important factor in understanding how an email message will impact a customer’s relationship with a product, brand, or company.

Irrelevant email about things a customer doesn’t care about might not impact their loyalty. Example: The emails from credit card providers to “transfer my balances.” I don’t have any balances to transfer, so I don’t really care. Although some might find this annoying, it’s unlikely that few will actually stop using the card or go searching for another as a result.

But irrelevant emails in high-emotion situations can be detrimental. Example: A couple waiting to hear back from their bank about their short term loan application (for the money they need to travel to China to adopt a baby that’s waiting for them) gets an email from the bank with a home equity loan offer. Doesn’t exactly leave them feeling positive about the bank.

Relevant emails (especially pro-active, unexecpected ones) in high-emotion situations are the holy grail. The trick isn’t figuring out the email message — it’s recognizing that a customer is in a highly emotional situation.

How will you identify these situations? By developing a sense-and-respond marketing capability.

The Unintended Consequences of Email Best Practices

Smart firms often deploy email practices like: 1) integrating email campaigns across channels; 2) following up on abandoned shopping carts; and 3) communicating special rewards through email. But sometimes these practices have unintended consequences.

Example #1: The Integrated Campaign Email

DogFoodCo sent an email to a customer who registered online after viewing a television ad. Nothing wrong with sending a confirmation email except that the email indicated that a coupon would be sent in 4 to 6 weeks.

Unintended consequence: The customer was ready to buy, but DogFoodCo lost the sale. With no coupon from DogFoodCo, he went to the supermarket and purchased his regular brand (which wasn’t from DogFoodCo). In fact, when he received the coupon four weeks later, he didn’t even remember that he had registered online with DogFoodCo.

Example #2: The Abandoned Cart Email

Three days after abandoning an online cart (including a dog hair conditioner), PetStuff sent a customer an email (with a picture of the conditioner) offering her 10% off online purchases. What PetStuff didn’t know, however, was that she had purchased the product at a store two days ago.

Unintended consequence: An irate customer. Her lament: Why didn’t they offer me the discount when I was online three days ago, or give me 10% off for an in-store purchase?

Example #3: The Special Reward Email

A discount brokerage emailed a customer, notifying him that his recent trading activity earned him a discount off the standard trade commission. But when the customer placed his next trade, the fee wasn’t discounted.

Unintended consequence: Instead of feeling rewarded for his loyalty, the customer was inconvenienced, orced to email and call the firm to fix the problem.

Avoiding The Unintended Consequences

It’s not that the firms shouldn’t have used these tactics, it’s that they didn’t implement them orrectly. Firms that deploy these best practices should:

  • Align offers with the consumer’s purchase cycle. A consumer who views a TV ad, registers on a Web site, and then opens a confirmation email is signaling his engagement with the brand and sending signals of purchase intention. DogFoodCo should have capitalized on its customer’s interest with an email that included the coupon. Forcing him to wait four to six weeks was out of sync with the consumer’s buying cycle.
  • Track cross-channel behavior. Ecommerce groups are often incented to drive sales online, and incenting consumers the change their channel behavior and preferences is commendable. But an abandoned cart may not mean an abandoned sale. If cross-channel transactions are too expensive and difficult to track, than firms should use abandoned cart emails to elicit from customers why the transaction was aborted, so they can determine whether or not to extend an offer.
  • Test operational capabilities. The discount brokerage in example #3 didn’t understand the systems requirements of its trading app. The email notification was sent before the trading app was updated to reflect the discounted commission. Marketers should assess the operational impact of email offers on business processes and systems. Consumers who transact online typically do so because it’s more convenient for them and operational issues negate that convenience.