CAN’T Spam

Stop blasting e-mails at your customers and come up with something relevant. Or else.

By Beth Stackpole

Fossil, the hip fashion accessory maker, is all about individual style and personal taste. That ethos was nowhere in evidence when the company took its first shot at e-mail marketing six years ago: All 1 million customers on Fossil’s e-mail list received a generic message. Every month or so, it repeated the mass mailing for a different product, hoping the message was relevant enough for some section of the full customer base to respond to the offer. The strategy worked fine, initially. But in 2003, the message began to lose steam. Between 2003 and 2004, average open rates on the e-mails dipped by 28 percent, and conversion rates declined by 36 percent. And more customers began opting out of the e-mail list. “One-size-fits-all is really the death knell for e-mail marketing,” acknowledges John DeCaprio, Fossil’s vice president of e-commerce. “If you hope to fight people clicking the ‘this is spam’ button every time you send a message, it has to be relevant for that particular audience.”

With its “batch and blast” strategy waning last year, Fossil developed a more personalized e-mail marketing campaign. Using software and services from Silverpop Systems, Fossil began analyzing website click patterns to target its communications based on the browsing and purchasing behaviors of online visitors. Using this same Web information, as well as customer data from its SAP system, Fossil now divvies up its e-mail list into a half-dozen segments, to which it sends messages and promotions about the products that are most relevant to each group. Fashionistas, for instance, might get pinged with a message touting the build-your-own-watch bar, while sci-fi aficionados receive offers for collectibles such as the autographed Star Wars timepiece.

Since the segmentation campaign started, Fossil has tracked a 54 percent increase in open rates over 2004 levels, while conversion rates are 84 percent above where they were in 2003. Fossil’s Q4 2004 e-mail channel revenue was three times higher than in the same period the year before, in part due to the targeted campaigns.

DeCaprio has learned what many marketers still don’t get: Power-blasted e-mails, although cheap and easy, are lost in a cybervortex. Or worse, the onslaught of unwanted, inbox-clogging messages has soured many consumers on all promotional e-mail, even the ones they’ve signed up to receive. Two-thirds of the respondents to a 2004 Forrester Research survey said the messages they get aren’t interesting, and a whopping 77 percent said they deleted promotional e-mails without reading a word.

“The way companies have been doing e-mail is grossly wrong,” says Bill Nussey, CEO of Silverpop, a provider of permission-based e-mail marketing solutions, and the author of The Quiet Revolution in Email Marketing.

As disenchanted as the public may be with e-mail offers, the medium is still very much a viable marketing tool—if used properly. The same Forrester survey shows that consumers appreciate receiving information from companies via e-mail—if that information is relevant to their interests, if they have trust in the marketer delivering the message and if the e-mail delivers real value.

How do you turn those “ifs” into absolutes? To cut through the clutter and reengage the customer, marketers need to embrace new practices as well as some good old-fashioned direct-marketing techniques such as segmentation and testing. Success means sacrificing list size for a narrower but more receptive audience. And it requires some heavy lifting on the technology front to analyze and integrate website behavior and information from other customer databases across the organization.

“In the new generation of e-mail marketing, companies need to stop thinking about consumers as targets, but rather consider them as individuals,” says Jim Nail, a principal analyst at Forrester. “They need to make sure the messages are tuned to the value they can provide the customer rather than the value the business is pushing.”

Not Dead Yet

If batch-and-blast e-mail has outlived its usefulness, then why are so many marketers still using it? The answer is simple: Even if it’s not an optimal way to reach customers, the e-mail equivalent of a carpet bomb is so inexpensive that many marketers believe there’s no harm in dropping one on their customers.

That’s a dangerous view, most experts contend. “The cost of the [batch-and-blast] approach is not immediate in terms of campaign cost and returns, but in harm to your long-term customer relationships,” says Shar Van Boskirk, a consulting analyst with Forrester. “One value of e-mail is to create an ongoing, interactive dialogue with customers that may help them feel emotionally connected to your brand.”

Even if blast e-mails provide an initial boost in sales because of the sheer volume of recipients, Van Boskirk adds, “too many irrelevant messages will deteriorate customer relationships and counter any long-term loyalty goals.”

The long-term benefits of using more advanced segmentation techniques for e-mail campaigns should be clear to most CMOs. Targeted content helps a company establish an ongoing conversation with a customer, in which sequenced e-mails build off one another to drive the customer toward a particular conversion—be it making a purchase or signing up for promotions and newsletters.

More marketers are taking small steps in this direction by personalizing messages with the recipient’s name, for example. Other simple segmentation tactics include dissecting an audience by demographics and geographic region.

Another approach is to court customers’ feelings of investment. For example, let customers take the lead by setting up a personal preference page on your website. Through a series of simple questions, visitors can select the topics and types of communications they wish to receive, and their preferred frequency for receiving those messages.

Scotts, for instance, relies heavily on preference pages to drive segmentation for its e-mail campaigns. The manufacturer of lawn-care and gardening products embraced segmentation from the start of its e-mail marketing efforts more than five years ago for a very practical reason: “People in Georgia are dealing with conditions in their yard that are very different than those in Boston or Minnesota,” says Joel Reimer, the company’s former interactive marketing manager. (He left Scotts in June, after being interviewed for this story.) “We don’t have a national message we can blast out. We wanted to make e-mails more relevant and get people engaged in the category.”

Scotts has two major e-mail initiatives: The first is a lawn-care reminder service that tells subscribers what products to apply to their lawn and when; the second involves more traditional newsletters that serve up custom content based on subscribers’ self-selected information from the preferences pages. At first, the Scotts team handled segmentation for both campaigns manually, using spreadsheets and manpower to divide the audience into categories based on geographic region, grass type, lawn-care program and so on. But the cumbersome process didn’t allow marketers to create enough variations of content or produce new e-mails in short order. To move its program to the next level, Scotts turned to a permission-based e-mail marketing platform from ExactTarget. Now, Scotts’ marketing group can drive new, more targeted content to its subscribers quickly, without relying on a service provider to orchestrate a campaign.

Using the template and business rule functions of the ExactTarget platform, Scotts can create one e-mail that can be easily tailored for each audience. “We can create a customized message for each person based on where they live, their grass type, et cetera, and change content around that,” says Kip Edwardson, Scotts’ interactive project manager. “The possibilities are limitless.”

The targeted programs have translated into higher-than-average subscriber rates to its lawn-care reminder service, which now has more than 830,000 recipients, and helped boost sales of the Scotts products used in the four-step lawn-care process. (On average, subscribers are putting down one additional application of Scotts products on their lawn each year, compared with nonsubscribers.)

The next step for Scotts’ interactive marketing team is integrating purchase and other data collected from the Scotts website to develop even more targeted messaging, such as messages reminding customers to apply their next round of fertilizer.

Stretch Goals

Tapping into this type of purchase behavior (whether online, through catalogs or in stores) or site usage is still a stretch for many companies, experts say. In a 2004 JupiterResearch survey, less than one-third of the respondents said they use and analyze Web clickstream data to help with customer segmentation. Those who do use it, however, reported a ninefold jump in revenue growth over broadcast campaigns and increased net profits by an average of more than 18 times over batch-and-blast e-mail, according to David Daniels, research director at JupiterResearch.

Those returns may help CMOs justify the additional resources required to launch more personalized e-mail marketing campaigns. Unlike low-budget and low-maintenance batch-and-blast techniques, this next generation of e-mail marketing requires a heavy investment in time and technology. Special software and services are required to automate the process of dynamically generating and pushing out relevant content, while additional man-hours must be spent developing unique creative for each target segment. In general, marketers should expect to pay twice as much for a targeted e-mail campaign than a traditional batch-and-blast program, says Daniels.

Pricing is only part of the challenge. Some of the resources needed to integrate all the customer data scattered throughout an organization simply don’t exist (or haven’t until recently). “The data is there; it’s just that there’s been no way to leverage it, so marketers fall back into mass marketing,” explains Chris Baggott, cofounder and CMO of ExactTarget.

Software and service providers—including Bigfoot Interactive, ExactTarget, Silverpop and others—are beginning to respond with updated e-mail marketing platforms that the vendors claim make it easier for marketing teams to create their own segmentation and content development strategies, without a heavy investment in IT infrastructure or third-party consulting services. Many of these next-generation platforms provide templates and other functions that help marketers create and distribute multiple versions of e-mail offers or tailor content in newsletters without advanced programming. Many showcase sophisticated rules engines for creating complex message sequences that are triggered by certain events, such as a purchase or a birthday. Vendors are also adding new website tracking and analysis tools to their e-mail marketing platforms to provide a more in-depth picture of their online visitors’ activities.

“Structuring [content] based on what the user did and was interested in has a huge impact on how effective e-mails are,” says Josh Baer, CEO of Skylist Email Marketing Solutions, an e-mail service provider. “And with tools making this a lot easier, anyone can do these kinds of sophisticated mailings.”

Staying In Touch

New dynamic content and campaign automation technologies from Skylist are helping e-mail marketers at iParenting Media, a network of 40 family-related websites and communities that currently serve about 1 million subscribers. Using Skylist’s StormPost technology, iParenting can reach out to members with content targeted at various stages in the parenting lifecycle. Through a combination of preference pages and clickstream data analysis, iParenting can serve up to subscribers specific articles of interest along with relevant coupons and promotions. A newsletter subscriber who clicks on a link related to “baby’s health,” for example, would begin receiving newsletter content specific to that subject, along with coupons for vitamins or fever reducer.

“We wouldn’t be able to do anything like that without segmenting and targeting. The sophistication of the technology has really evolved,” says Julie Keywell, senior vice president at iParenting Media. “Being in touch with consumers at the right time allows us to move them through our lifecycle and give them targeted information.” Keywell says iParenting has already recouped its initial technology investment and has seen its website traffic increase 64 percent since implementing its segmentation strategy.

So where does the CMO fit in all this? E-mail marketing groups typically comprise a small team sprung from IT or e-commerce. As a result, their efforts generally fly under the radar of the rest of the marketing mix—and are accordingly underfunded. “CMOs haven’t been as involved as they should be,” says Michael Della Penna, CMO of Bigfoot Interactive. “But now that they’re being held more accountable for how they spend money, you’re starting to see a lot of them show up at the e-mail marketing meeting.”

It’s time, many experts say, for CMOs to acknowledge the potential of e-mail marketing not as a broad-stroke communications tool, but rather as a highly measurable and controlled way to foster relationships with customers.

“The punch line of all this is that e-mail is not an advertising medium; it’s a relationship medium,” says Silverpop’s Nussey. “If you view it the same as a broadcast medium like TV, radio or print, you’ll ultimately be unsuccessful. But there’s never been a better tool for building relationships and customer loyalty.”

Beth Stackpole is a freelance writer in Newbury, Mass.

From CMO magazine (a publication of CXO Media, Inc.), August 2005

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