July 24, 2000

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Free Advice:
E-mail Marketing Smartens Up

E-marketers who capitalize on innovation will score best mail response rates

By Tony Priore

ust as E-mail marketing has achieved a reputation for outperforming banner ads and traditional direct mail, critics claim the medium is showing signs of maturity. Some analysts even predict that E-mail marketing will reach saturation levels in the not-too-distant future, flooding each consumer's in-box with thousands of messages a year and driving down response rates.

But I believe slumping response rates can be temporary, an inevitable consequence of marketers' hasty efforts to achieve the high returns promised by this new tool. Response rates will rise again, I predict, but only for those companies that devise E-mail campaigns that not only pay attention to the fundamentals of direct marketing, but also leverage the technology's full capabilities to precisely target prospects.

Since its inception, E-mail marketing has boasted response rates ranging from 5% to 15%, far better than online banner ad click-throughs and traditional direct mail. Drawn by the high return on investment, short time to market, and quick response time, 65% of companies have already allocated between 1% and 5% of their marketing budgets for E-mail marketing, Jupiter Communications said in an April report.

Marketers will continue to jump on the E-mail bandwagon. By 2004, the average household will receive nine E-mail marketing messages a day, according to Forrester Research. Jupiter says consumers will receive an average of 1,612 E-mail marketing messages a year--more than four per day--by 2005.

The large number of E-mail messages will contribute to a decline in response rates as consumers increasingly delete unopened E-mail messages. Response rates will dip, too, in response to E-mail campaigns that are poorly targeted or lack relevant, compelling offers.

Permission-based E-mail marketing, where consumers receive messages only on topics they have requested, isn't immune to the effects of the crowded in-box. Many marketers, impressed with the medium's potential, are sending messages that are just tangentially related to consumers' specified interests, risking the trust of customers who can quickly opt out of the relationship.

Saturation and misuse of the medium already may have hurt response rates. E-mail response rates have historically averaged between 5% and 15% and now, according to Geoff Ramsey of eMarketer, they're hovering at an average of 5.3%--at the low end of the range for E-mail.

Depressed response rates, however, don't have to last for those who can blend smart technology and smart marketing. Marketers must first commit to the most basic principle of direct marketing: relevance. They must provide compelling offers that are not available offline and adhere to strict interpretations of permission by providing only information about products and services that match consumer interests.

This laser-sharp targeting will come about as marketers develop more focused permission E-mail lists. For example, an online electronics retailer selling business-related products recently mailed a campaign to people with an interest in two topics--business and electronics--and generated a 19.4% response.

Robust database technology and sophisticated data-mining and tracking tools are converging, permitting marketers to better understand who their customers are, what their interests are, and to what offers they might respond.

To improve the response of any one campaign, marketers need to exploit the learning capabilities of the technology. E-mail's relatively low implementation cost permits marketers to test a variety of offers through small, tactical E-mailings; determine the most effective strategy; and then quickly deploy it on a large scale.

The messages themselves also need to become more compelling, with technology innovations such as rich media, streaming audio and video, and shop-within-E-mail capabilities.

How marketers are using or misusing E-mail isn't a reflection of its ultimate power or its potential. Rather, marketers who adopt the best emerging practices and who take full advantage of the technology's tracking and modeling capabilities can continue scoring response rates that outperform other marketing media.

Tony Priore is senior VP of marketing for yesmail.com, an E-mail marketing service and technology provider. He's also co-author of the book E-mail Marketing: Using E-mail to Reach Your Target Audience and Build Customer Relationships.

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