Marketing Capitalizes On E-Mail

For years, Del Webb Corp. has relied on direct-mail campaigns to recruit prospects to vacation at one of its adult living communities in hope that they'd buy a house. A few weeks after a mailing, responses would trickle in from 1% to 2% of the recipients.

Four months ago, the company shifted to E-mail marketing, using tools from Annuncio Software Inc., with some surprising results. Soon after Del Webb sent out an E-mail, 12% to 13% of the recipients responded. "If you get a 10% response on direct mail, you're doing backflips," says Robert Brown, E-business project manager at Del Webb.

What's more, Brown gets real-time feedback from each campaign. "It's fun to send a message out, hit refresh, and see 100 responses jump to 150 responses in seconds," he says. A recent batch of 10,000 E-mails promoting the new Sun City Grand in Sun City, Ariz., resulted in 1,000 customer click-throughs within the first 48 hours--70% of the total number of responses. "With direct mail, you don't even know if the communication is going to get there within 48 hours," he says.

Like Del Webb, many businesses are finding the simplest tool--E-mail--can create the most lasting relationships. Smart marketers are using the personalization and customization capabilities of E-mail campaign-management apps as the basis for an ongoing conversation with consumers and business clients. The aim is to build loyalty and increase the value of each customer--and the interactivity of the medium makes tracking returns on investment easier than before.

Businesses have a number of options for E-marketing campaigns. DoubleClick, MessageMedia, and @once offer distribution outsourcing services that cost from $3 to $20 per 1,000 E-mails sent. In-house software for E-mail distribution and tracking is available from vendors such as Annuncio, Kana, and MarketFirst Software. Like other E-customer-relationship-management vendors, E.piphany Inc. has expanded its campaign-management offering to incorporate data analytics and personalization. Such systems can cost as much as $250,000 for software packages that include features such as personalization and analytics.

E-mail campaigns generate response rates of 10% to 30%. Compare that with offline direct marketing, in which a 2% response rate is considered successful. The Aberdeen Group estimates that by 2003, revenue for E-mail marketing services and software vendors will reach $1.2 billion.

But there are challenges on the road to riches. The novelty of E-mail promotions may diminish as in-boxes become overloaded. Consumers already are showing signs of immunity to E-mail correspondence and have slowed their responses. Also, as more marketers buy the same software or use the same outsourced services, customers will stop noticing the E-mail and the need for differentiation will increase.

For now, retailers rely on personalization and other unique features to build relationships with customers. Del Webb, for example, personalized half of the E-mails in one campaign by putting the recipients' first names in the subject lines. E-mails without the names generated a 5% to 6% response; those with the names had a 12% to 13% response rate.

Borders Inc. in Ann Arbor, Mich., also tries to make its customer contact more personal, says Mary Campbell, senior marketing manager. Aside from personalized E-mails, Borders presents on its Web site a menu of options for E-mail communications, ranging from requests for discount coupons to subscriptions to jazz newsletters, with explanations of the content and frequency of the E-mails. "Our long-term goal is to create a dialogue with our customers; E-mail is a great way to make that happen," Campbell says.

The return on investment for that goal is hard to quantify, but Campbell says she can infer how customers are responding by looking beyond click-throughs. If a jazz newsletter mentions a book that otherwise has gone unpublicized, for example, Campbell can monitor sales spikes in both retail and online stores. Bar codes attached to E-mail coupons help monitor the offline response to online promotions.

There are other ways businesses can measure the success of campaigns. "The last newsletter we sent had 100 unsubscribes from 1 million E-mails," Campbell says. That's a drop rate of less than 1%--an indication that Borders is meeting customers' demands. Campbell also keeps an eye on the "open rates," or the number of people who open E-mails. A decline indicates a problem.

But one pitfall in measuring the ROI for E-mail marketing is keeping track of the actual investment, says Tony Gonchar, CRM manager for online travel agency Expedia Inc., which has an in-house E-mail distribution platform from Xchange Inc. and uses analytic software from E.piphany. Most companies look at the cost of sending an E-mail, but the back-end costs can be significantly higher than installing the technology, he says. "It costs money to handle the responses, too," he says.

Not all consumers obey the rules of subscribing or unsubscribing, Gonchar says. That means staff members must be around to handle E-mail replies, and the call-center staff needs to be trained to field service calls from E-mail recipients. "The biggest hidden costs to E-mail are the people who unsubscribe and you can never E-mail again," Gonchar says.

To combat unsubscribing, Gonchar says, companies must make sure customers are aware up front of what they're subscribing to. That means letting customers opt-in to an E-mail relationship, rather than assuming they want it. Also key are basics such as sending links that work and messages that are proofread. Like all direct-marketing campaigns, content is key. "We have to rely on our ability as a leading travel brand to make people look forward to the message we send them and seek out our message in a crowded in-box," he says.

Moving forward, it's important for businesses to recognize the importance of E-marketing, experts say. They need to treat E-marketing campaigns with the same degree of caution as other IT practices involving customer data, says Mike Gotta, a senior VP at Meta Group. On June 27, pharmaceutical company Eli Lilly and Co. took some heat after it inadvertently listed the addresses of more than 600 subscribers to its E-mail reminder service for taking Prozac. "These are critical systems," Gotta says. "If businesses foul up on their E-mail, they have a huge issue with customers, privacy advocates, and regulators."

The best bet for marketers is to use E-mail with care and make it one part of a relationship in which the customer is supported on all touch points, Gotta says. "The successful, single-channel business is the exception," he says.

"E-mail is one part of a bigger mix that has to mirror a Web-site strategy, a call-center strategy, and a business strategy."