January 17, 2008

E-Mail Strategies And A Study From Return Path

A recent study documented on the Return Path website chided retailers for sending what consumers considered "Junk E-Mail".

I think all of us have sat in the seat of the consumer, and understand how irrelevant many e-mail marketing campaigns appear when they arrive in our in-box.

Now, I want to make it clear that I am not taking sides here (nor is this a criticism of Return Path in any way, shape or form). I just want to present a case from the viewpoint of a General Manager accountable for delivering a healthy profit and loss statement. The GM is given four choices (sales and profit are based on actual e-mail marketing relationships):
  1. Send two e-mail campaigns per week to the entire e-mail list of 500,000 customers. Total sales = $9.9 million. Total profit = $2.9 million.
  2. Send two e-mail campaigns per week to the top half of the e-mail file, send no e-mail campaigns to the bottom half of the e-mail file. Total sales = $8.1 million. Total profit = $2.4 million.
  3. Send one very smartly designed e-mail campaign per week to the entire e-mail list of 500,000 customers. Total sales = $6.5 million. Total profit = $1.9 million.
  4. Send one very smartly designed e-mail campaign per week to the top half of the e-mail file, no e-mail campaigns to the bottom half. Total sales = $5.3 million. Total profit = $1.6 million.
Again, I'm not taking sides here. I do want for you to see things via the eyes of the business leader.

If a business leader is required to deliver increases in sales and profit (and if the brand is publicly traded, the business leader has a fiduciary responsibility to increase shareholder value), the numbers listed above drive the business leader toward choice #1. The business leader may feel pressured to increase e-mail frequency, mailing non-responders in an effort to deliver promised sales and profit forecasts, delivering less-than-compelling e-mail campaigns that deliver half the productivity of a well-designed campaign (as is illustrated in this example).

The challenge for all of us is to present a compelling case that illustrates how fewer campaigns offering relevant, targeted content actually increases sales and profit more than choice #1 outlined above.

Until this happens, we'll continue to see business leaders opting for choice #1. This choice is opposite from the strategy advocated by many e-mail experts, the opposite strategy desired by a consumer, but is often the choice most beneficial to the brand in the short-term (i.e. twelve months).

P.S.: I realize I'll get comments about high opt-out rates and consumer frustration and sender reputation and long-term profitability. If you elect to take this route, please pretend you're speaking to the General Manager of a direct-to-consumer brand --- present a compelling case with realistic metrics and accurate financial information --- no rhetoric please.

4 comments:

  1. I so get this. As the VP of CRM Marketing for a privately held B to C company, I too have the responsibility of maximum profits, so clearly experience the pressure to chose option #1. However, the "CRM" side of me wants to execute the most targeted, timely and relevant campaigns. Somebody help!

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  2. After sitting in meeting after meeting reviewing campaign numbers- I have to say that transactional, daily campaigns get *such great* returns, that it makes promotional one-offs, like the ones you describe, seem ridiculous. And I question the costs.

    So you have 2,000 emails every day going out based on some online user selecting "blue jeans". Rate of open/clicks, in the 20% to 40% range, conversion 5-10%. That's DAILY.

    The biggest thing for me is the cost in creative groups - not the price per email via the ESP, but the cost of making a new interesting promotional email to go out every few days. The real wins are the short little targeted emails that go out daily and you only had to adjust once to run for 6 months- maybe holiday-ize them near Christmas.

    You need to show the decision makers a time frame, over the year, and the costs broken down, and the metrics and revenue of each campign to show the wins. The hard part I've seen is getting groups to be honest about costs, adn accounting for revenue directly to the campaigns (and not via online advertising, and other line items).

    Still, it's hard for me to think that blasts make anywhere near the money that you mention- and also, the segmentation from 500M to 150M- You're right, that's an argument that doesn't quite work. But from 2000/day from 150000/twice a week with no behavioral/action-based targetting, that is an argument I could win.

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  3. Jacquie --- Anna might have a solution for you!

    Anna --- I'm mostly sold on where you are heading.

    We can agree to disagree on the costs and performance data. The performance data is an average of several multichannel e-mail programs I've actually been accountable for, or consulted with, measured via the phone, online and retail channels using test/holdout groups. Open rates, click-through rates and conversion rates always underestimate e-mail performance for multichannel retailers, and only measure e-mail performance in the online channel, completely under-counting retail sales driven by e-mail campaigns. For many multichannel retailers, e-mail campaigns drive more business to stores than to the website.

    Arguing with the GM about performance and costs won't convince the GM to change strategies.

    Arguing that the GM should execute mini-campaigns of 2,000 emails every day, campaigns that have dramatically better open/click/conversion rates is an argument the GM would be willing to listen to. Build a financial case around that strategy, and I, as a GM, would be willing to test your suggestion.

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