March 24, 2008

Cross-Marketing E-Mail (And Catalog) Lists

Last fall, I requested information about a Recreational Vehicle.

Within two weeks, I started to receive numerous e-mail campaigns from various organizations loosely aligned with the Recreational Vehicle industry. A campground in New Mexico offered a discount if I stayed with them during a regional festival. A finance organization offered a low introductory rate if I purchased a vehicle in the next thirty days.

As a consumer, this was frustrating. I didn't appreciate appearing on a veritable plethora of e-mail lists, lists that I lhad to unsubscribe to on an individual, case-by-case basis.

It is easy to empathize with the bloggers, vendors, third parties, and customers who continually ask brands to discontinue the practice of cross-marketing e-mail and catalog marketing lists, a practice that results in a ton of ill will and marketing waste.

Now sit in the shoes of the e-mail marketing manager for a moment. Pretend that the e-mail marketing manager at J. Jill wants to use the "sister file" at Talbots (Talbots owns J. Jill) to promote J. Jill merchandise. The e-mail marketing manager blasts a campaign to 100,000 Talbots customers who have never purchased from J. Jill. A week later, the results are tabulated, and are illustrated below:

E-Mail List Size 100000
Opt-Out Rate 20.0%
Remaining Candidates 80000
Open Rate 18.0%
Engaged Candidates 14400
Click-Through Rate 6.0%
Potential Purchasers 864
Conversion Rate 5.0%
Number of Purchasers 43
Average Order Value $137
Total Demand $5,918
Flow-Through To Profit Rate 38.0%
Marketing Contribution $2,249
Advertising Cost $250
Variable Operating Profit $1,999
Demand Per E-Mail Delivered $0.06

So let's review the challenge, through the eyes of the e-mail marketing manager.
  • Her practice of cross-marketing e-mail lists is acceptable, as outlined in the small print, the legal-speak, of the privacy policy of her brand.
  • The e-mail marketing manager gets to keep her job if she grows the sales of the brand she manages. In fact, she earns a nice bonus, maybe 15% of her annual salary, if she adds "x" new customers, above and beyond the number of new customers from the prior year.
  • Given her incentive structure, the e-mail marketing manager executes an easy strategy. Instead of doing the hard work of finding customers truly interested in her brand, she cross-markets her brand to a "sister file".
  • She angers 20% of the folks who receive the message, a shocking percentage by any account. These folks opt-out of further e-mail marketing of her brand.
  • Yet, 43 customers out of the original 100,000 choose to purchase merchandise, spending a total of $5,918, generating $1,999 profit.
Any rational individual would consider this marketing campaign a colossal failure. Only 43 out of 100,000 customers chose to purchase something, while 20,000 customers were so angry that they opted-out of future campaigns.

Yet from the standpoint of "the brand", this campaign could be viewed as a marginal success. From the perspective of the brand, there aren't a veritable plethora of profitable ideas out there ... if there were, the brand would already be executing them!

This campaign generated profit. This campaign gets our e-mail marketing manager one step closer to earning a fifteen percent bonus that she will use as a down payment on the purchase of her first home.

Third parties have become increasingly critical of the practices of marketers, and for good reason. Third parties can easily see issues from the standpoint of the customer, and can empathize with the customer.

It isn't as easy to see the world through the eyes of the e-mail marketing manager or catalog marketing manager. Would you be willing to execute politically correct strategies that are likely to be money losers (in the short term), costing you the bonus payout that funds the down payment on your first home purchase?

Until you sit in the seat of the individual executing these strategies, it is easy to criticize cross-marketing strategies.

In an ideal world, leadership provides an incentive plan that encourages the e-mail marketing manager or catalog marketing manager to create and execute marketing strategies that are consumer friendly.

In this example, if you were the executive in charge of e-mail marketing, what type of incentive (bonus) plan would you create for the e-mail marketing manager, to encourage her to execute customer friendly strategies that may actually cause a decrease in sales (in the short term)? As an executive, would you be willing to lose your job because you "appeared to side with your customer" by discontinuing cross-marketing practices?