July 06, 2009

Gliebers Dresses: E-Mail Marketing

It's time to Skype-in to another Gliebers Dresses Executive Meeting.

Glenn Glieber (Owner): "... and I don't understand why the ratings for the evening news are down, because quite honestly, I still watch it every night, don't you all?"

Meredith Thompson (Merchandising): "Kevin, is that you?"

Kevin: "Yup, it is me!"

Glenn Glieber: "I asked Kevin to hop on today, so that we could talk a bit about e-mail marketing. Sarah, go ahead and take the lead."

Sarah Wheldon (Marketing): "Thanks, Glenn. As all of you know, we have what we believe to be one of the better e-mail marketing programs in the industry --- not as good as what Anna Carter has, but pretty darn good."

Lois Gladstone (Finance): "Let's just see a show of hands, really quick. How many of you have purchased from any e-mail marketing campaign in the past year?"

Roger Morgan (Operations): "Oh, I have, I have! I love Amazon.com. They do those 'customers who liked product-x may be interested in product-y' e-mail campaigns. Why don't we do any campaigns like that?"

Sarah Wheldon: "As I was saying, our program is pretty darn good. We have two targeted versions of each e-mail campaign. We have one version which goes to customers who purchase 'younger' merchandise, and we have one version which goes to customers who purchase 'older' merchandise."

Lois Gladstone: "How do you decide who gets each e-mail version? Do you look at the age of the customer, and then draw an arbitrary cutoff, like at age 35 or something like that?"

Sarah Wheldon: "No, we don't know the age of the customer. That information is not stored in our database."

Lois Gladstone: "Seems like you should know that."

Sarah Wheldon: "How would you like for me to find out that information for each of three hundred thousand e-mail subscribers? Should I send a quick text message to each of them? Should I visit each of their homes, criss-crossing the country in the Gliebers Dresses RV?"

Roger Morgan: "Woodside Research recently released a report that says that the customer is in control --- that the new best practice is to let the customer decide everything regarding e-mail marketing. Let the customer pick e-mail frequency, let the customer pick the version she wants to receive, let her volunteer whatever information she wants to volunteer. We will store the volunteered information in a tiny little database, and then mine it for gold, folks, we'll mine it for gold!!!"

Meredith Thompson: "That sounds great. But doesn't something like that that need to go into the book of work?"

Sarah Wheldon: "Yes, that sounds great. But we've tested e-mail frequency, remember, Kevin was here and he presented those results. When you give the customer fewer e-mails, the customer spends less."

Roger Morgan: "But the customer would be happier, right? And if the customer is happier, she'll become more loyal. Loyal customers spend the most money."

Sarah Wheldon: "That's lizard logic. We tested a reduced frequency, and the customer spent less when she received fewer contacts."

Roger Morgan: "You didn't let the customers who wanted fewer contacts dictate their own strategy. You just arbitrarily sent fewer e-mails. Get the strategy right, and everything will work out. And think about all of those customers that opt-out. We're disappointing each and every one of those customers. How much damage does that cause our brand?"

Lois Gladstone: "Yeah, let the customer decide the strategy! Who wants to be spammed?"

Sarah Wheldon: "We're not spamming anybody. When the customer buys from us online, we make it very clear that the customer is agreeing to participate in our e-mail marketing program, and that the customer can expect between 50 and 150 campaigns per year. She can opt-out at anytime she wants. We're fully CAN-SPAM compliant."

Roger Morgan: "Oh, that's not an industry best practice. The customer should be the one who decides if she opts-in to the program, she shouldn't be auto-enrolled."

Sarah Wheldon: "That's exactly how Anna Carter executes their campaigns. And if we let the customer make the decision, then we lose out on all of the sales associated among customers who we automatically opted-in to the program. We're just not in a position to lose sales, are we?"

Pepper Morgan: "Kevin, how do the e-mail campaigns perform, anyway?"

Kevin: "Here are some key metrics about your e-mail customers."
  • Half of all customers who purchased in the past twelve months subscribe to e-mail campaigns.
  • E-mail buyers have a 77% annual repurchase rate, among the most loyal of any channel.
  • Only 25% of your e-mail file bothers to click on at least one e-mail campaign, per year. The remaining 75% are inactive.
  • Only 5% of your e-mail file buy something from your e-mail campaigns, on an annual basis.
  • E-mail is what I call a "transition channel". It is the channel that your customers migrate to as they begin to rely upon catalog marketing less. After the customer buys from an e-mail campaign, the customer is likely to buy from your website, without attribution to any other marketing campaign.
  • 80% of your e-mail purchasers buy merchandise on sale, or buy when free shipping is offered. As a result, your e-mail buyer file is over-populated with discount shoppers.
  • When you offer full price merchandise via e-mail, you generate $0.05 per e-mail campaign.
  • When you offer sale merchandise, or you offer free shipping, you generate $0.25 per e-mail campaign.
  • Over time, you optimized e-mail performance based on the metrics you had available to you ... open rates, click-through rates, conversion rates. As a result, your optimization best practices resulted in a program that sale/promo customers love. Your customers are no longer interested in e-mail marketing unless there is a marketing promotion.
Lois Gladstone: "Oh my goodness. That's a disaster."

Sarah Wheldon: "It's simple Darwinistic evolution, Lois. We're always been asked to maximize the productivity of our e-mail campaigns, we can never plan for a sales decrease, right! So we offer sale merchandise, we pop a promotion like free shipping on top of the merchandise, and then the campaigns work. Sure, this attracts a sale/promo customer, and the circular logic requires e-mail to be a sale/promo channel. But we all know that. And we've all accepted this. I've presented the options to you previously, and none of you like it when we generate just $0.05 per e-mail, you tell me the program is broken when that happens."

Roger Wheldon: "Isn't it a best practice of a multichannel brand to align all channels? Now we have an advertising channel that only works when you offer sale merchandise with free shipping? This means that the e-mail customer isn't aligned with our website or catalog customer. That's a bad thing."

Meredith Thompson: "Oh, we're aligned. We offer the same merchandise in e-mail campaigns that we offer online and in catalogs, and we offer it at the same price, and we honor free shipping if the online customer specifically asks for free shipping, or if a catalog customer yells at somebody in the call center."

Pepper Morgan: "But the e-mail customer, by definition, is a different customer. She likes sales and promotions. So technically, we're serving a different customer. So what is the goal of e-mail marketing, my dear teammates? Is the goal to optimize e-mail marketing performance? Because if that is the goal, you should be praising Sarah right now. Or would you rather have performance that stinks, but is reflective of the whole brand?"

Lois Gladstone: "I want it all. I want to sell a ton of full price merchandise, I want to fully integrate all channels, I want to have the customer pick and choose what she gets, when she gets it, even if that means a significantly reduced contact frequency, and I want the customer to be happier and to spend more as a result."

Pepper Morgan: "I'd like trigger-based programs, too, but we don't have the technological resources to be able to manage that."

Roger Morgan: "Pepper, we can put that on the book of work, and prioritize it. If it is the most important project, it will get top priority. Now Lois, you seem frustrated with the concept of e-mail being a discount/promo advertising channel."

Lois Gladstone: "I am."

Roger Morgan: "But you're the biggest advocate of offering our customers free shipping if they buy four or more dresses in a year. Doesn't that mean you're causing all advertising channels to migrate toward promotions?"

Lois Gladstone: "My strategy only gives perks to the most loyal customers. Sarah's e-mail strategy gives perks to any dweeb confused enough to not opt out of our automatic opt-in process."

Sarah Wheldon: "So it is ok when you decide to offer loyal customers free shipping, but it isn't acceptable for marketing to optimize the e-mail marketing program around the sale/discount customer?"

Lois Gladstone: "I'm just saying we have to be a lot more strategic about how a multichannel business like ours evolves. I'd rather give a loyal customer a reward than give a customer who has an e-mail address a reward. We need to use tools like CRM to get customers to do the right thing. The right thing isn't to give us an e-mail address. The right thing is for the customer to spend a lot of money!"

Pepper Morgan: "Kevin, what is the lifetime value of an e-mail address?"

Kevin: "If we control for all other factors, the lifetime value of an e-mail address is approximately $40 of profit. It's a reasonably high number because there's almost no variable marketing cost associated with e-mail marketing."

Glenn Glieber: "I love free marketing!"

Pepper Morgan: "So the real question you're asking is this: Can we move away from discounts/promotions for e-mail customers, and in the process, increase the $40 lifetime value of an e-mail address? Because if we can do that, we don't care if we generate only $0.05 per e-mail selling full-priced merchandise without free shipping, right?"

Glenn Glieber: "That's a tough question, folks! Sarah, why don't you tackle that one, and have an answer for us by later this afternoon? Thanks. Ok, time to move on to the next topic on the agenda. I'm schedule to appear on 'Wake Up New Hampshire!' tomorrow morning. I'm participating in a round table discussion on weathering challenging economic times. I need a cheat-sheet that illustrates all of the things we've done to weather challenging economic times. Please send me your list of the top five things you've done to weather challenging economic times in your department by 4:00pm today. Thanks, great meeting!"