How Many Times Should You E-Mail A Customer Each Week?

Here is an article from DMNews, authored by Philippe Suchet, CEO of Kefta. Kefta is a company specializing in dynamic online targeting. The article advocates dismissal of frequent, untargeted e-mail blasts, and outlines several qualitative reasons why this practice should be stopped.

Let me pose a scenario to you. Pretend you are CEO of an online company that sends four untargeted e-mail blasts each week to an e-mail list of 10,000 names. You do not have the resources, nor the marketing budget, to develop targeted e-mail campaigns, or pay a vendor to execute complex campaigns for you. Like most businesses, you need every additional penny you receive from your customer. You have tested different two different e-mail contact strategies, one strategy includes four campaigns per week, the other strategy, only one campaign per week. Here are the metrics:

Situation #1: Four e-mail campaigns per week.

• E-Mail list = 10,000 names.
• Each week, 500 names are added to the e-mail file.
• Each week, 450 names opt-out/unsubscribe, or become invalid.
• Across a typical week, the four campaigns total $12,000 net sales and $2,000 profit.

Situation #2: One e-mail campaign per week.

• E-Mail list = 10,000 names.
• Each week, 500 names are added to the e-mail file.
• Each week, 350 names opt-out/unsubscribe, or become invalid.
• Across a typical week, sending just one campaign yields $5,000 net sales and $833 profit.

It is your turn to play virtual CEO. Do you over-contact your customers, and generate more than double the profits, or do you contact your customers less frequently, and sacrifice $1,167 of profit per week?

When we play the role of "customer", the answer appears cut and dried. We wouldn't over-contact the customer.

When we play the role of "CEO", our objectives may be different. The scenario where four e-mails per week are sent results in a 30% increase in opt-outs/unsubscribes. However, there are fewer names leaving the database than being added to the database. As a result, the CEO is likely to advocate four e-mail contacts per week.

Ok, time to share your point of view. You are the CEO. Which e-mail contact strategy do you implement, and why?

The Long Tail, Inventory Management, and Customer Loyalty

If you are like me (and I doubt you are), and you spend your evenings wondering what you are going to write about for your next blog entry, you have run across countless online discussions about The Long Tail, a new book written by Chris Anderson.

I have not read his book, but I have followed his blog and online discussions about the book. My interpretation of his thesis is that the internet allows companies to profit by marketing niche products to various customers. For instance, Apple's iTunes store does not bear a significant incremental cost by carrying Robbie Dupree's early 80s favorite "Steal Away" (ok, maybe that's one of my early 80s favorites). As a result, iTunes can appeal to a wider audience with virtually no additional overhead, yielding increased profit. Furthermore, Anderson would suggest that somebody like me can have a healthy blog by writing content that appeals to a small, but enthusiastic audience (that's where you come into the picture). So far, Anderson's theory has proven true, in the case of MineThatData.

Of course, Direct and Database Marketers understand the challenges surrounding inventory management, especially management of styles with limited and unpredictable selling behavior. When inventory management is practiced in a flawed manner, the impact on the profit and loss statement is disastrous.

I never directly analyzed the impact of an increase in assortment/styles/skus on customer behavior. Can the retention rate of loyal customers be increased from 60% to 70% by increasing skus from 100,000 to 200,000? Maybe retention rate doesn't increase, but items per order, or annual purchase frequency increases because of an increase in skus. My guess is that a dramatic increase in skus does not result in dramatic increases in retention rates, items per order, or increased purchase frequency. My guess is that a dramatic increase in skus could increase the audience who might purchase from your company.

Do any of you have any experience analyzing this topic? Even if you don't have any experience with the subject, what impact do you think increased assortment has on customer loyalty, purchase frequency, items per order, or the size of an audience willing to purchase from your brand?

What Should You Do With Your Career When Your Company Is Failing?

I read this post on the Business 2.0 blog, about a Microsoft employee leaving the company.

I have worked at five different companies. Only once did I leave a company because the ship was sinking. I could not see any way that I or the company could be successful. To me, the culture was not able of overcoming its problems.

Have you ever worked at a company that was sinking? What did you decide to do? Did you ride out the lows, and help turn around the company? Did the company eventually fail, or downsize your position? Did you leave, and if you did, why? What do you think is the right employment strategy when a company is going through challenging times?

Branding verses Selling: Gap vs. Zappos

Sometimes, Database Marketers get caught in the crossfire of the age-old discussion between branding and selling.

Visit www.gap.com. Notice how the homepage is merchandised. Or notice how the homepage is not necessarily merchandised. Gap advertises a theme, a reason to purchase, during the dog days of summer. Even more interesting, Gap chooses to dedicate eight lines of valuable homepage real estate to the terms and conditions of various promotions. Internet Retailer estimates that Gap converts 2.92% of homepage visitors to purchasers at an average order size of $85, yielding $2.48 per visitor.

Now visit www.zappos.com, an online shoe retailer. Zappos views home page real estate as being essential to capturing customer interest. No square inch of the homepage is ignored. Internet Retailer estimates that Zappos converts 5.20% of their visitors to a purchase at an average order size of $100, yielding $5.20 per visitor.

Given Gap's "brand recognition" and "brand heritage", it is surprising to see that Zappos, with just seven years of history, is twice as efficient at converting visitors into buyers than Gap. Now Gap may lose some sales to their retail stores, thereby cannibalizing online potential. Still, the difference is staggering.

If you are a marketer, which of these two approaches do you think is more effective at driving sales? If you are a brand marketer, how do you defend Gap's homepage strategy against Zappos? If you are a marketer who believes that each square inch of the homepage is valuable real estate, how do you defend the potpourri of merchandise on Zappos, compared with the clean presentation of Gap?

Multi-Channel Experience at CompUSA

In dire need of acquiring more memory for my wife's notebook computer, I visited www.compusa.com, identified that CompUSA carries the memory I need, failed to print the webpage featuring the memory I wanted, got in my car, and drove thirty miles to the nearest store.

At CompUSA, I failed to see the memory I needed, so I stopped at their repair desk, and asked the nice young lady to help me. The employee paged another employee, who had a key to get into the file cabinet where the memory was stored. Both employees spent five minutes searching for memory for me, before informing me that CompUSA did not carry the 1GB memory that I needed for their PC.

Now, I'll fully acknowledge that I could have done a better job of researching the product online, and I could have driven to the next closest CompUSA store (about 20 miles away), to see if they had the product. Instead, I drove home, and tonight, I plan on ordering memory online.

Ok, all of you multichannel pundits. How should CompUSA run their multichannel business model? Obviously, they cannot have all skus available in their stores, or they would run into enormous inventory issues in their stores, thereby rendering the stores unprofitable. Pundits will tell you that you should be able to order merchandise online, and pickup in the store. However, I wanted my merchandise today, I didn't want to wait a day or two until the merchandise was shipped to the store (and CompUSA does not have this service, to my knowledge).

So how do you think CompUSA should run their multichannel business model, in a way that meets or exceeds customer expectations, but makes certain that CompUSA runs their business profitably? What ideas do you have?

Optimized Marketing Spend

Last week, DMNews reported on an initiative at Dell to optimize marketing spend across all channels. Database Marketers are good at building tools that help marketers understand the best way to optimize their marketing spend. One of the most convenient and formulas used by Database Marketers is the square root function.

For instance, assume a company generates $10,000,000 of sales on marketing spend of $2,000,000. If the company wanted to increase marketing spend from $2,000,000 to $3,000,000, it is common to take the square root of the increase ($3,000,000 / $2,000,000 = 1.50 increase), and apply that to sales. In this case, an increase of marketing spend from $2,000,000 to $3,000,000 causes a theoretical increase in sales to (1.5^0.5) * $10,000,000 = $12,247,449. The challenge Dell would have to face is quantifying marketing activities that are not easily measured. For instance, Dell recently started a new blog. How does a Database Marketer quantify the impact of this initiative? How about television advertising? Without good matched-market testing, it will be a challenge to accurately measure the incremental benefit of this form of advertising. If the incremental impact of advertising can accurately be quantified, formulas as simple as the square root function, and a simple spreadsheet, can be used to measure the optimal level of marketing spend. In lieu of having accurate information, let's get your opinion. If Dell had an additional $5,000,000 of marketing spend available to them, how should they spend it?

• Should they mail more catalogs to existing buyers or new buyers?
• Should they pay for various keywords on search engines like Google?
• Should they pay for portal advertising on a site like Yahoo!?
• Should they pay for television ads?
• Should they pay for radio ads?
• Should they pay for newspaper ads?
• Should they pay for magazine ads?
  
• Are there any other advertising avenues you would suggest Dell pursue?

Let's hear your thoughts on this topic!

Archived Nuggets File

The conversion to this blog means old posts have been archived for your convenience. Please visit www.minethatdata.com/archived_nuggets.html, and enjoy commentary from April 2006 - July 2006.