Hewlett-Packard’s One-to-One E-mail Reaps $20 Million a Month

Hewlett-Packard Co. enjoys an auto-replenishment program with kick. Not only do e-mails go out to company decision-makers each month keyed to the age of products purchased, they are customized to the decision-maker’s specific needs and past behavior.

The rewards are enormous. The e-mails, which broadcast as a newsletter called HP Incoming, have had such an influence on customers that they’re responsible for delivering $20 million in sales each month.

Plus, because recipients are more inclined to contact customer service by e-mail than phone, there are call-center savings up to $150,000 a month.

The marketing cost? “It almost pays for itself in cost-avoidance alone,” said Paul Horstmeier, North American e-marketing manager in the Boise, ID, office.

The program started about two and a half years ago when Hewlett-Packard’s e-mail marketing company Digital Impact approached the Palo Alto, CA firm and offered to custom-build an “engine” smart enough to target e-mail to the life cycle of the product—and react to customer behavior over time.

The life-cycle technology was already in place—fueled by Digital Impact’s expertise and hosting capabilities—but Digital Impact suggested the engine to reduce human involvement. “The engine automates the decision-making,” said Michael Lewis, senior account manager at Digital Impact, San Mateo, CA. “It actually automates the marriage of content and customer.”

One-to-one marketing is the result. “This is not just segmenting into clusters,” Lewis said. “This is micro-segmentation to the extent that there are 50,000 to 100,000 different contact combinations that go out to customers each month.”

Customers usually sign up for the newsletter when they fill out the registration card online after their firm buys a product. (Half a million new e-mail addresses are typically collected each quarter from the cards as well as retail point of sale, the Web site or call centers.) HP Incoming covers about 100 items, including all H-P printers, PCs and computer-storage products.

The newsletters broadcast to half a million companies. Two-thirds are small and medium sized; the rest boast more than 500 employees.

About half of the newsletter content relates to product life cycle: a sequence of messages is generated depending on when a customer entered the program and what product was bought.

Say a company purchased a printer. The first month’s e-mail says thanks for signing up, here’s the customer-support telephone number for this product. Month two might include instructions on how to print envelopes from your ink-jet. The third month could suggest that the print quality might be fading a bit and here’s how to get replacement toner. Month six might recommend the purchase of an envelope feeder and present a note on how to extend the warranty.

Each content item in the e-mail is presented as a teaser with a link to a Web page, so recipient activity can be tracked. As the customer clicks through to some of the hundreds of Web sites set up to support the newsletter, their behavior is recorded in the database and then added to the data gathered when they registered–data such as company size, a person’s job title, industry and product-related interests.

It takes about six months for enough useful clickthrough data to be gathered to truly specialize each newsletter.

“We collect al the data and then a calculation is done on each person: Do they have a product and what is the life cycle messaging? What do we know about them?” Horstmeier said.

Since different executives at a company may be getting the newsletter, this click behavior helps H-P target different content to the CIO and the purchasing manager. The purchasing manager will hear about a dollars-off deal, perhaps, while a CIO will receive a link to an article on improving networking. A real estate agent might get a specialized piece on realty concerns. If someone clicks often on technical-support messages, there’ll be more support links included in the next e-mail. Ongoing customer-service queries may be addressed in future issues, too.

“Over time, everybody gets a different newsletter,” Horstmeier said.

After lifecycle content, the two or three promotional teasers are the most clicked on element in the newsletter.

The vision behind the newsletter is to provide usage tips at the right time, assist with business problems and help the customer understand H-P’s offerings, and encourage the customer to continue ordering from H-P. “It’s not auto-replenishment only and it’s not promotional,” Lewis said. “It’s very relationship-oriented.”

Still, the two or three promotional links per issue draw interest. They are the most clicked-on element in the newsletter, after the lifecycle content.

The e-mail program also saves money by directing customers with questions away from the phones to the e-mail. Customers get used to providing feedback and asking questions via e-mail rather than telephone. An e-mail from a rep costs 3 to 8 cents versus $15 for a phone call, Horstmeier said.

A final, unexpected savings occurs in the direct mail arena. A test comparing whether direct mail or e-mail was more effective in driving people to the Web site showed that direct mail costs $163 per lead. E-mail costs $7.

“So that made e-mail 27 times more efficient than direct mail,” Horstmeier said. “We no longer use direct mail to drive people to the Web.”

The home page photo is of Paul Horstmeier.