No longer the new kid on the block, e-mail has grown up to the point that it’s as much in the game as direct mail and telemarketing. But that doesn’t mean it’s being used to its full potential. Marketers are still learning to measure e-mail results and integrate this knowledge with other channels. ▪ Data integration is, of course, more crucial than ever during these hard economic times. E-merchants must justify every penny in their marketing budgets, while struggling with consumers’ overflowing inboxes, ISPs’ mistakenly filtering out legitimate messages, deciding whether or not to use e-mail append and declining response rates. ▪ To discuss these and other related issues, DIRECT recently gathered some of the industry’s leading e-mail providers and an e-mail marketer in New York for our second annual e-mail roundtable.
PARTICIPANTS
Reggie Brady, president, Reggie Brady Marketing Solutions, Norwalk, CT (moderator) • Gerardo Capiel, co-founder and CTO, Digital Impact, San Mateo, CA • Al DiGuido, CEO, Bigfoot Interactive, New York • Matthew Goldenberg, operations director, Bloomberg Magazine Group, Bloomberg L.P., New York • Genevieve Mallgrave, vice president and general manager, direct marketing and tech solutions, DoubleClick, New York • Jay Schwedelson, corporate vice president, Worldata/WebConnect, Boca Raton, FL • Geoff Smith, director of client programs, ClickAction, Palo Alto, CA • Steve Smith, CEO, Mindshare Design, San Francisco • Scott Stephen, COO, YesMail, Chicago • Kris Oser, senior writer, DIRECT
BRADY
Traditional marketers are dealing with a postal increase, we’re all faced with hard economic times and yet we’re coming into the fourth quarter, which is traditionally extremely busy in terms of marketing. Is there a ramp up of special campaigns and plans either with you or your clients?
GEOFF SMITH
I definitely see our clients gearing up as they’ve done every year in the e-mail space. They are coming to realize that e-mail is going to be a bigger part of their marketing mix than before and a higher percentage of their revenue dollars are coming from e-mail.
MALLGRAVE
At DoubleClick, we just did a marketing-spending index study. About 62% of the marketers who responded indicated they would be raising their budgets for e-mail marketing. The average increase was between 17% and 20%.
CAPIEL
We’re definitely seeing a continued shift from spending in traditional channels like telemarketing and direct mail toward e-mail.
BRADY
What are you seeing in the prospecting world?
STEPHEN
[At YesMail,] I’m seeing a spike, but I’m seeing smarter marketers — less of ‘Here’s X amount of dollars blasted out’ and more of ‘Let’s test, measure and then I have so much budgeted to roll out a campaign.’
SCHWEDELSON
From the prospect side, this has been the year of the house file. Everyone is focusing more on how to dig deeper into their customer list and while I’m encouraged by the spending we’re seeing on the prospect side, and it’s growing from where it was six months ago, I don’t see this by any means being a strong year compared with last year.
STEPHEN
You’re starting to see the nature of acquisition change. No longer is it predominantly ‘I need a sale immediately.’ It’s more like ‘This is the first point of contact that I’ll then roll into retention.’
SCHWEDELSON
I’m getting a lot of prospect marketers who would like sales from the outset and when they don’t [get them immediately], they are not entirely pleased with the campaign. With retention, they do have a much more sophisticated outlook. But they still like sales! [Laughter] As the industry matures, acquisition is not going to play out the way it did in direct mail. In direct mail, you could get a certain level of response. I think in e-mail, the shakeout that’s happening is there are certain products and services you can market by e-mail for a one-time sale and there are products you can’t. Like financial services will never perform as well in e-mail as they do in direct mail.
DIGUIDO
We’re also seeing marketers who are starting to understand the relationship between the e-mail and the direct mail piece — how one message deployment impacts on another one.
GEOFF SMITH
I see two trends. The first is that the time for marketers to profitably mail one message to their entire list is quickly coming to an end, if it hasn’t already. So they have to get a lot smarter about personalization and segmentation. The second is integrating several channels, coming up with coordinated programs and pushing out messages in multiple channels to reach people in multiple ways.
DECLINING RESPONSE RATES
BRADY
Are clickthrough rates declining among your clients?
STEPHEN
I think in aggregate, clickthrough rates are going down, but the aggregate amount of people clicking is going up.
STEVE SMITH
There’s more e-mail impressions, as well, to compete for those clicks.
STEPHEN
Absolutely. There’s more noise, there’s more clutter, there’s a lot going on in the space right now.
DIGUIDO
I think all those broad-brush views of e-mail clickthroughs declining are really kind of missing the point. Relevant communications is where it’s at.
CAPIEL
Good, targeted programs are working. HP, which we’ve been working with since 1999, has a very sophisticated one-to-one program and it generates about $300 million in revenue annually and about $6 million in cost savings. As more marketers come into the space, some of those are not going to start out targeted, and they are going to blast. Those are the ones [that will show a] decline in clickthrough rates, and of course that drags down the industry numbers.
GOLDENBERG
We just did an e-mail campaign — a recall effort for one of our controlled-circ magazines — where we got a 35% to 40% clickthrough rate. Granted, it was a retention mailing, but the response told us if your relationship with these people is solid, they will respond.
STEPHEN
The bottom line is relevancy drives response. Period. That’s personalization, that’s aggressive profiling, that’s triggering messages. The better you know your customers, the better they are going to respond.
MEASUREMENT
BRADY
Two recent studies said that roughly 50% of marketers aren’t doing analysis. And if you don’t do the analysis, you are not going to get smarter, you are not going to have better programs. Are you finding your clients aren’t measuring, or is that a myth?
GEOFF SMITH
One of the benefits of e-mail is it’s not only a great channel in itself, but it’s a great medium that reaches every other touchpoint you have with your customer. Because of that, it’s a lot more difficult to tie in those different channels than it is to just send out an e-mail and count the register rings at the retail store. Closing that loop by putting results back into the database and using those results for subsequent campaigns, I don’t see that out there.
STEVE SMITH
I don’t know if I agree with that entirely. For a lot of our customers it’s very easy for them with e-mail to get clickthrough and open rates and track responses.
GEOFF SMITH
Well, clickthrough and open rates are par for the course. I’m talking about ROI.
STEVE SMITH
But they are valid measurements and more measurement than you get with radio or TV.
DIGUIDO
It’s incumbent on us to ask marketers how they’re going to measure success at the outset — what are the metrics for success? When you ask this question, a lot of times you get blank stares. Nor can they tell you the lifetime value of the customer.
SCHWEDELSON
Measurements are the best and worst thing for e-mail. It’s been the best thing because you can find out what happened. But I spend half my day managing expectations. Half the marketers I deal with started to use e-mail because they read some statistic that says they’ll get a 15% response whether it be clickthrough or sale. And they call up and say I need to do this right now, and of course they don’t get that response — and then they’re upset.
STEVE SMITH
We can always point to customers who’re getting 10% and 15% clickthrough rates consistently and saying, ‘Here’s how you do it.’
SCHWEDELSON
That’s interesting because my clients call me and say, ‘What’s a good, average clickthrough rate?’ And I say, ‘I won’t give that number.’ If I give you a good, average click-through rate I’m not doing my job because I don’t know what you’re selling, I don’t know who you’re marketing to and I don’t know your industry yet. There are so many variables.
DIRECT
Aren’t there a lot of variables in direct mail? And yet there’s an average response rate.
GOLDENBERG
But in direct mail, you test over a long period of time and that package or that catalog is refined, and we’re now realizing it’s going to be that same process with e-mail.
DIGUIDO
Not that direct mail is any ringing winner. I think that’s what gives us all hope here. It’s an industry where the average response rates are less than 1%.
MALLGRAVE
Marketers need to look not just at response rates, but at their ROI relative to their acquisition costs or the conversion expense in other channels. Catalogers and direct mailers no longer have a director of interactive marketing and a circ director for their catalog. Now they have a person with responsibility for both channels who can make decisions about how they want to allocate across different channels.
DATA MANAGEMENT
BRADY
Most marketers are using an outside service bureau to send out their e-mail, so all of the their wonderful behavioral data and customer data on the e-mail file is nicely residing, but their master file is in another place. Is there a lot of focus today on how to pull that data together? What are the challenges and some of the solutions?
DIGUIDO
Most of the activity [in integrating data] is in financial services. Banks and credit card companies are some of the biggest direct marketers out there in the offline space. They have to go through the accounting people and the CFO and defend the marketing budgets. The marketing people and the CFOs are asking, ‘Isn’t there overlap between offline and online? What’s the impact of online on offline? Can you do less offline and more online?’
STEPHEN
That’s allowing them to look at what I think they should be looking at: the lifetime value of that customer. If we’re looking at the ROI on a campaign-by-campaign or a mailing-by-mailing basis, that’s shortsighted.
SCHWEDELSON
The other big day-to-day problem in this area is internal ownership of data. There’s bureaucracy within these companies that’s causing people not to be able to remove data from certain databases and it’s just causing a mess overall. It’s unbelievable. It’s anarchy when it comes to retention e-mail marketing. And there’s not a lot we can do as an outside service provider to help.
E-MAIL APPEND
BRADY
A marketer is likely to have only 50% of its file with e-mail addresses. And there’s churn — 30% of the e-mail addresses are going to change within a given year. You’d think people would totally buy into e-mail appending for customer files. And yet, a recent study shows that maybe 4.8% of marketers are trying appending. Is e-mail append really a non-starter?
GEOFF SMITH
We’ve seen a great demand for that type of service.
MALLGRAVE
We’ve not seen much demand for it at all, and the clients who are trying it are proceeding cautiously.
GEOFF SMITH
This is a legitimate way to grow a database if you pick a good vendor with good standards in how they go about the append in the initial e-mail. And it’s legitimate if you have a strategy for what you’re going to do after that first message.
SCHWEDELSON
I have a different perspective. I think it’s a poor life preserver for marketers who are late to the game at best. What you wind up with is a database that does not perform. But when you have to mail these out and you’re responsible for getting response rates, your appended file will never, ever perform as well as an e-mail database collected under normal conditions.
DIGUIDO
It all depends on the offer. Where we’ve seen it work incredibly well is where there’s a previous business relationship with the customer and it’s not ad hoc marketing broadcasts going out to these companies.
MALLGRAVE
Relevance is the key. How you approach that relationship, and that marketers can’t overestimate the depth of the relationship they have with their customers. That’s a mistake a lot of people make — that the first offer is much too hard. They’re looking for a sale with that initial introduction, with that append, as opposed to treating it as an introduction and confirming permission with the customer.
GEOFF SMITH
One of the worst things you can do is append an e-mail address and treat is as though it was in your database forever.
PRIVACY ISSUES
BRADY
In the early days — and most of the people in this room were around in the early days of e-mail — we talked about permission, we talked about opt in, double opt-in, opt out, but it seems like there’s not as much noise about that anymore. So does that mean it’s not a problem — that all of your marketers are doing it well?
SCHWEDELSON
There’s mass confusion in this marketplace. You’re getting all sorts of new players. Whether they are players or not, they think they’re players, and they are coming out with lists that are zillions of billions of names, with double opt-in, triple opt-in, single opt-in, who knows what opt-in, and they’re causing massive confusion in the marketplace.
DIRECT
Steve Smith, that’s your business model, right? To make sure you advise clients what is appropriate?
STEVE SMITH
We don’t just advise, but at Mindshare Design we enforce certain regulations. Really they are not our regulations, they are regulations that Internet service providers say you have to [impose] in order for mail to get through.
DIRECT
What are your requirements?
STEVE SMITH
The fundamental basis behind it is permission and expectation setting. When a customer opts in to something, the marketer sets the base expectations about how that name will be used and it’s stated clearly, not hidden somewhere in fine print.
BRADY
So they have to actively check the box that says, ‘I want to be added to this list’?
STEVE SMITH
Or it has to be very clear at the time of subscription that they are subscribing to something and what they are going to get as a result. And then when they get it, they have a way to get out of it. What we’re [working against] is the concept of bulk co-registration, which is somebody at some point signed up for something, which had a privacy policy that said we can resell this list as many times as we want to anybody we want. And we would see the list go from place to place to place, and consumers were not able to get off it because it kept replicating itself.
BRADY
Matt, as a marketer, is prospecting more of a problem with all these third-party lists that are out there?
GOLDENBERG
It’s a huge concern. We have a very good privacy policy in terms of opting in people from our own files. We would like to do a lot more e-mail prospecting, but I’m concerned about privacy and the caliber of some of the files.
GEOFF SMITH
The pandemonium that Jay described out there is perhaps true for the acquisition side, but I think on the retention side most people are quite comfortable with the policies and procedures and expectations that they have set for their own lists and their own companies.
CAPIEL
Digital Impact commissioned a poll with Harris Interactive and what we found is 86% of the people who were polled had actually requested to receive e-mail. Seventy-one percent of those had actually purchased as a result of those e-mails. So people do know the difference between spam and legitimate e-mail marketing. But there’s a lot of work to be done in terms of making that difference clear to the ISPs.
DIGUIDO
That’s the chokepoint. Because in the offline world, a $540 billion direct mail business is not built on permission, it’s built on the fact that your name lives on a list. This chokepoint that the ISPs have is the fear that Bloomberg has of being coded a spammer.
MALLGRAVE
[What bothers consumers] are these bulk co-registration lists where people’s names get propagated to 20 different lists and they can never unsubscribe. And even legitimate marketers sometimes don’t understand why we want to require them in every message with a way to opt out. They say, ‘These are my customers. We want to hold them captive and keep them on the list.’
SPAM FILTERS
BRADY
There’s a lot of talk today about spam filters that the ISPs are subscribing to. What they’re doing is looking at each e-mail message or group of e-mail messages that are coming in and giving them scores based on certain words that are used in that particular e-mail and blocking the e-mail from being delivered. In the mail you’re sending out on behalf of your clients, is the mail getting through?
DIGUIDO
We have a privacy officer working with the ISPs 24/7. There are several ISPs where [they won’t tell you] what happened.
STEPHEN
They won’t send a bounce-back [for those e-mails that don’t go through], they just chew it up and swallow.
DIGUIDO
We’re dealing with financial services companies where there’s legalities involved with that message [that] has been sent by a bank or credit card company to a recipient and they have to receive it or that bank is liable.
STEPHEN
We dedicate a lot of resources to dealing with the top 20 ISPs in making sure that everything is going through OK, that we’re always in the loop with them, that these filters aren’t being invoked and that the mail always goes through. We work very hard to stay on the white list. It’s a significant challenge, but something that we just have to do.
MALLGRAVE
We recently did a domain distribution on one of our client lists. It was only about 3 million names, but there were over 75,000 different domains within that list. It’s impossible for us to maintain relationships with more than 75,000. But recently, I was waiting for a test message from a client that got blocked by DoubleClick’s spam filters because it was for a grocery store and in the subject line it was promoting a special on chicken breasts.
So, understandably, it got filtered out and we didn’t get it. Even internally, we have to keep tweaking our filters and make sure the mail is going through.
GEOFF SMITH
It’s inconsistent, too. I’ve seen Hotmail corporate e-mails go into the Hotmail bulk mail folder, so even they don’t even have a handle on it.
DIGUIDO
The angst and the intensity and the anger among marketers about this whole practice is just getting whipped up.
MALLGRAVE
I think the ISPs need to determine whether they are a utility that people pay for and therefore should be getting the mail that they requested, or are they private networks that can determine what mail gets through and doesn’t get through at their discretion.
CAPIEL
AT&T Broadband, in May of this year, sold its customers e-mail filters that later actually blocked messages from AT&T Broadband about a price increase. Customers called in to complain. In February, Earthlink e-mails going to AOL accounts were blocked out because of spam filters.
DIGUIDO
If you are on the sending side of that e-mail how do you feel about that?
CAPIEL
I’m angry as hell.
DIGUIDO
You’re angry as hell and you don’t know about it until four or five days later, when you start looking at reports.
STEPHEN
If you think about it, you have centralized domain registration, right? Why not have centralized mailing registration? So the ISPs can look in one location and say, hey, they have clearance.
DIRECT
What are you doing as an industry to establish that?
STEPHEN
Well, we just came up with the idea yesterday, so…[Laughter]
SCHWEDELSON
Isn’t that called collusion? Isn’t that illegal? To bring the dominant players into a room and say, ‘We’re going to do it this way, and lesser players can’t send out e-mail anymore’?
STEPHEN
Not just the dominant players. It would just be setting standards.
DIGUIDO
That’s what AIM (the Association for Interactive Marketing) is doing now. We have committees set up to talk to the ISPs.
SCHWEDELSON
What AIM is doing is leaning more toward a best-practices discussion, rather than a regulation that we’re going to pass among ourselves.
DIGUIDO
You’re right, you can’t mandate it. You get the 20 usual suspects in a room and reach some consensus.
SCHWEDELSON
Hopefully there’s a lawyer in that room, too.
BRADY
From the marketer’s perspective, what are the big issues in the next year?
SCHWEDELSON
From the prospect side there’s going to be more players, not fewer. There’s going to be even greater confusion. So it’s more of a foggy outlook, but with more business, hopefully, too.
DIGUIDO
Marketers’ testing so far has been effective and efficient. But the frustration is that they don’t have a large enough database of e-mail addresses.
GEOFF SMITH
One, I think marketers are going to spend a lot of time trying to become smarter. Segmentation strategy is key. They will be testing more. Two, integration is going to continue to be a big part of an organization’s goals.
BRADY
What do you see happening in the next year?
MALLGRAVE
I think one of the best things we can do to help the marketers out there is to help them manage the disparate pieces of data, and to measure across the different channels.
STEVE SMITH
We want to simplify the process [and] take away the intermediaries.
SCHWEDELSON
I think that millions of people in this country are going to get intimately familiar with how to put filters on their e-mail inboxes. E-mail is still in its infancy and who knows what we’re going to talk about next year?
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