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 Email Lists Come of AgeOctober 2002 BY REGINA BRADY They're qualified and permission based. They're affordable and efficient. And the results speak for themselves. Visit just about any Web site and you'll find an offer to sign up for an e-newsletter, or to receive promotions. And when you do sign up, you are often asked the million-dollar question: Would you like to receive offers of interest from our marketing partners? The names and email addresses collected as a result of that question fuel the burgeoning email-list business. There are between 300 and 400 million email names available today. Marketers are using email to communicate with prospects and customers like never before. Fortune 100 corporations, medium-size businesses and even small businesses have embraced email as a viable way to acquire new customers. In fact, Gartner estimates email advertising revenue to reach $1.26 billion by year-end, up from $948 million in 2001. By 2005, email ad dollars are projected to grow to $1.5 billion. Why? For two reasons: interactive strength and cost-effectiveness. An evolving industry: then and now Two years ago was the height of the dot.boom. Pure-play Internet companies that wanted to build their businesses as quickly as possible were aggressively mailing almost any email address they could find. But there were few success measurements. Some looked at aggregate site traffic, independent of marketing channels used; many measured clickthroughs. Few attempted to determine whether business was actually transacted. Traditional marketers watched this frenzy with dismay. They couldn't understand how dot.coms were mailing hundreds of thousands of names when they did not see enough success to justify large mailings. They cautiously tested lists, creative, offer and format, then analyzed results. While they did find pockets of opportunity, progress was slow. Fast forward to email prospecting today. Now, metrics and methodology matter. Marketers carefully manage their efforts, examining clickthrough rates, list deliverability and, where possible, site transactions or registrations. Email lists are tested, and continuations occur only for productive lists and segments. Marketers determine success based on the cost-per-sale, or the cost to acquire a new name. And this is done on a list-by-list basis. List quality and quantity has improved. B2B lists have always offered a wide range of selections. Now consumer lists offer increased targeting. And, more lists have postal-address information as well. The number of available names in the market today has grown by more than 25 percent over the last two years. This is a result of new lists becoming available, as well as businesses focusing on growing their files. Recently, many magazine publishers have made their email lists available, and marketers view this as a great source of names in vertical niches. Prices have come down as a result of the economic slowdown. Lists have two pricing components: the cost of the list and the cost of sending the list. Consumer lists now average $100 per thousand names ($100/M), down from between $125 and $150/M. B2B lists have decreased slightly to about $300/M. The cost of deployment has dropped from $150/M to between $50 and $100/M. Procedures have been codified for the list-rental process. Most list owners have created their own consistent headers and footers that wrap around the marketer's message. Offer clearance and the steps required to stage a mailing are similar from company to company. Email formats have evolved, as well. In the past, there was a preponderance of text email. Today, almost 60 percent of recipients can receive HTML (graphic) messages. Most marketers will develop campaigns in both content versions. The right format will be delivered based on the preference recipients chose when they opted in. Permission: key to the kingdom Email is used to attract customers the same way that postal direct mail is used in the offline world, with one big difference: Permission must be received from the customer. The online world does not tolerate unsolicited messages. Marketers who use email addresses of those who have not granted permission run the risk of consumer backlash. When an individual registers at a site, places an order, or signs up to receive email, there are two levels of permission that are sought. First, the site wants to contact individuals about company offers; and if they seek to monetize their list by sending offers and promotions from third parties, a second permission request will be made. It is an industry best practice to provide "clear and conspicuous notice and choice." List owners use a variety of techniques to gain permission to make names available for rental. These range from sending email notifications to customers that they will be receiving third-party promotional emails (primarily used in B2B), to a technique called "double opt-in" or confirmed opt-in. Here, recipients must confirm via email that they want to receive outside offers and promotions before they are added to a list. Obtaining initial consent is only the first step in permission. "Permission is a continuum that must be managed on an ongoing basis," says Deb Goldstein, president of IDG List Services, a division of IT magazine publisher, International Data Group, in Boston. "It begins with a trusted brand and well thought out procedures that extend and protect that trust." List owners should establish messaging standards for the 'from' address, subject lines, headers and footers. The headers and footers of each message should clearly explain why the individual has received the message and allow a standardized method for her to opt-out of receiving any future email communications. It is also very important to carefully screen each offer to ensure it is appropriate for the audience," Goldstein says. Marketers applaud such standards, since a welcomed message is more likely to be opened, read and acted upon. Email List Pricing Is Not as Simple as It Appears To Be Data cards, the bible of the list industry, reflect list costs as a cost-per-thousand (CPM). They outline the base rate, selection charges and the cost of deployment, as well as provide information about the list. For example, a gardening file could be priced at $100/M. If a marketer wanted additional targeting, it might choose only names in the Northeast, and for this it could pay $15/M for the selection. Deployment charges might be $50/M. The total list cost would then be $165/M. This pricing appears to be simple and straightforward. But that is not the case. Brokers, agencies and marketers aggressively ask for discounts. It is standard practice to negotiate discounts for volume and re-use of names. But many look for a better deal and push for performance-based pricing. They want to pay only for clicks, sales or leads. Some bargain for hybrid pricing models that combine a low cost-per-thousand with a performance element. Under these scenarios, the list owner receives income only if the list performs. List owners argue that performance-based pricing asks them to assume all the risks, when they have little or no control over the offer and creative. "Six months ago, it seemed that everyone wanted a performance deal. This appears to be subsiding. There is a recognition that the owner is providing value and should charge a CPM commensurate with that value, in order to make a living and keep the industry stable," notes Bob Kweller, VP of list management at MyPoints.com. For a marketer to be in the best position to negotiate, it is advisable to test the list first and then negotiate based on that experience. That way, both the buyer and the seller have a base of experience to work with. The players To find lists, most marketers turn to brokers, or their agency. These experts survey all available lists and recommend those that meet the target-audience profile for the offer. Direct marketers and agencies establish relationships with one or more trusted brokers. Often finding that their traditional broker is not schooled in email, they look for a broker who specializes in email or whose company has such expertise. It is the broker's or agency media buyer's responsibility to know the marketplace and to guide their clients through the emailing process. They conduct list research to determine whether marketers with similar offers have tested and continued with specific lists. A good broker can evaluate the integrity of the list and the list-management company. "Most list owners are trying to do the right thing," says Rick Buck, director of e-media at Lexington, Mass.-based e-Dialog. "But the good broker or media planner looks for quality. They work with trusted sources to build recommendations and will survey both individual lists and networked lists." Individual lists usually represent a single source, such as subscribers to a particular magazine, or Web-site registrants in an interest category. Companies that are familiar in the offline world, such as Direct Media, American List Council and Worldata, manage such lists. Some lists are managed in-house, such as Cahners and IDG. Sizes vary from 10,000 to several million names. The Internet has given rise to a new breed of players that aggregate permissioned names collected on the Web into a list network. These networks are repositories of large numbers of email addresses that will range in size from 30 to 60 million. Often, names are gathered from up to 400 partner sites and funneled into the network. Names can be selected as an individual list source or based on pre-defined criteria across the entire network. For example, a marketer might choose a list of CEOs from one financial company or CEOs from all financial companies within the network. NetCreations, Yesmail and MyPoints are examples of network companies. What's available in the market? The ability to drill down and target lists has dramatically increased. On consumer lists, selections range from interests (cooking, sports, shopping, automotive, computer, etc.), to demographics (age, gender, presence of children), and geographics (city, zip code, region). For B2B lists, selections include industry interests (technology, finance, business, pharmaceutical, etc.), demographics (title, department, SIC code, number of employees) and geographics. Opt-in News conducted a study in early 2002 on what media buyers look for in email lists. Seventy-seven percent of buyers said the most important criteria for consumer lists are "interest" selects. For B2B files, 67 percent believe demographic and geographic targeting works best. And, more than half of the media buyers prefer double opt-in lists, because they feel this qualifies recipients to a greater degree. It is estimated that there are more than 5,000 individual and networked lists available. Opt-in News examined list-rental trends in late 2001 and found that 4 percent were for lists between 500,000 and 1 million names; more than 36 percent were for list orders of 100,000 to 500,000 names, and 8 percent were for lists under 10,000 names. Email differs from direct mail The biggest difference is that each list owner has designated one, and only one, company to send their email. Owners want to preserve permission and maintain the ability to quickly process opt-out requests. Consequently, a mailer who selects 20 lists will have its campaign sent by multiple vendors on a list-by-list basis. This makes merge purge and the identification and removal of duplicate names nearly impossible. There are rare exceptions, however. High-volume mailers, such as credit-card marketers, have been able to make arrangements for all names to go to one trusted data processor for merge purge. However, after the process is completed, the net output of each list must be returned to each owner for subsequent deployment. Many marketers offer incentives for first-time buyers, such as $10 off a first purchase. In these cases, they may want to match their existing customers against an outside list, to suppress those names. Most list owners will accommodate these requests. Traditional mailers often use the USPS' National Change of Address (NCOA) file to improve mail deliverability. There is no direct equivalent in the email world. Vendors such as ReturnPath and FreshAddress have introduced email change-of-address files; but they are currently only available to improve house names. And there is no consistency in the reports a mailer will receive. A few owners provide no reports, some provide total emails delivered, along with clickthroughs on each link, and others provide additional metrics, such as undelivered mail, and even the number of transactions or registrations that occur. The promise of multi-channel marketing One area that has garnered a lot of interest is multi-channel marketing. This is spurred by studies that show that the more channels a customer uses to connect with the marketer — the more that customer will spend. Many email lists offer at least a portion of their file with both email address and postal address. A marketer can send a catalogue or prospecting piece in the mail and use email to pre-announce or follow up the mailing. List owners encourage this activity by discounting pricing when both online and offline names are selected. "This is definitely the direction the industry is moving toward," says Cyndi Lee, VP at American List Council, based in Princeton, NJ. Today, marketers are testing the impact of multi-channel marketing to their own customers and many are seeing strong results. On email list rental, it has been slow to take off, but we expect this will be a significant trend for the future." Some marketers are even using the intersection of email and postal names to their advantage, applying geo-targeting at a zip-code level in their email prospecting strategies. Factors hindering success Email prospecting holds great promise, but there are impediments to success. The biggest is spam. Consumers and professionals are bombarded by unwan ted, unsolicited email. These messages result in mailbox clutter and have an impact on legitimate permission-based marketing efforts. According to Jupiter Media Metrix, the average U.S. online user will receive 738 unsolicited emails this year, and more than double that by 2006. Spam erodes trust in the email channel. Individuals struggling with overloaded mailboxes are less likely to open and read messages even from trusted sources. There is no consensus on how to deal with this problem. The FTC announced an initiative to pursue spammers, but their focus is on fraudulent and deceptive activity. Many states have enacted legislation that levies fines on unsolicited commercial email. But this has not stemmed the tide. TRUSTe recently partnered with Postiva to introduce a "Trusted Sender" program. Legitimate owners and mailers who comply with certain permission standards can license the use of a seal in email messages akin to the "Good Housekeeping Seal of Approval." But such a program needs significant traction in the marketplace to succeed. "Unless the goliaths like Microsoft, AOL and Yahoo decide to sanction or mandate a seal program, these solutions will be slow to take off," offers Jay Schwedelson, VP of Worldata. Another issue list owners face is deliverability. ISPs develop automated filters to cope with the millions of emails coming through their inbound mail systems. Free email providers such as Hotmail and Yahoo relegate unrecognized emails to "junk mail" folders, and individual users and enterprises can employ filters to all inbound email. Filters can be circumvented by carefully crafted messages that avoid subject lines or content that looks like spam (for example, "free," all CAPS and excessive use of punctuation marks in subject lines). Email-deployment companies now dedicate staff to monitor ISP delivery and follow up on any problems. But it is a challenge. "There is no forum for conversation on an industry-wide level with ISPs. Industry leaders in permission marketing need to sit face-to-face and start a dialogue for understanding on both sides," says Michael Mayor, president of New York City-based NetCreations. Innovative techniques that hold promise Prospecting email is working, but to maximize return, it is important for the marketer to figure out how to capture new email addresses as a result of his mailings. "I advise clients to make the primary purpose of an email campaign to drive the recipient to the Web site and encourage him to register or volunteer his email address," declares e-Dialog's Buck. "Once a marketer captures an email address with permission to continue the conversation, they can then begin to cultivate a relationship and build loyalty." Sequenced email promotions are being tested, with good results. Instead of a one-time mailing, two or more messages that build upon the offer are sent over time. A retailer may promote a sale and then send a reminder message two days before the sale ends. A conference sponsor may plan a series of emails that individually cover keynote speakers, exhibitors and early-bird specials to encourage registrations. "The best marketers create unique content to support their offer, eliminate responders from any subsequent mailings, and take care to stage the timing so that messages are delivered over weeks and not days," reports Denise Moser, director for Cahners Business Lists. The recency of a name can make all the difference. NetCreations announced an "Instant Offers" program in which individuals are sent email promotions as soon as possible after they sign up. Response can be up to 50 times higher for marketers who have tested recency versus timed mailings. "This is cutting-edge technology, which uses the Internet for what it's good at-real-time marketing," says Mayor. "It prompts marketers to think in new ways." Marketers have been using personalization in subject lines and in message salutations, but customization can be deeper. Yesmail recently reported response rates almost double when three to six data elements are leveraged to personalize email communications, and they almost triple when seven or more data elements are used. Email lists will continue to play a critical role. The best advice for success is to continue to test and to measure results. That foundation will allow any marketer to generate sales and increase his return on investment. Marketing Success Stories Moen Inc. utilized email prospecting in its plans to introduce its Revolution Massaging Showerhead. Its interactive agency Optiem LLC created an online promotion and a Flash-based (rich media) email for registered customers and prospect lists. The "Chill Out Sweepstakes" included three $5,000 online shopping sprees, product giveaways and a dancing penguin. The animated penguin reinforced the showerhead as a fun product. Moen would distribute the product to Lowe's and Target chains, so their email selections needed to include zip-code targeting to store locations. The campaign mailed to 160,000 prospect-list names and 60,000 Moen names. The overall clickthrough rate was 15 percent. Recipients were so delighted, they forwarded the message to 17,000 more people. In addition to driving retail sales, 16,000 recipients registered to receive additional promotions CareerJournal, the job-search Web site of The Wall Street Journal, wanted to encourage executives to post resumes and assure them anonymity. Its interactive agency, Trahan, Burden & Charles, developed three separate email creatives: a Flash email with a job-seeking executive who could disguise himself with various props, including sunglasses, a clown's nose, a pink straw hat, and a horned helmet; an HTML email with the executive already disguised; and a text email with a straightforward presentation. Sent to prospect lists, the text version won hands-down in generating job-seeking inquiries. Marketers often do not understand why one test is successful, but they theorize that the target audience takes job seeking seriously. The Economist magazine was faced with rising costs to acquire new subscribers, and decided to test email. The publication identified 600,000 opt-in email addresses that matched its criteria. Working with MindArrow, a rich media provider, it created a campaign that included a streaming-video message narrated by Nelson Mandela, along with a secure method to subscribe. More than 45,000 people opened the message, and on average, each viewer spent more than a minute with the content. The campaign generated more than 1,000 new trial subscribers and The Economist was able to reduce its cost of acquiring a new subscriber by 52 percent. Brady is president of Reggie Brady Marketing Solutions, a consultancy on direct and interactive marketing. She can be reached at 203-838-8138 or reginabrady@att.net. Return to Articles | ||||||||||||
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