| Reggie Brady Marketing Solutions 203-838-8138 | ||||||||||||
| ||||||||||||
Reggie's Articles appearing in DM News | ||||||||||||
| Give me that old time email religion! May 1, 2000 BY REGINA BRADY Every reader of this publication knows the value of good data. Anyone involved in direct marketing for any length of time soon gets the database religion. A comprehensive database with flexible options can make all the difference in the profitability of your marketing programs. The value of good data is just as much, if not more, important for email marketers. Building a quality database is key. Still, there are some important distinctions in how data is used and how it is evaluated, and marketers should take these differences into account. Mining your house file In traditional direct marketing, we mine our customer lists, and segment them to maximize the return on investment (ROI) from a campaign. There are two factors that I’m going to focus on that represent a major difference between traditional marketing and email marketing: the recency of the name and the cost in the mail. Typically, companies use the RFM model (Recency, Frequency, Monetary Value) as the basis of file segmentation. And Recency becomes a key determinant in how deep a marketer can go in mailing their house file. The more recent the customer activity the more likely that response will be high. The longer it has been since recipients have made a purchase, the less likely it is that the list can be profitably mailed. Each mailer plays with different scenarios in deciding whom to mail to; but there is always a definite cut-off point, beyond which it would be unprofitable to mail. Why? It’s all about ROI, and there is a substantial dollar investment in mailing to customers. When the cost in the mail is between $250 and $750 per thousand, response rates are critical to success. We know that the longer it has been since a customer made a purchase, the lower the response rate. The same cost constraints make it difficult for traditional direct mailers to push personalization and customization to the limit. While testing is imperative marketers are often restricted due to the costs of creating and producing new test packages, short run printing penalties on smaller print runs coupled with higher postage costs for smaller mailings. A good example would be catalog mailers: it is generally cost prohibitive to think about creating custom catalogs for select customer groups and at best a cataloger will include a wrap on their catalog to provide some customization of content and message. Cost often dictates the frequency of mailings to customers. If we could, we would all like to be in constant communication with our customers but physical mailing costs often preclude this activity. Same data, different cut-off point With email, the profitability dynamics shift dramatically. Recent data (Forrester Research, January 2000) indicate that aggregate costs to communicate with customers via email are $5 per thousand. Even if the actual costs for a specific emailing were four times that amount, there is a major difference between $5 to $20 per thousand and the $250 to $750 per thousand seen in traditional direct mail. That means the old rules can be challenged: instead of choosing to mail only as deep as the 6 or 12-month buyer on a list, many marketers can now go much deeper. Many mailers can mail profitably to 24-month buyers, and maybe beyond because costs are next to nil. Don’t get me wrong! In email, it is still all still about looking at RFM. At the same time, RFM can mean different things to email marketers. Clicks matter! A recipient may not have bought recently, but you may be able to see that he was interested enough in your marketing proposition to click through to the Web site and take a closer look at the offer. This is observable behavior. Someone who looks and does not buy will still not be as valuable as someone who purchases, but if a recipient takes an action that the direct marketer can track, it is a measure of success. Direct marketing is, after all, all about getting people to act on what they receive. Contact frequency changes. Because email costs are significantly lower marketers can develop regular communication programs. Many marketers are moving to weekly promotions and several companies are considering the possibility of multiple daily promotions to selected portions of their files. As marketers increase their contact frequency they are moving into this very carefully. They are watching to see if their click-throughs and purchases decline. Another key barometer is whether the opt-out rates remain stable. If they begin to increase that’s a danger signal that the marketer is over-communicating. Separating the e-pros from the dabblers The winners in email marketing are going to be sophisticated marketers who use the capabilities of email marketing to the nth degree. Just as in traditional direct marketing, the use of effective database and segmentation principles will always be the cornerstone to success. Customization. If a recipient always clicks on a particular kind of offer — always choosing sale items, or always clicking through on the R&B selections from a CD outlet or the detective novels from a book seller — marketers can use this intelligence to further customize and personalize future offers. To do so is not easy; it means setting up a strategy at the outset to be able to monitor and capture usable information. You’ll need the ability to look at your email campaigns over time and be able to identify (as in the previous examples) all those who looked at sale items, or R&B selections or detective novels. You can then segment your file based on these behaviors for ongoing communication. Obviously; this means an ongoing plan to create discrete campaigns to smaller groups that are customized and personalized to customer needs. This change in mindset means more planning for the marketer: creating multiple messages, rather than adopting a one-size-fits-all approach. But in the end, the more robust the segmentation strategy, the deeper marketers are able to go into their files, and the closer they come to creating real one-to-one communications. Yes, this is more work. But there’s some good news to report! Several of the email deployment companies are now offering a feature called “dynamic content generation.” Simply put, the marketer establishes a series of rules based on database elements and creates content around each of the rules. The messages can then be assembled “on the fly” and delivered. For example, let us assume a general cataloger wants to drive traffic to their brick & mortar stores, to introduce a summer line of men’s and women’s clothing and include a special offer for previous buyers. In this instance, zip code will be used to select customers who are within a 30-mile radius of each store location, gender will be used to determine who hears about men’s or women’s clothing. Six-month buyers will get a 10-per-cent discount while those who have purchased between 6 and 12 months will get a 5-per-cent discount. Each recipient gets a personalized and customized message based on whom they are, where they live, and how recently they purchased. Identify your advocates. Email marketers are developing programs to reward evangelists. They track pass-along rates, to find those customer segments interested enough in a product or service to forward messages to friends or colleagues. When planning an overall email strategy, good marketers may want to segment their lists according to pass-along behaviors. Traditional direct marketers would kill to be able to get the same information and act on it! Measurement. Good marketing databases include a promotional history on each customer and the same holds true for email. Marketers want to measure their clickers, their buyers, how much money was spent, their evangelists and a customer’s activity over time. There are now campaign management systems in place that make it easy to query your customer base to see how often a customer has been contacted and to measure whether clicks and purchasess are declining based on the number of contacts. This is not all that different from traditional marketing but results are available in real-time and it is easy to select discrete segments for future promotions. Data enhancement. As direct marketing activities increasingly move online, we’ll see the application of other tried and true database techniques. Emailers will want to enhance their email lists with traditional data overlays, to provide additional segmentation and customer analysis opportunities. Think about the potent combination when marketers are able to marry full offline data with behavioral data! Modelling, scoring and profiling will be taken to a new level. Into the future Several pundits have predicted there will be a glut of email activity in the second half of this year, which will result in declining click-through and transaction rates. The losers will be those companies who haven’t embraced the database religion. The winners are going to be those companies who have developed an email relationship with their customers and who keep their messages relevant to their customers. That relevance is going to be gained by applying all the tried and true principles of database marketing. I would further say that the winners are more likely be traditional marketers who are embracing the Internet. These are the folks who understand database marketing and are applying tried and true principles to the new communication channels. Pure e-commerce dot.coms can certainly react to this and the best advice I can give them is to hire good database and direct marketing people – they can be your secret weapon. Clearly, there is still plenty of room in the wired world for the database-marketing zealot. Amen! Regina 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 | ||||||||||||
| ||||||||||||
