Xenakis on Technology

Say 'Please' Before You Market Via E-Mail

Written by John J. Xenakis for CFO.com, Dec 06, 2000.

How The Museum Company and CNNSI.com use E-mail as a marketing tool.

E-mail is becoming more and more a prominent part of marketing campaigns for small and large businesses alike. But as with any other marketing technique, you must use it carefully. Otherwise, you risk alienating potential customers instead of embracing them. The key to successful E-mail marketing is called "opt-in E-mail" or "permission E-mail," in which the people who receive your E-mail messages are only those who have indicated that they want to receive them. Without that permission, your E-mail message just becomes worthless "spam." And spam can engender negative feelings toward the sender of the message.

E-mail marketing is generally much more successful than banner ads that appear on Web pages, according to Rick Bruner, an analyst with IMT Strategies, an E-business market research firm based in Stamford, Conn. "Marketers can commonly achieve 15 percent click-through rates on permission E-mail campaigns (compared to 1 percent or below with Web banner ads) and conversion rates (for sweepstakes, newsletter sign-ups, surveys, E-commerce sales, and more) of 5 percent or better," he says. "Unlike Web banners, E-mail is an elegant and universal 'push technology' that puts the marketer back in control of what messages the customer sees [, and] when."

That's exactly the kind of program that's been set up by The Museum Company (http://www.museumcompany.com), the New York City-based headquarters for the national chain of over 100 The Museum Company retail stores in the U.S. and Canada. The chain sells a variety of items, including jewelry, gifts, and even toys, based in culture and history.

"We have an in-house EDM [electronic direct mail] program that we use to communicate with our registered members," says Helen Elizabeth Kim, vice president of marketing for the retail firm.

"We communicate special offers or promotions for store events to register customers or other people who have given us permission to market to them online."

The Museum Company has a mailing list of several hundred thousand E-mail addresses, starting with those culled from cards filled out by customers in retail stores. "In addition, we have lists of people who are registered to our site, and we have national sweepstakes that people can enter, and they can provide addresses and E-mail addresses," says Kim.

Anyone can send out E-mail to a list using a standard E-mail program. But once you have tens or hundreds of thousands of E-mail addresses, then the problems become complex. Just sending that many E-mail messages through a system can overwhelm it, and then keeping track of messages and responses requires a great deal of technology.

For this reason, The Museum Company uses the services of Responsys.com, an E-mail marketing firm, to manage the E-mail operation.

Kim says that a core principle of marketing is that you have a hypothesis, you test the hypothesis, track the results, and expand the programs that are working, retiring those not working."

Kim has experimented with a number of different marketing campaigns -- holiday promotions, promotions for special store openings, special product promotions, and different kinds of E- mail messages -- varying with the amount of graphics, for example.

Responsys.com provides a variety of tools to mount and measure these campaigns. E-mail addresses can be segmented according to geographic region or other demographics provided by users themselves. According to the company, Responsys charges its customer 10 cents to 15 cents per outgoing E-mail message, depending on the volume of messages and complexity of services.

"For example, if we sent out 100 EDM pieces today, we could track when they go out [and] what percentage actually opened them, and [we could] follow their behavior to see what people click on and what they order," says Kim. "And I want to be very clear that we like very much that the Responsys tools are permission-based, and all our members have said, 'I want to receive E-mail online.'"

But more than that is required for a successful campaign, according to Jim Nail, an analyst for Boston-based Forrester Research Group. "The biggest 'gotcha' in conducting an E-mail campaign is that on the surface it looks like a direct mail campaign, but without paper and postage," he says. "While there are a lot of similarities, and a lot of direct mail insights will apply to E-mail, the big thing that doesn't apply is that E-mail has to be a lot more personalized, and has to deliver some kind of value."

For that reason, each outgoing E-mail message is personalized in several different ways. It contains the recipient's names, and any URLs in the E-mail message are unique to that message. Each E-mail message is assigned a unique number which can be tracked back to the user, and that number appears in all the URLs in that message. If a user clicks on one of the URLs in the E-mail message, then the Responsys tools can provide aggregate information on how many people opened the messages, how many people clicked on a URL, and how many orders were generated. Each recipient's interests can be tracked, so that the content of the next E-mail message can reflect those interests.

Another company, CNNSI.com, uses E-mail marketing in a different way -- and also very successfully, according to marketing director Andy Mitchell.

"There are three goals," says Mitchell. "To remind people that we're on top of the sports news; second, to drive traffic back to the site; and third, since E-mail is valuable to advertisers, to monetize that as well."

CNNSI.com sends out very popular E-mail newsletters on golf, football, and basketball, with baseball to begin in the spring. Users can subscribe to these newsletters for free from the Web site. There's also a "refer-a-friend" program in which one sports fan can name another fan's E-mail address, and that person will be asked if he or she wants to receive the free newsletters.

The newsletters are even customized for the recipient. For example, a Massachusetts football subscriber might find a lead story about the New England Patriots.

CNNSI has almost 200,000 subscribers for its first two newsletters alone, and the list is still growing.

Because of the size and complexity of the job, CNNSI also outsourced the E-mail marketing, in this case to the firm E2 Communications (http://www.e2communications.com). E2 Communications quotes prices of 2 cents to 4 cents per message, considerably lower than Responsys.com's price quotes. Although, since the tools and service are different, it's not always possible to compare the two companies directly.

E2 Communications is taking care of the first two newsletters on golf and also on football, which started last summer.

"At CNNSI we're a content company, and E-mail is their business," says Mitchell. "We provide the content to them, they design the newsletters, they format it, and they crank out new E-mail products every day."

This campaign is already paying for itself, according to Mitchell. "Through advertising alone, we more than recoup our costs for the service," he says.

However, when CNNSI was about to start up its basketball newsletter in November, Responsys.com convinced CNNSI to give them a try.

"E2 had done a good job, and we were already comfortable with them, but we were aggressively sold by someone at Responsys," says Mitchell. "At first we didn't even want to consider testing Responsys, but they gave us equal pricing with E2. I think that both these companies hope that by establishing themselves with CNNSI, it's going to open doors with other CNN properties and with [parent company] Time Warner."

So, at this time, E2 Communications is marketing the golf and football newsletters, and Responsys.com is marketing the basketball newsletter. "It's completely practical for us to test both their solutions simultaneously," says Mitchell. "The real judgment day is going to be in February when we decide who's going to do the baseball letter for us. Our present plan is to move all the letters to a single vendor."

Responsys.com and E2 Communications are just two of many companies in the E-mail marketing business, with prices ranging from roughly 2 cents to 3 cents per E-mail message to as much as 15 cents per message, depending on volume of E-mail.

In addition, there may be large up-front consulting expenses required to integrate the E-mail system with financial systems. For example, E-commerce companies may want to integrate their order-entry and order-fulfillment systems with the E-mail system, in order to send E-mail messages automatically to customers at the time an order is placed and again when the order is shipped.

Both Responsys.com and E2 Communications make their entry-level tools available on their Web sites to low-volume users on a self-service basis.

Responsys.com's JumpStart is available online for free without time limit, with usage limited to 500 messages per month. The next level up is a supported package for $900 per month, allowing up to 5,000 messages per month.

E2 Communication's entry-level product has a somewhat different price structure. There's typically a couple of thousand dollars in setup costs. Then, however, monthly costs are $400 per month for an entry-level supported system permitting up to 10,000 E- mail messages per month.

Another market leader in E-mail marketing is Digital Impact (http://www.digitalimpact.com). But its service is heavy on the consulting services, according to Matt Cain, analyst with the Meta Group. Digital Impact, which he calls a more expensive, high-touch outfit, works closely with the customer, to the point of holding the hand of the customer, says Cain. "Reponsys.com is more self-service. They want to provide their tools, and provide a lower-cost service."

In fact, there are so many firms offering E- mail marketing services, that we're starting to see a lot of merger-and-acquisition activity, according to Cain. "The interesting dynamic is that the guys who've done a lot with banner advertising, like 24/7 Media [http://www.247media.com], Engage Inc., [http://www.engage.com] and DoubleClick [http://www.doubleclick.com], are now very interested in E-mail, and are acquiring E-mail companies," he says. "They want to diversify and offer services so that customers can go to one place and get numerous online advertising services."

Sidebar: Whatever Happened to Sanford Wallace?

He burst on the scene in 1997 as one of the original E-mail marketers. But Sanford Wallace didn't exactly follow the "opt-in" or "permission marketing" model. Through his company, Cyber Promotions, he sent out millions of advertising E-mail messages to mostly unwelcoming recipients.

He was hated and reviled by many in the traditional Internet community, several of whom referred to him as "Spamford Wallace" and mounted worldwide, hostile E-mail campaigns against him, in order to force him out of business. He just laughed it off, and even appeared in media photo shoots with cans of Spam, the food product that became famous in World War II as the dinner not quite of choice for soldiers in Europe.

Then Wallace got a stroke of luck when Spam's owner, Hormel Foods Corporation, sent him a cease-and-desist letter, ordering him to stop using the word "spam" to promote his business. The utter absurdity of the whole situation thrust Wallace onto many television shows and magazine pages, where he got enormous publicity, always thumbing his nose at his detractors.

Wallace's detractors never stopped him. But a funny thing happened: His E-mail marketing campaigns were utter failures. It turns out that people didn't and still don't like unsolicited E-mail advertising. Overwhelmingly, not only do people ignore such advertising, but often actually become actively hostile to companies who promote their products that way. So Wallace ended up losing many clients.

He now claims to be thoroughly reformed. He runs a permission-based E-mail marketing service, where he claims to be making much more money than he ever did through Cyber Promotions. "If I had it all to do over again and I knew how much profit and positive results come from permission marketing," he says in a news report, "I would have never have gone close to that [spam] model."

(This is a modified version of an article that originally appeared on Dec 06, 2000 on CFO.com at this location. )