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Test Your ROI-Q:
Five Steps to Maximizing E-Mail-Based Direct Marketing

  Article published in DM Direct Newsletter
August 1, 1999 Issue
  By Bill Herp

You're looking to graduate from e-mail marketing 101 and claim your share of the booming returns other direct marketers are harvesting from the electronic channel. You get it: e-mail marketing combines significant cost efficiencies with tremendous reach to your most coveted customers and prospects. However, this is only part of the puzzle. To ensure your direct marketing dollars are well spent, and your outbound messages dont fall into that most feared of categories, spam, here is an example against which you can test your e-mail- based direct marketing aptitude, or your return on investment quotient (ROI-Q). By following our example company's five steps toward a fully integrated e-mail- based direct marketing campaign, you will discover some powerful methods for successful customer acquisition, analysis and retention and, of course, methods for driving your return on investment into the quadruple digits.

Our example company is a thought-leading publisher of business-related materials, whose primary objective is to improve the practice of management and its impact on an ever-changing business world. With significant penetration into upper management echelons, this company was looking to develop new ways to cross-sell as their product line expanded into non-traditional media such as CD-ROMs and video. Their primary challenge: selling to an audience that never opens, much less reads, their own mail and has a limited attention span when they do look at what you have to offer.

Further complicating the situation is the mobility of this target audience, especially those living abroad. Not only are the recipients hard to reach, but job mobility requires diligent maintenance of contact information throughout the customers' career progressions. Therefore, this company provides an excellent study: they need to transition a high-value target audience into the electronic channel, maintain up-to-date contact information and generate the most appropriate and targeted messages and offers for that audience's needs based on careful analysis of customer interests. This example provides a rich resource for those looking to push their ROI-Q ahead of the pack.

Step 1: Understand It's a Two-Way Proposition

Where the majority of direct marketers focus on e-mail as a powerful push technology - e-mail's true value comes not by leveraging its efficiency as a low-cost delivery mechanism, but as a powerful response channel. By committing to engage your target audience in an ongoing, two-way dialog based on known needs and interests, fantastic returns can be realized. However, committing to achieve this form of a two-way relationship is deceptively difficult. Therefore, steps two through five are meant to enhance your e-mail marketing vocabulary and acquaint you with the challenges and benefits associated with developing and managing large volumes of targeted messages, as well as with the challenge of managing your customers' and prospects' responses.

Step 2: Know Your Audience

When looking to develop a two-way dialog with customers and prospects via the electronic channel, the first objective for e- mail-based direct marketers must be to understand the interests of their target audience. By offering information, goods or services that are relevant to each recipient, direct marketers ensure that the spam police won't come knocking. This essential first step is the key to building responsible and ongoing relationships. Recognizing this, various companies have built different methods for analyzing their customers' Web behavior, buying habits, etc., all of which is then gathered and incorporated to generate a better understanding of the target customer.

Our company, which was looking to gain a more detailed understanding of their target audience, developed a detailed e-mail-based survey to build baseline customer profiles. The survey generated a 50 percent response rate and provided targeted information based on specific interests and business needs of the audience. This information then served as the foundation for an interactive newsletter that featured articles, reader polls and additional surveys, all distributed via text-based e-mail. This format provided an easy-to-read, relevant source of information and served as a powerful community-building tool by offering exclusive content and promotions on the company's material, all targeted to the needs and interests of the individual recipients. By developing their understanding of a specific audience, the company unlocked the door to the next level: customer acquisition.

Step 3: Warm Acquisition: Focus on What - and Who - You Know

Spam has become a household name for many Internet users, but the consensus has also become less and less clear as to this least favorite of lunch meat's defining characteristics. For the sake of finding a common thread, however, we will concentrate on the unfocused nature of these spam-filled messages. These intrusive pieces of information have no relevance to the known needs and interests of the recipient and typically offer nothing of value. In short, recognizing that cold sells are more often than not met with cold responses, our company chose to practice warm acquisition based on feedback from the previously conducted surveys. By working with a common point of interest, a relationship can be built and grown to profit both the recipient and direct marketer.

Having built a sense of community among their target audience and having developed an understanding of each person's needs and interests, our company extended targeted offers to its customers and prospects with the hope of further evolving their online presence as a bona fide e-commerce site. The company looked to provide the list of contacts it assembled through the aforementioned newsletter with offers relating to ancillary products, such as CD ROMs and videos based on the information they had assembled.

In addition, new technology enabled our company to maximize their existing house file and extend the value of the electronic channel to those contacts. By appending e-mail addresses to existing postal records, the company provided existing or past customers with a new level of value and service that was previously not economically feasible. Here, the low-cost value of the electronic channel becomes clear, but this is only the beginning of what's possible.

This form of warm acquisition goes to the heart of e-mail's power as a direct marketing medium. By taking the time to learn about the specific needs and interests of the audience, the company developed the roots of what would prove to be immensely profitable relationships. Having built an understanding of that target audience, the company wanted to share some of the value of the e-mail channel. Their messages were branded, making it clear that the offer came from a respected business and had consumer's trust. In addition, the messages were sent with a compelling subject line in a personalized, one-to- one format which included a simple unsubscribe process should the recipient decide to opt out. Now that the company extended the offer, building the roots for ongoing dialog, let's look at the tools that enabled them to grow those roots into fruitful - and profitable - relationships.

Step 4. Transactive E-Mail: 'Tis a Gift to be Simple

A popular misconception in the world of interactive direct marketing is that eyeballs equal revenues. Look no further than the numerous claims to X number of click-throughs on a Web site or X percent response rates. In the end, methods for driving purchases and boosting returns is the purpose of our study, and click-throughs and response rates hold little clout if they don't translate into conversions or buy rates. Our model company understood this and sought to provide their target audience with a simple, easy-to-use response mechanism, transforming e-mail from a push technology to a fully transactive e-commerce channel.

Within each message was a "Johnson Box" call to action - a simple "buy by reply" ordering option - which dramatically increased the conversion rates. Through this technology, recipients needed simply to reply with a "yes" or other equally simple word to take advantage of an offer - no need to redirect to a Web site to fill out forms. In addition, the message enabled customers to make changes to their contact and shipping information all within the body of the e-mail. Conversion rates went up significantly when recipients were offered this type of simple, easy-to-use response mechanism.

Step 5. Evolution: Measure Your Results, Build on Them and Explore New Options

Our last lesson in boosting your ROI-Q revolves around the idea of measuring results. One of the most common complaints direct marketers have with regard to their interactive campaigns is that they have no quantifiable results from which to benchmark future efforts. Again, our model company provides an excellent example. They performed a split test to measure conversion rates for their e- mail-based campaigns against those returned through traditional channels such as fax and postal mail. The results speak for themselves: e-mail returned a 6.2 percent conversion, or buy rate, compared to fax's 1.6 percent and postal mail's 1.1 percent. E-mail was the clear champion, but they did not rest there. Based on these outstanding results, the company extended its campaign to an international audience and has become even more sophisticated, incorporating mailing frequency rules to avoid "list fatigue," with no customers receiving more than one e-mail in a two-week period. Going forward, the company plans to drive subscriptions to its crown-jewel product, a leading business review publication, through continued e-mail-based direct marketing campaigns. The company is even considering replacing their entire direct mail campaign.

Looking over these five steps, we see the life cycle of one company's integrated approach to e-mail marketing. This company understood from the beginning that they wanted their online presence to drive commerce and not be an advertising-based content and community site. Therefore, they allocated the time and the resources to build a clear picture of their target audience and was committed to engage that audience in an ongoing, two-way dialog - all through e-mail. Thus far, this practice has paid off handsomely, generating $300 in revenue per name on the list in the first year alone.

I hope that this brief case study has shed some light on the possibilities e-mail has opened up for direct marketers in all industries, and that it has helped raise your ROI-Q at least a couple of points.


For more information on related topics visit the following related portals...
CRM, E-Business and Strategic Intelligence.

Bill Herp co-founded E-Dialog, Inc. in 1997, based on 15 years of entrepreneurial experience in business services and direct marketing. Herp has led E-Dialog in producing unparalleled results for world-class organizations such as Harvard Business School Publishing, Ticketmaster and CDNOW. Prior to co-founding E-Dialog, Herp served as vice president and chief financial officer of Geerlings & Wade, Inc. Before joining Geerlings & Wade, Herp founded Event Cellular Communications, a cellular telephone rental company.

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