Direct Marketing, Mail Order, and E-commerce News from the National Mail Order Association
If ‘Batch and
Blast’ Emails Don’t Work, Why Are You Still Doing It?
Death by Email
That’s how we are killing our customers. In an effort to maximize revenue for online businesses, the majority of companies try to squeeze every dollar of revenue from their customer base by bombarding it with emails. This batch and blast approach produces immediate revenue but erodes future revenue and causes customers to unsubscribe in droves as the frequency of emails increases. Customers are subjected to a barrage of emails about products and services that they have no interest in, polluting their inbox and damaging their view of the companies that are trying to sell to them.
Targeted mailings are proven to generate higher response rates (opens, click-throughs, order conversion, etc.) and reduce unsubscribe rates, overall churn and replacement acquisition costs, leading to long term increases in ROI with a more active and engaged customer. By receiving less frequent and much more relevant mailings, customers are more receptive to the communications they do receive.
However, some retailers are reluctant to reduce the immediate volume of emails and subsequent sales. They view targeting as ‘sacrificing’ revenue that may come from customers on the periphery of their sales target. In addition, they are not willing to invest the time or bear the production cost of having to create multiple variant targeted email campaigns to make up for the sales volume deficit.
The Batch & Blast Conundrum
There is a well-known inverse relationship between the number of people mailed a specific offer and the ratio of people that will actually respond and purchase. That is because there is natural gradient of interest as not all people are interested in the same product and seldom at the same time and same price point. The relationship indicates that the more people sent an email, the larger the number of buyers, but, the lower the response rate and order conversion.
However, when retailers try to target customers with traditional methodologies, such as demographic attributes or historical purchasing profiles, this reduces the mailing population and the number of buyers and subsequent sales. In this scenario, executives don’t see the benefits of targeting if it only produces less revenue than a batch and blast approach to customer communications.
Send Less, Earn More
There are alternative methods for customer targeting that can completely change the dynamics of the customer-email relationship. In the graph below, the Campaign Relevancy Curve illustrates the two extremes of email marketing: generic emails to 100% of the customers generating higher gross sales or targeted emails to 5% of their customers and yielding lower gross sales. Given this choice, it is understandable why, despite achieving the almost mythically high response rates and longer term ROI, retailers forgo targeted mailings in an effort to meet sales targets.
But upon closer inspection, it becomes evident that there is a major opportunity to effectively target a much larger population of the customers, nearly 60%-70% of them and still yield higher sales over the same timeframe. This can be accomplished by creating multiple campaigns and generating revenue from each prospective customer based on their personal interests and buying habits.
In order to achieve these kinds of results, retailers must reexamine how they develop targeted mailings and segmentation. Most retailers rely on ineffective techniques of purchase-based targeting or demographic/psychographic-based targeting. This methodology tends to pinpoint a small number of prospective customers for a product or service.
Instead of looking at these two indicators, retailers can examine more robust data to significantly and intelligently increase the number of customers that are targeted while maintaining a relatively high order conversion rate in proportion to the size of the targeting population.
Most retailers would use the batch and blast approach in this example - sending one email to the entire population, generating $1.8 million (A). Others might use standard targeting to send emails to a smaller portion of the customer population and yield lower revenue (B). The most productive approach is Proclivity Mail (C), using intelligent targeting based on specific interest and buying probabilities to create multiple campaigns to segments of customers that have the most interest and highest propensity to purchase a specific product. Thus, earning more revenue ($2.1 million) by sending relevant emails to smaller, targeted sections of the population (650K).
Designed to Sell
Different customer segments are interested in different products, at different times and at different price points. Only a small portion of customers are often interested in any given product being offered at one time. If customers can only receive one email offer in a given timeframe, regardless of their true interest, the retailer is losing the opportunity (and the revenue) that could be generated by sending an email tailored to the individual. If marketers were able to predict which customers will buy which products, they could create multiple campaigns that are tailored to specific groups and enable revenue maximization.
Savvy marketers can exploit this opportunity by sending a behaviorally-targeted mailing as opposed to the two current polar extremes of batch and blast or purchase-based targeting. One mailing can be sent to 30% of the population with a high order conversion rate due to its relevancy to the population which now leaves an opportunity to send another separate mailing to the remaining 70% of the population that meets their specific interest during the same timeframe.
In addition to the potential increase in revenue in the targeted approach, consider further the additional benefits and ROI increases from the reduction in unsubscribe rates and replacement/acquisition costs for customers. As a result of sending out more relevant emails, at a lower frequency, revenue and customer satisfaction rise.
Behavioral targeting is the single most effective technique you can employ in your email marketing initiatives. The most innovative behavioral targeting solutions currently on the market offer ways to understand your customers’ preferences that go beyond self-reported data. The best vendors offer up specific recommendations for who to email, how to email them, and even when to email them. By reducing the number of email recipients for a campaign, based on a sophisticated understanding of how they interact with your site, you increase the likelihood that they will respond positively to your message. For online retailers, that means more inventory sold – and more money to spend on additional targeted email marketing campaigns that will effectively pay for themselves.
While I won’t go so far as to predict the death of the batch and blast email, I do believe that many marketers are already dabbling in the behavioral targeting tools that will revolutionize the way they communicate with customers. The early adopters are already reaping the benefits.
Sheldon Gilbert is the founder and CEO of Proclivity Systems, developers of Proclivity Mail™, a predictive engine to help its clients anticipate and forecast consumer purchasing behaviors online. He can be reached at email@example.com.If you're a subscriber to Direct Marketing Digest, you can look forward to our one-on-one success story interview with Sheldon in April's issue.
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