Making the Case for Email Marketing

I’m on a plane, and the gentleman next to me on the plane is the CMO of a large multi-brand retailer. After exchanging introductions and pleasantries, I ask him if he’s happy with his email marketing program. The resulting conversation was fascinating, and typical of those we have with our clients while trying to help email program directors make the case to executive management about investment in the channel. I’m hoping that this particular CMO goes back to his team and engages.

That would be just one small step for email marketer-kind.

SAM: How is email marketing working for you?

CMO: Well, it sure generates a lot of revenue for us. I can think of three or four months this year where we doubled up on email messages and that helped us make our month.

SAM: So it’s a really important part of the marketing mix then, eh?

CMO: Sure. It’s in there.

SAM: And, you have a lot of people working on email to optimize all that revenue, then?

CMO: Oh no. (Laughing) We have one junior guy. He reports into my head of ecommerce. I think his name is Steve. Yeah, that’s right, it’s Steve.

SAM: Sounds like you don’t get much visibility into the drivers that make email a success. Funny, because you said you really rely on it.

CMO: Yeah, that’s a good point. I don’t know much about it, but my team does. And frankly, I don’t have the sense that it’s all that complicated. We send out sale notices and get a high response. That is good enough for me.

SAM: Doesn’t that cut into margin, though?

CMO: Yes, that is a concern. We are not at bone yet, but I do worry about it. Are there retailers who don’t have that problem?

SAM: Frankly, no. You’re right. It’s a big issue. Funny, isn’t it? Email is the highest ROI channel by far. But only because it’s inexpensive to send, not because marketers are doing a great job of optimizing to create the kind of subscriber experiences that drive long term value. For too many marketers, email revenue per subscriber is not growing and more and more subscribers are simply ignoring our messages. Cutting into margin is a way to get around the fact that our messages are just not that compelling. The retailers we work with who are doing it well are moving away from the “batch and blast” approach and more toward a subscriber-centric approach through segmentation and custom content. That seems to be the only sensible way to protect margins and keep revenue high.

CMO: Doesn’t seem to make sense that we’d send fewer emails and make more money.

SAM: Ah, but you don’t send fewer messages per se, you just send fewer generic ones that are irrelevant. You send more messages when your subscribers are in market. That way you get a higher revenue per subscriber and stop burning out your file. Do you segment your catalogs?

CMO: Of course.

SAM: Same principle. You segment you catalogs because it’s costly to send me information on products that I’ll never buy, right?

CMO: Yes, and also because we know that too many catalogs can depress response, as well.

SAM: Exactly. The same is true in email marketing.

CMO: I don’t know about that. It’s pretty cheap to send email.

SAM: Only if you count just the cost of broadcasting the message. There are other costs as well. It seems easy. We send out a message, we get revenue. But that isn’t the end of the story. Sending out messages that are irrelevant to most of your file has other costs. Look at your unsubscribe rate. Plus, more people complain, which depresses your deliverability. Even five to ten points on deliverability can make a huge difference to response. And, you end up with lots of people who “emotionally unsubscribe” and just ignore all your future messages. The cost to replace these subscribers so that you can maintain your revenue in the future is high – it cuts deeply into that incremental boost.Can your team explain to you the real cost of those extra messages in terms of subscriber satisfaction? If they can’t, you are just playing a numbers games with averages.

CMO: Yeah, that email team gets away with some pretty inexact answers to my questions! The revenue speaks for itself.

SAM: Exactly. Poor Steve. (Laughing) And you know what, I can see why accepting that status quo makes a lot of sense. You hit send, you earn revenue. What could be easier?! But I know there is a better way – and frankly, a way that helps the channel improve its contribution for you AND engage more with customers.

CMO: What does that different way look like?

SAM: Imagine if you sent prospects something different than customers. If you send me a customized message just after I buy, or after I browse the site and don’t buy. Imagine if you identified all the people who bought certain items last season and then celebrated the new items this season? Or maybe if you engage with all the people who bought gift cards last year. I mean really, do you think that your email program is optimized if you send the same thing to every person on your file, every time?

CMO: Probably not, but we send the same catalog to large segments, and we have one website.

SAM: Do you think of your catalogs and website as mass marketing tools?

CMO: Not really – catalogs are definitely direct marketing, we spend a lot of time and money getting the right ones to the right people. And due to our aggressive search strategy, many visitors to our website have a very unique experience – they come in at different pages and have unique paths to checkout.

SAM: Exactly! That’s what you could be doing with email as well. Using some very simple strategies and readily available tools, you could actively segment prospects from customers; welcome new subscribers and engage with non-responsive subscribers before they tune you out completely. You can also respond to life stages like birthdays, anniversaries and seasonal purchase habits. Wouldn’t it be great to accurately forecast and improve results by tracking not the diluted behavior represented by averages, but by the true behavior of different segments, meaningfully arranged by relationship to your brand and products?

CMO: If that is easy to do, why don’t we do it?

SAM: Let’s ask Steve! (Laughing). I’m sure he’d love the time and technology to do this. But until you start asking more probing questions, the revenue from every generic, non-segmented blast mailing masks a lot of missed opportunities. We keep email ROI high because it’s inexpensive to send, not because we are doing a great job of optimizing subscriber experiences. For too many marketers, email revenue per subscriber is not growing and more and more subscribers are simply ignoring our messages.

CMO: Is it worth the investment? I thought email was supposed to be cheap!

SAM: (Laughing) “Supposed to be cheap”? You make it sound like a cost center. It’s an investment in your business! Great email doesn’t have to cost a lot. But bad email, that can cost you a fortune.

CMO: That would make a great tagline.

SAM: Honestly, I stole that from our website! But seriously, it costs only a little to send irrelevant email messages. But the hidden costs like poor deliverability, list churn and declining response rates add up quickly. Instead, invest in the technology, data, knowledge and human resources to make your program subscriber-centric. You’ll be able to predict results, and optimize them, from a position of strength. And, you will be designing your program from the subscriber’s view – and isn’t that what marketing is all about?!

CMO: Right, it is supposed to be all about the customer. Point taken. No wonder we cut into margin so much. Here, help me come up with some of the right questions to ask of my team to get this on a better track.

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