The killer app

E-mail marketing has come of age

E-mail marketing came to prominence in the UK in 2000. For a while, it was the talk of the town, but then things went quiet. The early adopters made e-mail a permanent part of their overall marketing strategy, but many other marketers in this country still haven’t seen the full value of this communication channel.

Nevertheless, e-mail marketing is gradually becoming a mainstay of UK marketing budgets, and companies are using it in increasingly dynamic and sophisticated ways.

It is now possible to see exactly what effect an e-mail has on the bottom line, thanks to analysis that follows the e-mail recipient’s behaviour – right from opening the e-mail all the way to click-through and website purchase.

Companies can also see immediately what return on investment (ROI) has been achieved and compare all this data with previous campaigns – all online and without manual effort.

There is now a high level of expertise in the UK, not only in the type of e-mail technology on offer to marketers, but also in the quality of e-mail marketing personnel, who understand everything from effective e-mail design and copy to incentives and integration within a larger marketing campaign.

E-mail’s moment as flavour of the month may be over, but its use is only just beginning to be appreciated by UK marketers. According to recent figures from the Advertising Association, total advertising expenditure on electronic media during 2000 was &£158m, an increase of 303 per cent compared with 1999. This represented 0.9 per cent of the total UK ad spend during 2000.

Growing force

It also represents just one per cent of total UK direct marketing spend, according to the Direct Marketing Association (DMA). Expenditure on e-mail alone was &£12m in 2000, but is forecast to rise to &£500m by 2005.

Denis Sheehan, chief operating officer of CheetahMail UK, a new entrant into the UK e-mail marketing arena, says: “We believe we are right at the bottom of the growth curve in the UK, and this is the best time to get into the market.”

Sheehan continues: “I don’t think most UK marketers have thought seriously about e-mail marketing. If just five per cent of them include it in their January 2003 budgets, I’d be pleasantly surprised. Of course, once they do try e-mail marketing, and see how effective it is, they tend to fight shy of publicity because they want to keep the secret to themselves.”

Widening the Net

Growth in internet-based marketing is being driven by the growth of business and consumers connected to the Net – 7.5 million households now have Net access, according to Oftel.

The advantages of electronic marketing include the ability to interact with prospects and customers on a one-to-one, real-time basis, and to create content and incentives that are personal to them. As internet use expands, so do the opportunities to reach a wider population.

E-mail is very low cost, and response rates have, so far, been much higher than those for direct mail campaigns – double figures have been reported.

Challenges that e-marketers face include low rates of click-through from online banner ads, clutter in the online and electronic environment, limited access to commercial e-mail address data, and a higher level of consent required for data usage: opt-in is the rule culturally and may become a legal requirement.

But with consumers continuing to increase their use of online retail channels, e-mail marketing will inevitably become more important as both a customer acquisition and retention tool.

New data from internet research company Forrester predicts European online retail sales will break all records this Christmas, totalling e7.6bn (&£4.84bn), up 86 per cent compared with last year. For the first time, says Forrester, Net sales will break the &£1bn-per-month barrier in December 2002. Furthermore, Net-influenced sales will rise to e20bn (&£12.8bn) across Europe, and will contribute e5bn (3.19bn) in Germany alone.

In addition to online retailing, e-mail marketing will play a larger role in attracting and retaining consumers who use the Web to research their purchases but still buy offline. According to separate findings from Forrester, many retailers futilely pursue online sales but ignore the influence of these so-called “cross-channel” shoppers on their offline sales.

To thrive and capitalise on the potential of e172.4bn (&£110bn) of Net-influenced sales predicted for 2007, retailers must adopt “right-channelling” – getting consumers to use the right channels for the right transactions and interactions, says Forrester analyst Hellen Omwando.

“To do this, retailers need to focus on three principles: understand cross-channel shoppers, know where to close a sale, and prioritise technology investments for 2005.”

While investment in new technology has almost become a dirty word for many companies stung by the bursting of the dot-com bubble, most internet marketing specialists agree that e-mail marketing technology is set to grow in the next few years.

E-mail’s potential as a key marketing weapon for the 21st century was underlined by a US study conducted earlier this year. It was commissioned by the Association for Interactive Marketing (AIM), a subsidiary of the Direct Marketing Association (US).

AIMing high

The main finding of the research was that e-mail marketing reduces the cost of customer acquisition by 20 per cent, while revenue per online customer increases 25 per cent.

Use of e-mail marketing is significantly more advanced in the US than in the UK. In the States, companies work hard to increase the size of their customer e-mail databases: the percentage of businesses whose e-mail databases ranged from 50,000 records to 500,000 records increased from 14 per cent in 2001 to 24 per cent in 2002.

Other key findings of the AIM study include:

â¢US marketers are fairly conservative about e-mail frequency – a total of 58 per cent contact their customers via e-mail no more than once a month. Additionally, a growing number (44 per cent) of marketers are enabling their customers to control how frequently they want to be contacted.

â¢While the majority of commercial marketers use e-mail for promotions, product announcements and e-newsletters (up to 76 per cent), only a small portion have begun using e-mail for billing or statements and invoicing (17 per cent).

â¢While affirmative opt-in policies remain the standard for commercial marketers, more respondents appear to be adopting opt-out policies. Fifty-seven per cent of respondents use opt-in or double opt-in methods to acquire a customer’s permission to contact them by e-mail, down from 71 per cent in 2001.

â¢The average amount of revenue generated per online customer increased from $168 (&£107) to $208 (&£132) from 2001 to 2002.

â¢The average cost to acquire an online customer fell from $38 (&£24) in 2001 to $30 (&£19) in 2002.

â¢According to 64 per cent of respondents, e-mail primarily generates revenue by driving transactions.

â¢E-mail provides significant savings for marketers on postal, marketing and time expenditures.

Overall, the US findings show that multi-channel marketers have moved from testing and evaluating the effectiveness of e-mail to establishing e-mail as a permanent component of their marketing mix. There is a clear trend of increasing budgets (or budget allotments) for e-mail marketing. Reinforcing this trend, commercial marketers also indicate that they are continuing to push the costs of e-mail marketing down, while increasing the return e-mail delivers to their bottom line.

Emma Hammersley, chief executive, CheetahMail UK

Irene Pedraza, chief executive of CheetahMail US

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