Commentary
Why There Are So Few Personalized Emails
- by Arthur Middleton Hughes , May 31, 2011
A Direct Marketing Association analysis shows that today there are more emails arriving in consumers' inboxes, but that the percentage of emails with personalized content has dropped from 38% to 22%. They may say, "Welcome Arthur Hughes," but the rest of the message is not personalized in any way. A million email subscribers get identical content.
This is not happening because email marketers are stupid, or do not know how to write dynamic content. It is happening because of the economics of creating segmented and personalized message. I have been in the direct and database marketing industry for 33 years. Around 1985, when database marketing was invented, we found that dynamic content based on a database was much more likely to generate a response than sending everyone the same thing. Response rates could go from 2% to 3% -- a 50% increase. That's really worth it, and why so many companies began to use database marketing.
When emails came along, most of us thought, "What a wonderful idea. We have been spending $600 per thousand for direct mail pieces. We can send emails for only $6 per thousand. We can use the cost reductions to create even better dynamic content, and to send more often." We soon found that sending an email once a week instead of once a month increased our revenue. Going from once a week to twice a week made revenue go up still more. Some email retailers send messages once a day. Why? Because it is more profitable than once a week.
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Meanwhile, back in the creative department, we found that it was usually impossible to put dynamic personal content into frequent emails. When we were sending direct mail pieces once or twice a month, we had the time to create four or five different segments (Seniors, college students, young families with children, loyal buyers, etc.) and create content based on their segment and their previous purchases or preferences. With emails going out several times a week, we just do not have the creative talent or time to write four or five versions of each email.
The situation today is this: we can increase response either by personalizing, or by increasing frequency. The lift we get from personalization is not as great as the lift we get from frequency. We can't do both, so we go with the one that is most profitable.
This has some bad results. By sending too many emails, we turn some people off. We analyzed the lifetime value of customers of a large retail chain with more than 400 stores. The company sent frequent emails to all those whom they could get to sign up. At its request, we analyzed customers who left through unsubscribing or delivery problems and compared them with those subscribers who did not leave. We found that those who left were more valuable than those who did not leave. Here is what we found by analyzing the spending habits of those who stayed and those who left. Those who left had average revenue of $220. Those who did not leave had average revenue of $177. The company was losing its best customers because it mailed too often. No attempt was made to get these departing customers back. Why not? Because we knew that we could not correct the problem that made them leave in the first place: too many emails with batch-and- blast content.
As we look at the future of database and email marketing, we see this problem getting bigger and bigger. Even well-crafted emails with dynamic content are delivered to email inboxes already loaded with hundreds of batch-and-blast emails from other frequent marketers. It is hard for consumers to tell the difference between them by looking at the subject lines alone.
We did an analysis of how that store chain could turn its situation around by creating a marketing database and writing dynamic content for five segments. The analysis showed that the company would have to spend about $1 million more to do this, but would generate profits of far more than that by keeping its best customers from leaving each year.
Companies using database marketing can do the analysis it takes to determine that using database marketing instead of batch and blast will be profitable for them. They will let their customers know that they will not receive more email than they want to receive, and they will personalize that email with content designed for the subscribers. It will cost companies more to do this, but it will pay dividends. They will lose fewer customers, and gain more friends and sales.
Unfortunately, many companies will not do this. The current trend (was it ever different?) is to say that each quarter's sales have to reach some given number, regardless of how you get there. Worries about losing valuable customers, giving customers what they want, looking at the long run will all take a back seat to next quarter's numbers. The profits from database marketing will be impossible for these -- and all - companies that seek only quarterly email marketing revenue projections and ways to cut costs. Furthermore, the customers that they will lose through unsubscribes will be more valuable than the ones that they keep.
I appreciated your walk though the history of online marketing today as I did at Email Insiders last month, Arthur. A 'personal' relationship with a customer, donor, constituent or advocate is a special privilege. An additional retention tool utilized to keep them engaged online is Email Change of Address. Should your recipient go silent, it could be that they have changed their email address and forgot to tell you, just like moving to another town might delay postal contact. Working with volunteered email updates, retailers etc. can reengage with those thought lost. And we would agree with your mention that it costs so much more to prospect than to retain. Thanks!
Years ago I noted (Why I love Spam") that one solution was metering of bandwidth, forcing DM'ers to undertake the same database analysis that Direct Mailers and Marketers undertake in order to establish the best possible profile and match to the products and services being offered, separate the endles supply of chaff-lookee lou's/not interested/unqualified's -from the wheat kernels-buyers.
SO, here we are today, with Mass Marketing E-mail (AKA Spam) still driving the discussion. But now, it seems that Behavioral Marketing ( AKA Profiling) is still the right answer.
It becomes even more important when you realize that Convergence AAA (AnyThing, AnyTime, AnyWhere) is the driving force behind the desperate need for expanded-substantially expanded-bandwidth available for MAAO (Multiple Applications Always On), demand for which is growing 200%-300% a year.
Consider that Cloud Commuting (50 million jobs in the next ten years) Cloud Education (30 Million "home schooled" in the next ten years (plus 2030 million more in extended education for work or job training), and Cloud Health-up to 150,000,000 million Home Health subscribers in the next twenty years, will place tremendous demands on bandwidth of all types, Wired and Wireless. Therefore, the ONLY solution will become Metered Bandwidth, to achieve, in economic terms, the highest Value(Content) for the lowest competitive price. Which, also, can only happen if the FTC and FCC do their job of limiting monopolistic, pricing, geo-monopolies, force competitive access for Content providers, AND, most importantly, force the separation of Content provisioning-everything, Data, Video, Entertainment, services- from the control of the infrastructure-the Broadband pipeline.
Pricing transparency, reasonably competitive access, and separation of Content are absolutely necessary.
Then we'll see more and better services, at more competitive pricing, and recover from dropping into 16-17th place in World Internet Rankings of reach and speed, and we're-the U.S.- the highest cost!
And, metering, just like other utilities, forces "conservation" and allocation of highest value resources, which offers the best marketplace to Consumers and Business.
The Internet IS the future of not just the U.S. economy, but the world economy, and a free, transparent and openly competitive marketplace is the ONLY way to insure that the U.S. can stay competitive.
I agree with the closing comments, although I think that there are some variables missing from the middle....
Personalization can be as simple as inserting someone's name into a message, using an appropriate image (dating sites regularly send photos of women to men, and photos of happy couples to women), or even developing personas; something the direct mail industry has done for years.
In direct mail it can take a bit more to develop five different pieces of creative for a single persona than it does with email; whereas with email, a standardized wireframe/template can support a variety of different data-driven dynamic content elements into a variety of different personas. And with email, you can both personalize and increase frequency; and you can break that down by persona if you want to, too. Unlike direct mail, with email the data is there, you just have to look at it and know what you're looking at
It's more economically feasible to create a personalized and segmented email message than it is in direct mail. It's much quicker and easier to analyze data and create content around it in a much shorter cycle than direct mail. In other words, don't try slicing the pie before it's been baked. While there are things that email marketers can learn from direct mail database marketing, there's a whole lot that direct mail database marketers can learn from email marketers, too.
The ability for an organization to develop data-driven messaging is based on resources and executive buy-in/sponsorship. While everyone looks at the next quarter, those that look beyond are moving to more data-driven email programs and seeing the results.
Arthur, I simply love this article because it gets back to the basics of email marketing and that is 1. Get a List 2. Build your relationship with your list and 3. Make them an offer.
Segmenting your main list is crucial to building a relationship. Most of my clients now have 7,14, and even 42 sub-lists within their main database. This allows them to send targeted messages to the right people. What I am seeing more and more of by larger companies is "email brochures" being sent out and calling this email marketing. That's poppycock. If you wish better results, personalise and send a message your recipients expect. Kurt Johansen - Australia's Leading Email Marketing Consultant to the Small to Medium Business Owner - http://www.kurtjohansen.com