Why There Are So Few Personalized Emails
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.
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.