Making a List That Is Worth Its Weight in Gold
A company’s email list is a vital organizational asset. Assuming the list was built organically and not purchased, most, if not all, of the names on the list have a specific connection with the company. That connection can be nourished and strengthened with appropriate email communications. Also, the more that is known about customers (e.g., first contact, method of first contact, demographics, buying history, etc.), the greater the likelihood a company can identify the right and most relevant opportunities to reach out with highly targeted and personal communications. The challenge is building this list the right way and keeping track of the right information. In this chapter, we will discuss the thought process for building an email list and methods to increase sign-ups. We will also discuss issues around the process of signing-up, such as amount of personal information to collect and whether to use a single- or double-opt-in process.
Building a List, Checking It Twice. . .
Building an email list from the ground up, requires mapping out all of the potential points of contact or sources of contact with existing and potential customers. We have grouped the most common sources of contact into four categories (see Figure 6.1): personal sources, Internet sources, referral sources, and outside engagement sources. Personal sources include any opportunity to connect directly with people as part of doing business. For example, when an individual makes a purchase in a store and provides an email address while checking out. Another direct opportunity is when a company fields a phone call from a customer who might be requesting information or looking for customer service. Essentially, any everyday business task that involves directly interacting with a customer is an opportunity to add to your list. Internet sources include any interaction a customer has with a company in the digital world. For example, if a person visits a company’s website or a related blog. There should be an automated process or exchange that allows the company to solicit the individual’s email address. Even creating an opportunity to provide an email address within another email is important. For example, a customer who receives an email newsletter might forward that email to a friend who is not on the list. Having a sign-up action area that brings this new potential customer to a sign-up landing page increases the likelihood of adding that person to the list.
Figure 6.1 Sources of contact for building email lists
A third source is referrals. Some companies have a formal referral program, whereas others may have partnerships with other companies or organizations. For example, a sporting goods store may have a special relationship with a local sporting training school. In the process of signing-up for the school program, a person could opt-in to receiving an email from the sporting goods store to buy the appropriate equipment or clothing. A contact that is made based on an existing relationship is a key opportunity to reach a warm audience. The fourth source is through engagement opportunities such as trade shows, speaking engagements, or other appearances in a new environment. Either by collecting names at a booth or by working with conference organizers to collect names of those who attended a keynote speech, collecting emails from individuals interested in a related topic or where your company is the point of discussion is another key opportunity to add to an email list.
It Is Less about Privacy and More about Value
Some individuals may be concerned about sharing their email address because of privacy concerns or fear that they will be overwhelmed with solicitations. However, most of these concerns can be overcome if the requestor is offering something of value. For example, when making a purchase in a store, a cashier may ask a customer for their email address as part of the checkout process. This creates an awkward moment. While consumers understand in general terms how the marketplace and its social actors work (John 1999; Vohs, Baumeister, and Chin 2007; Wright 2002; Wright, Friestad, and Boush 2005), they also remain wary of the motivations marketers have for specific behaviors (Darke and Ritchie 2007; Kramer 1999; Main, Dahl, and Darke 2007). Many customers may contemplate what the store wants with their email address and what the potential outcomes of sharing their address will be. From the cashier’s perspective, requesting the email address is just a matter of store policy. Now let us revisit this same situation but provide an incentive.
What if upon checking out the cashier asked the customer if they would prefer an electronic receipt instead of a paper receipt? The cashier could also tell the customer, if they are not already aware, that the advantage (i.e., value) of the e-receipt is they are less likely to lose it and it will make returning any items purchased simpler. Now, instead of contemplating what the company will be doing with their email, the customer is considering the benefit (i.e., value) of this e-receipt. Thus, the preconditions for a win–win exchange have been established: the store provides a service in the way of an electronic receipt in exchange for access to an individual’s email address. Research has shown that people tend to self-disclose more about themselves the more they like the person they are talking to or if the other person self-discloses first (Collins and Miller 1994). So it should be no surprise that providing an incentive or explaining how sharing an email address can facilitate greater service would enhance the likelihood of self-disclosure.
There are many ways companies can offer value in exchange for an individual’s email (see Figure 6.2). For example, a retailer may connect the exchange of an email address with joining a loyalty program. The Container Store has the POP! Star loyalty program where customers provide their email address and in exchange they are enrolled in a program that provides many of the standard loyalty perks (see Figure 6.3). Additionally, customers automatically receive e-receipts while also maintaining a record of the purchase receipt, thus eliminating the need for the customer to even worry about finding a receipt should they need to return or exchange an item.
Figure 6.2 Examples of marketing inventory that a company can exchange for an email address
Figure 6.3 Container store’s POP! Loyalty program
Running a contest or a giveaway not only provides value to the customer but it also provides an opportunity to increase engagement with the company if the event is tied in with social media. Service firms can provide a free e-book or whitepaper in exchange for an email and contact information.
In some cases, it may be simpler just to pay money directly for email addresses. For example, when you visit BananaRepublic.com, you are immediately greeted with an opportunity to provide your email for a 25% discount (see Figure 6.4). A company could take a more direct approach and literally offer $1 to $5 for an email address. For example, in a recent visit to the local CVS Pharmacy store, the cashier asked whether one of the authors would be willing to provide their email address in exchange for $3.00 in-store credit. It is now up to CVS to make sure that subsequent contacts are valuable or this could easily be $3.00 wasted. Alternatively, a company can rent a list of addresses from a credit card company or similar organizations. The upside to renting a list is the quick turnaround. The downside is that the people on the list may have no real connection to the sender and may automatically delete or potentially complain about receiving an email that they do not recall signing up for.
Figure 6.4 Banana Republic offer of discount in exchange for email address
In sum, companies should continually assess the cost of acquiring an email address through the different contact opportunities and also assess what short- and long-term value is returned to the company by those email addresses. For example, imagine a research and consulting firm that is trying to add new email addresses to their existing database. Let us assume they have recently offered the following in exchange for an email address: a white paper with a cost of $7,000 to create, a webinar with a cost of $5,000 to run, and a contest with a $2,500 prize. If each of the activities led to acquiring 4,000, 1,000, and 10,000 unique emails, respectively, the least costly method for acquiring email addresses is running a contest (see Table 6.1). However, reading a white paper or participating in a webinar is likely to provide a stronger connection with the names on that list and they may have a better understanding of the quality of services provided by the focal company. Hence, they may be more likely to purchase a future report or service knowing the quality and level of expertise that was displayed in the sample white paper or webinar. To consider the impact of these factors, let us assume that the revenue derived from these new addresses through subsequent email campaigns over the next 12 months is $200,000 for the emails generated by the white paper offer, $100,000 from the webinar emails, and $50,000 from the contest emails. Thus, on a revenue-per-email basis, offering the white paper in exchange for an email has better long-term value of the three tactics. The contest which had the lowest cost per email acquired, has the least long-term return of the three. While the webinar is in the middle of the three approaches, it is interesting to note in this case it has the best return per email sent of the three tactics. Companies should regularly conduct these types of analyses to confirm that they are optimizing their approach to acquiring email addresses.
Table 6.1 An example of cost and revenue from email-generating activities
In addition to the actual email address and the method by which it was acquired, it is helpful to track other information regarding the acquisition context. For example, if an email address is collected in the store, is it associated with a purchase or a request for information? If it was a purchase, what was the value of the purchase? Was this purchase the individual’s first purchase at the store or have they previously purchased?
Other types of information that can be collected or associated with an email include demographic data such as zip code, gender, and age for B2C-oriented products and services or company size, position, and industry for B2B-oriented products and services. Ideally, one would establish the ability to continually track customer behavior and update an email list regularly. However, not all companies have the data infrastructure to capture such details. We will discuss some of the advantages of having more data than less in Chapter 10.
Permission FIRST, Not Forgiveness Later
As mentioned in Chapter 2, the CAN-SPAM Act of 2003 does not require a commercial emailer to obtain permission to send an email to an individual. However, most email-marketing experts will tell you that sending an email without prior permission is a poor choice. In fact, professional emails services, such as MailChimp and Constant Contact, have specific rules against emailing without permission. The best course of action is to obtain permission to send an email before sending that email. If you are not sure you have it, assume you do not. Moreover, it helps to keep a record of how the email address is acquired (e.g., in store, website, exchange for whitepaper, etc.) in case the company needs to prove that they are in compliance.
Let us be clear about permission to send an email. By asking for permission, you are asking an individual to “opt-in” to receiving an email or other communication. The opposite, opt-out, would be asking the individual if they would like to decline receiving emails. The distinction between these two actions has strategic implications. In 2011, Barnes & Noble Bookstores (B&N) completed the purchase of competitor, Borders Bookstores. As part of the purchase, B&N also acquired Border’s email list from their loyalty program. Rather than ask if Border’s customers would like to remain with B&N, hence opt-in to the new program, B&N sent an email giving Border’s customers the chance to opt-out as long as they did so by a specific date. This action angered many of the Border’s customers and generated negative press for B&N. Thus it is critical when obtaining an email address that the company makes clear that they are also asking for permission to communicate with the individual. If an email list is acquired, as in the example of B&N, then it is up to the company to renew this relationship by asking again if the individuals want to opt-in to the new company.
The Opt-In Process and List Maintenance
As described earlier in the chapter, when requesting someone’s email, there is also an opportunity to ask for additional information. For example, in a retail store, the cashier may ask for an email address and the individual’s zip code. If the request is coming online, then the individual may be required to fill in a pop-up form that asks additional questions about them. Alternatively, additional information can be built up over time. For example, when an individual email is collected verbally in a store, this could trigger a welcome email confirming the opt-in and requesting more information.
One key to increasing likelihood of opt-in (beyond offering incentives and explaining the value of opting-in) is to keep the initial process as simple and as quick as possible. To do this, a company needs to evaluate how much (or really, how little) information they need up front from an individual to communicate with them effectively. Although more information is generally better than less information, it is not wise to jeopardize the success of opt-ins by asking for too much. It is important to take a long-term view and consider the company’s abilities and opportunities to augment customer data over time.
For example, many national retailers send frequent emails to their customer list without targeting based on a specific gender or age or other demographic or behavioral variable. In such cases where there is no immediate plan for targeted emails, the best opt-in design is to use the simplest process possible—gather only the email address (e.g., see Banana Republic’s opt-in tactic in Figure 6.4). To add more information about an individual, they could simply be invited to join a loyalty program where there is an added benefit to providing additional information.
Another important consideration is assuring that an email address acquired is valid. Most opt-in processes require an individual to type their email address in two different fields to assure that they type it accurately. However, this does not assure that the email address is valid. It just assures that the person can replicate their provision (or that they know how to use copy/paste commands). Instead, it is recommended that, where possible, companies should use a double-opt-in approach. A double-opt-in process means that an individual is not officially signed up (and hence receives anything in exchange) until the email address has been confirmed. To do this, upon the initial sign-up, a confirmation email is triggered and sent to the email address provided. In the confirmation email, the recipient will be asked to validate their sign-up by clicking a provided hyperlink, hence opting-in a second time. Alternatively, a company may also pay for a third-party verification tool to assure that the email address entered is legitimate. Either of these procedures provides assurance that the email address entered is valid and reduces the likelihood of imposters’ accidental opt-ins due to typographical errors by the user (e.g., [email protected]).
The Nuts and Bolts of Segmentation and Targeting
So why segment and target? Customers are diverse in their needs, so to satisfy everyone with one offer or message can be difficult. Trying to please everyone or “the average consumer” can leave the organization vulnerable to more focused competitors at every differentiable point in the market. To recount a popular example in marketing strategy courses: if half of the people prefer hot tea and the other half prefer cold tea, then marketers who fail to segment will conclude that the “average” consumer prefers lukewarm tea. This, of course, is a recipe for dramatic failure since no one in the market prefers lukewarm tea. A further benefit of segmentation is greater efficiency, since less effort is wasted by saying the wrong things to the wrong people or by engaging with individuals who are not even in the target market. The advantages of segmentation are clear, as evidenced by a 2012 study by BtoB Magazine stating that 84% of B2B marketers use segment targeting in their email campaigns (Hosford 2012).
Ultimately, segmentations are judged on their ability to enhance outcomes on key metrics. Since there are multiple metrics that matter, there may be multiple valid segmentations. At the customer level, such metrics may include historical or current valuations such as revenue, profit, or cash flow. However, many companies also care about indicators of potential value, including lifetime value, up-sell/cross-sell potential, or share of wallet. At the brand level, common metrics include brand image/equity, momentum, or share of loyal customers in the market.
List segmentation depends on having data on your customers as well as the actual existence or nonexistence of underlying segments along the dimensions spanned by the data. Each data type, or variable, becomes something you can use to search for meaningful differences (with respect to focal metrics) among customers. For example, if you have tracked when a customer first joined the email list, this variable can be used to distinguish between long- and short-tenure customers. This difference may matter, not because of tenure per se, but because of the different nature of the customer–company relationship and the attending implications for managing the relationship. To this point, segmentations must be dynamic. Consumers’ situations, requirements, and expectations evolve over time and marketers must continually examine the mix of individual statuses in a market of interest. Other variables that frequently serve as segmentation bases include zip code, profession, gender, average order size, recency of last purchase, and frequency of purchases in a calendar year. Tier-1 commerce companies (see Chapter 1) use historical behavioral data for predictive modeling and can segment based on an expected action (e.g., purchase timing).
Despite the potential advantages of segmentation, it relies on differences that emerge along observable dimensions, and there is no guarantee that these dimensions have anything to do with differences in consumers’ requirements. For example, we may segment customers based on differentiated lifestyle characteristics only to learn (the hard way) that lifestyle is not important in terms of how consumers relate to the product category. Alternatively, even when we use “good” segmentation bases, it still may turn out that it is infeasible to properly serve our preferred target segments given our sales and media channel configurations. Additionally, the way that segments react to marketing levers (elasticities) may differ such that the profitability of designing and delivering multiple effective email communications is lower than that of simply using a nonsegmented approach. Thus, segmentation is a moving target.
After segmenting the email list, the next step is to determine how to approach one or more segments with a highly targeted message or offer.
Measuring the Impact of Blast Emails vs. Targeted Emails
As discussed, companies can segment their list and send highly targeted offers to subgroups within their email list. Interestingly, over 80% of email marketers send the same content to all subscribers (Experian 2014). Not only does this increase the likelihood an individual receives an email that is less relevant but it also potentially leaves money on the table as marketers may be sending the wrong type of message to many of their customers.
Artbeads.com, an online jewelry supply shop, increased their conversion rate by 208% by using a targeted email instead of blasting the same email to all of their customers (Moran 2012). Artbeads.com used a service provided by Windsor Circle (a vendor of marketing automation software) to evaluate the buying behavior of their customer list. Using this information, they sent a targeted end-of-season promotional email to only 2% of their total list, which generated a conversion rate four times larger than when they sent it to their entire list. By not sending the same email to the entire list, they reduced the risk of exhausting all of their customers with nonrelevant emails and instead sent a subgroup of names offers that differed in type or timing. MailChimp, an email service provider, has found that list segmentation and targeting increases unique open rates by approximately 12% and clicks by 53% compared to nonsegmented email blasts. Acxiom, a marketing technology and services company compared the performance results of similar clients using blast emails versus targeted emails. While the cost per email using a targeted approach was $0.14 per email compared to $0.04 per email due to the additional cost of tracking and integrating customer data, the revenue generated by targeted emails was 3.5 times greater than that generated by the blast emails.
Managing Lists with Software and Third-Party Vendors
Once you have got the list assembled, the next step is to find a way to efficiently send out and report on your email. For professional marketing, you will want to avoid an approach that involves simply putting all of the addresses in the bcc line in Outlook as discussed in Chapter 3. This approach is fraught with danger.
Instead, you will want to select an email-marketing technology platform. There are two categories of platforms—those oriented for small businesses and those oriented for enterprise applications. Both will handle the creation of email using a template or custom email, testing and previewing, basic list management, and reporting on opens, clicks, and link activity. Small business applications include web-based platforms like Constant Contact, MailChimp, Bronto, and Vertical Response. These are suitable for most single person to midsized businesses that are working from a single, static list.
The enterprise applications will add advanced features to help with segmentation, list management, reporting, and working with larger data sets.
• List management can be linked to CRM software, and lists can be created on-the-fly using segmentation rules.
• Dynamic publishing in the email allows portions of the email content to be driven by segmentation attributes.
• Advanced reporting features and visualization
Example 1: Understanding Segments—Hotel Business
One major hotel firm that we worked with developed an email list with over 200 attributes for each of its customers. These attributes included items such as:
• Last visit
• Number of nights stayed
• Loyalty program status
• Business versus leisure traveler
• Last minute purchaser
The hotel chain used these attributes to generate segments. They had established segments—such as “road warriors”—that they would think about developing offers for in every email. However, using the rich attribute data, the hotel never sent just one “road warrior” email. They would use the data to fill in the offers based on other behaviors. For example, a road warrior who had stayed with them in the last 30 days and was a member of the loyalty program would get a different offer than a road warrior who had not stayed recently. This type of microsegmentation allowed for the fine-tuning of offers that would produce over one million dollars in sales per email.
Example 2: Branching Out from Your Segments
Although segmentations are essential to creating targeted emails, it is important to not restrict your segments too tightly. In one instance, we learned of a national retailer who was preparing an email for their “new mothers” segment. This was a well-defined segment in their database based on purchase transaction history of diapers, toys, car seat, and other newborn sundries. The email was a product-driven offer that was aimed at driving people to purchase more baby items online.
In the production process, the email was inadvertently sent to the entire email list of the retailer. This is a career-ending type of mistake in some companies. But, in this case, the email was a smashing success. Although the email was not targeted (by any definition), it outperformed previous “new mothers” emails, produced no angry customers, and actually expanded the list of “new mothers.”
More recently, another client in the high-end travel and tour industry vastly improved the impact of their email program by expanding the offers in their emails. This company had a very loyal base of customers who took multiple international trips with them each year. Their email open rates are three to four times the industry benchmarks. However, they were sending emails only about tours that customers had explicitly expressed interest in. By adjusting the content of their emails to branch out and offer related tours in addition to the primary tour, the company was able to increase the business generated from these emails.
Imagine a small business such as a local ice skate shop that sells, rents, repairs, and sharpens ice skates. In addition to the retail store, the business also has a web page that it uses to post information about the store and its products, but is not a commerce site or a Facebook page. The business has a phone and an email address for the store. They also work with a local ice-skating school that teaches both kids and adults how to skate.
Questions:
1. How many sources of contact with a potential customer does this small business have? What types of source are these?
2. What should this small business offer in exchange for a customer’s email address?
3. What type of information about the customer should the store try to maintain? How would you recommend they use that information?
4. If one type of customers are the parents of children learning to skate and these customers typically purchase a new pair of skates (~$50) every year for around 5 years, what should the store be willing to spend to acquire the email addresses of these customers?
References
Collins, N.L. and M.L. Carol. (1994). “Self-disclosure and liking: A meta-analytic review.” Psychological Bulletin 116, no. 3, pp. 457–475.
Darke, P.R. and R.J.B. Ritchie. (2007). “The defensive consumer: Advertising deception, defensive processing, and trust.” Journal of Marketing Research 44, no. February, pp. 114–127.
Experian. (2014). “Q3 2014 Email Benchmark Report.” Quarterly Email Benchmark Reports, Experian Marketing Services.
Hosford, C. (2012). “BtoB study: Marketers using digital channels to boost brands.” BtoB Magazine 97, no. 3, p. 3.
John, D.R. (1999). “Consumer socialization of children: A retrospective look at twenty-five years of research.” Journal of Consumer Research 26, no. 3, pp. 183–213.
Kramer, R.M. (1999). “Trust and distrust in organizations: Emerging perspectives, enduring questions.” Annual Review of Psychology 50, pp. 569–598.
Main, K., D. Dahl, and P. Darke. (2007). “Deliberative and automatic bases of suspicion: Empirical evidence of the sinister attribution error.” Journal of Consumer Psychology 17, no. 1, pp. 59–69.
Moran, G. (2012). “How customer data can help build better marketing campaigns,” Entrepreneur.com, August 13, 2012 (http://www.entrepreneur.com/article/223788 accessed May, 2015).
Vohs, K.D., R.F. Baumeister, and J. Chin. (2007). “Feeling duped: Emotional, motivational, and cognitive aspects of being exploited by others.” Review of General Psychology 11, no. 2, pp. 127–141.
Wright, P. (2002). “Marketplace metacognition and social intelligence.” Journal of Consumer Research 28, no. March, pp. 677–682.
Wright, P., M. Friestad, and D.M. Boush. (2005). “The development of marketplace persuasion knowledge in children, adolescents,and young adults.” Journal of Public Policy & Marketing 24,no. 2, pp. 222–233.