Carpet bombing. Scatter-gun approach. Laser strike. Who in business would dare use such loaded terms? It could only be marketing; and for what is rapidly escalating into a major battle in a contemporary, competitive marketplace - customer acquisition and retention - marketing departments have added a new weapon to their arsenal. It is called email marketing and is supposedly capable of that most penetrating of strikes: one-to-one marketing.
The reason email marketing is so powerful is that it is a form of advocacy marketing. Typically, the campaign begins with a pre-existing customer relationship, based on, say, an online magazine or better still a recommendation from a friend (using the familiar 'recommend a friend and win a trip to paradise' tactic). Using a variety of devices, perhaps another competition or game, consumers are encouraged to ask for information on products they would like to hear about. A music store might get individuals to check boxes that describe the music they like. A supermarket might ask a few questions about car insurance, notably when it expires. In all cases, the customer is then asked the crucial question as to whether they'd like to receive information in the future on a 'need-to-know' basis. When they say yes to that question, they opt-in and join an elite list of names that is worth its weight in gold. They have given permission to the marketers.
And it's now that the really-clever on-line campaigns kick in. Such campaigns are fully fledged in the US and just coming up to speed in Europe, but will ideally have emails arrive in an inbox straight from a friend. These rather unfortunately named 'viral emails' turn existing customers into brand evangelists to generate new leads in a pyramid marketing strategy.
Consider the case of Kraft, the manufacturer of the cheese so beloved by children. The problem Kraft has with direct marketing its 'lunchables' to these customers is that no personal information may be stored on individuals under the age of 14. Lists of the names, addresses and preferences of this highly influential group of consumers simply cannot be bought.
But email marketing has provided Kraft with a way round this. The company struck a deal with Pokemon to create a series of joint-branded digital postcards that kids could email to their pals. Like their paper counterparts, the postcards were a hit and within a short period of time, Kraft had more than 50,000 children exchanging its cards and receiving record brand exposure as a result.
"Email marketing is now part of every campaign mix that we recommend to clients," says Mark Hopwood, director of creative and technical services at Agency.com, the marketing agency that worked with Kraft. "It is a tool that can be used to touch any part of the sales cycle, which means that it is important to be very specific about what the campaign will do. But its strength is that it can be used to capture and retain customers." This joint-capacity is important because, in terms of customer economics, companies spend a lot of money achieving this, and it is not until customers are retained that they become truly profitable.
The benefits are clear, explains a report by Jupiter, Email marketing: closing the loop from acquisition to retention. 'Across all key metrics, email marketing to house lists is far more effective than direct mailing to house lists. Cost-per-customer averages $6 [£4.15] for email verses $18 [£12.45] for direct mail. Up-front creative for email averages $1,000 [£692] versus $20,000 [£13,836] for direct mail.'
The report points out other savings: time to launch a campaign online is three weeks, whereas for direct mail it is three months; turnaround to receiving replies from customers is 48 hours as opposed to three weeks.
All sorts of additional benefits accrue from these shortened cycles. Campaigns can be tested more effectively and, of course, virtually every click of a mouse while online can be tracked and analysed. However, email marketing's greatest strength - personal access to the inbox - is also its greatest weakness. "The big problem in Europe right now is that only 10% of consumers give up their email addresses," says Staffan Engdeg†rd, a lead analyst at Jupiter.
Supply and demand
Engdeg†rd's work has shown that takeup is slow in Europe, compared with the US, because of a dearth of email addresses and profiles. 'Demand for permission-based lists will boom in the next 18 months [but] the supply of email addresses will be limited.' Mid-term, then, while email marketing can be extremely effective, it will carry the high cost of the addresses themselves, ranging from $0.2 to $0.5 (£0.14 to £0.35) per consumer profile.
Guy Marson, CEO of Mailtrack, a permission-based and electronic CRM service provider, agrees. But his business is tackling these limitations on a number of fronts. For example, ISP World Online has rebranded Mailtrack's product to produce a service called InfoAxis. Here, customers have the choice of filling in a form asking them a variety of questions. World Online, in turn, works with marketing agency I-level, whose clients include Bertelsmann Online (BOL), among others.
Basically, World Online users receive emails from BOL about their favourite subject. "Apart from gathering emails, the great thing about this approach is that it does not rely on the traditional marketing technique of segmenting," says Marson. "An 80-year-old granny who is into AC/DC could get emails on rock this way. She would have been completed missed before."
What is email marketing? Email marketing comes in three guises.
Retention email exploits data held by a company. The plus side of retention email is the fact that the company already owns the information and that the customer already has a relationship with the company.
The drawback is the fact that many company databases are 'dirty' - they simply do not have the volume of addresses or the quality of profiles to make marketing campaigns really effective. Thus, companies are running extensive campaigns simply to gather emails.
Sponsorship email is an alternative to buying online advertising. It can be thought of as a successor to banner advertising since, with sponsorship email, a click does not take you to a website but begins an email-based relationship with you. The advantage is that the surfer is not interrupted there and then, which has been the major failing of banner ads.
The disadvantage is that while the surfer has opted-in to receiving the email (ie, the emails are not junk), there is no previous relationship to build on.
Acquisition email is, in effect, direct marketing online, but with the attraction that running the campaign, if not buying the lists, is much cheaper and has shorter cycles. It is also typically opt-in since email lists are generated from campaigns that seek the permission of consumers before selling the names on to receive the specific information they have requested.
Heineken: the missing link
What do Heineken and rugby have in common? To the company that is spending millions sponsoring the Heineken Rugby Cup, that is an important question. The risk is that lovers of Heineken simply miss the connection with rugby, or vice versa. In marketing terms, that money would be ill-spent.
So, Heineken has been running an extensive campaign, using the images of rugby and beer. The mix includes an email-based campaign that stems from the TV ads that feature peanuts being shot into beer glasses, much as rugby players convert tries. Online this image is converted into a game, in which people shoot ballistic peanuts into virtual glasses. The winner receives a wide-screen TV.
Heineken has received reports of whole offices playing the Peanut Challenge. By monitoring the website, it can see that Friday afternoons are a particularly popular time to play - just before people leave for the pub to buy, well, a Heineken.
Electronic CRM: tailored messages
On the Internet not only does information move fast, so does infrastructure; which is why Siemon, the manufacturer of cable systems, felt frustrated with the blunt customer relations tool of paper-based mailings to its network of distributors. Even its invitations to view a customised website seemed clumsy.
But Siemon held good records of customer details, notably emails, and so an innovative solution was possible with electronic CRM system GL Communicator from software vendor Gordano. It delivers tailored marketing messages to partners and automatically maintains targeted user lists.
The results have been impressive. After an initial distribution to 17,000 contacts, the mailing generated more than 3,000 responses, an 18% response rate. Marketing cycles have been reduced, too, since responses are typically on the next day of business.
Food for thought
The email marketing industry will be worth $4.8bn (£3.3bn) worldwide by 2004, says Forrester.