Retail Email: How Much is Too Much?

Retailers love the instant stimulus-ka-ching of e-mail marketing. You blast out an e-mail and cash flows in.That's why 54 percent of retailers say e-mail performs better or much better than other marketing programs. And that's why they'll send 158 billion marketing e-mails this year according to forecasts by Forrester Research reported in the current issue of Internet Retailer.

But when 77 percent of customers complain they get too much e-mail, marketers have to ask themselves; "how much is too much?"

Consider the case of Fashion Outlet, analyzed by Arthur Middleton Hughes, in the same issue. These guys fell so much in love with the blast-bucks cycle that they tripled their marketing e-mail frequency from 5 per month to 15 per month. Working with a list of 500,000 double opt-in customers they were generating gross revenues of $6.5 million which after deducting COGS, the cost of e-mail creative and blasting and the cost for churning names yielded $1.2 million in profit or a nice margin of 19.1%

Looking to do even better, they figured some percentage of their list was always up for shopping so the discounter presented more opportunities to more customers assuming many would would shop. By cranking up the number and frequency of outbound campaigns, the revenue doubled to $14 million along with orders and the number of unique buyers.

What wasn't obvious were the attendant costs, especially the costs of replacing about half of the opt-in list who bailed under the weight of every-other-day e-mails. In the end while the top line grew, profits fell 8 times down to 2.6% under the weight of the added cost factors. And this doesn't measure or monetize brand preference, which had to suffer if half the list defected!

Fashion Outlet went to extremes. What if they increased frequency from 5 to 7 or 8? And what if they were smarter about segmenting the list and instituting a contact strategy limiting the frequency of outbound e-mail per customer per month?

As it turns out 44.8 percent of e-mail markets don't segment their lists. Not even the basics like -- geography, responders versus non-responders, products bought or order value. These simple sorts can make an enormous impact in campaign reception, response and profitability. So can A/B testing which carves out a small number of names to measure the relative pulling power of different SUBJECT lines, copy or graphics before a campaign is transmitted to the list.

Nervous retailers, especially those facing predictions of holiday doom, can probably increase their e-mail frequency slightly without alienating customers, provoking significant opt-outs or reducing profits. But the key to making additional campaigns more palatable to customers is pre-testing and basic segmentation.      

Comments

[Dominique Hind]

Really interesting post. I was having a look at Tesco and Australian retailers to understand what their email strategy was around subject lines, send times and file size.

Not many companies have a defined email strategy. I have written a couple of posts about my findings:
http://dominiquehind.wordpress.com/2008/09/19/what-when-retailers-send-emails-tesco-coles-aldi/

Tesco have so many different emails supporting every department, special interest and offers. When I initially subscribed, I was receiving at least one a day and up to 10 emails a week. A lot of emails, which no doubt would encourage a high churn or unsubscribe rate.

[LEADSExplorer]

Push Marketing with emails is coming to an end.
Pull Marketing is the new kid on the block.
Now you need to identify your website visitors. In many cases in B2B that is possibile by revealing the company name.
Cold call on warm companies.

[Shopping Malls]

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