THE MAGIC IN E-MAIL MARKETING
04/23/01- Marketing Magazine
by Chris Powell

With response rates that traditional direct marketers would win awards for, permission-based e-mails are becoming the method of choice for cost-conscious marketers

TD Waterhouse's just-completed e-mail marketing effort was a real slam dunk. "Score with TD Waterhouse," a joint venture between the Toronto-based financial services firm and the Toronto Raptors basketball franchise, featured e-mail—this season's hot marketing tool—as a key component.

"The objective was to leverage our relationship with the Toronto Raptors," explains D'Arcy McDonald, alliance marketing manager at TD Waterhouse. "We're a new sponsor this year, and we want to tell the GTA (Greater Toronto Area) more about that. At the same time, we want to leverage that relationship in an interactive environment where more and more of our current clients are choosing to interact with us."

TD Waterhouse is just one of the many marketers, both traditional and Web-based, that are flocking to e-mail marketing. In fact, 86% of the about 200 industry people who participated in 24/7 Media's recent survey on Internet marketing in Canada said that e-mail is an important part of their marketing mix, with 55% claiming that it is "very important" in helping them achieve their overall marketing goals.

E-mail was certainly a core component in the TD Waterhouse campaign. Upon entering the promotion, participants were given the option of clicking on boxes entitling them to receive e-mails containing biweekly contest updates, notification of special offers and promotional offers from TD Waterhouse or The Raptor Insider, a team newsletter. According to McDonald, the promotion drew 10,000 entrants within the first two weeks: 78% requested contest updates, 55% agreed to receive announcements from TD Waterhouse and 27% signed up for the Raptors newsletter. "We're bullish on the rest of the campaign," he said. "We got the critical mass we needed early."

All entrants were also sent an e-mail thanking them for participating in the contest, and giving them an opportunity to submit another entry ballot by referring the contest to a friend or correctly answering all the questions in an Investment Trivia Challenge–a five-question contest combining sports and finance. Links to both the refer-a-friend and trivia-challenge Web pages were contained within the e-mail.

"Our objective was to bring someone who through the normal course of their day wouldn't interact with TD Waterhouse and give them a very positive first experience," says McDonald. "If we're confident we're delivering on that, that person will be more prone to consider us when it comes time to make an investment."

And offering customers cool prizes or incentives doesn't hurt marketers' chances of having a hit promotion on their hands. The TD Waterhouse promotion, for example, offered a grand prize of a trip for two to Orlando, Fla. for a Raptors/Magic NBA game that pitted Raptors superstar Vince Carter against his former teammate Tracy McGrady. The prize included three nights accommodation, $1,000 in spending money and a $2,500 deposit into a TD Waterhouse direct trading account.

The promotion was created by Integram Marketing Group of Oakville, Ont. and powered by N5R.com, a Toronto agency specializing in online contests and giveaways that boasts a roster of clients including Sunoco and Sears. N5R CEO Roman Bodnarchuk is passionate about e-mail marketing, which he calls his "favourite topic in life."

He's not alone. In fact, an increasing number of marketers are eager to do what the Bodnarchuks of the online world are doing. A recent report by Cambridge, Mass.-based Forrester Research states that e-mail marketing will be a $6-billion-a-year business in the United States by 2005, comprising 10% of all online marketing initiatives. And it's one of the fastest-growing segments of online marketing, with a compound annual growth rate of about 88%, says the report.

"Marketers have spent five or six years thinking it's all about the Web and just building Web sites," explains Bodnarchuk. "They don't get it. The point is, 90% of your (online) time is sending and receiving e-mails. That's the magic."

E-mail marketing is not limited solely to customer acquisition. In fact, its most popular use may be customer retention. "Marketers see e-mail and direct mail as a very efficient way to sell to customers, but e-mail has got some additional advantages," says Jordan Kendall, an analyst with Forrester Research in Toronto. "Direct mail is generally used to sell, e-mail has got a lot of different elements. It can be used for retention, it can be used for customer service. It gives marketers the flexibility to tie together a bunch of different stages in the buying cycle."

And the advantages are many, says Kendall: e-mail is ubiquitous, it's considerably cheaper (as little as 25¢ per e-mail compared to up to $2 a pop for traditional direct mail offerings like flyers and coupon cards), it's more efficient and it allows marketers unprecedented interaction with the customer.

Plus, while the clickthrough rate for Web-based banner ads is declining (less than 1%), the industry average for permission-based e-mail marketing campaigns–as opposed to unsolicited or "spam" e-mails–is an estimated 11%. Recent campaigns by firms like N5R and Toronto's FloNetwork, however, have received response rates as high as 25%, with some, like N5R's recent Win Xterra promotion for Nissan, achieving an astounding 79% clickthrough rate.

It's those kind of numbers that lead Fransi Weinstein, chief creative officer for the Toronto agency tattoo direct + digital, to refer to e-mail marketing as "direct marketing on steroids."

Obviously, Bodnarchuk agrees. "If you could get 2% or 3% (response rate, through traditional direct mail initiatives), you'd be getting plaques and awards and they'd be having a dinner for you," he jokes. "You'd be nominated for marketer of the year."

And e-mail is efficient. Unlike traditional direct mail campaigns that can take many weeks to plan, mail and evaluate, marketers can deploy e-mail campaigns quickly and receive feedback within as little as 48 hours. "With an e-mail, we can tell if you opened it, how long you read it, we can tell if it was forwarded. It offers unprecedented measurability," says Bodnarchuk.

"Companies in this fast world want their customers to have access to product information and content," agrees Peter Evans, vice-president of marketing for FloNetwork, which was recently bought by New York-based ad network DoubleClick. "There's a speed to e-mail that direct mail and other media can't rival."

FloNetwork, which employs about 200 people in its offices in New York, Chicago and San Francisco, bills itself as an "e-marketing application service provider." It offers marketers a full suite of services, which includes building and managing e-mail address lists, testing and deploying e-mail marketing campaigns, and real-time tracking, reporting and analysis of the results. The company has created and carried out recent e-mail campaigns for barnesandnoble.com, buy.com and Virgin Records.

FloNetwork has already sent more than 500 million permission-based e-mails on behalf of its 150 clients this year, en route to a projected total of roughly 6.5 billion. Last year, the company sent about 1.5 billion e-mail messages.

It is numbers like these that lead to perhaps the one concern about e-mail marketing: overkill. "It is the hot topic right now," says Katherine Dimopoulous, vice-president of marketing for Toronto-based President's Choice Financial, which has used e-mail marketing as a component of recent campaigns, including its newly launched "Fresh Cut Mortgages" promotion. "It's going to remain hot until everybody starts doing it, and then it's not going to be a very effective tool because consumers will be inundated."

But others, like FloNetwork's Evans, simply view e-mail marketing as an improvement upon traditional customer relationship tools. "(Marketers) have spent a lot of time working with customers in the traditional world, though the mail, through retail stores, call centres and such, but e-mail is far more effective," he says. "We look at it not as a replacement to traditional marketing channels, but a very effective overlay you want to move into your business."

And it's going to become more sophisticated. While the bulk of today's e-mail campaigns typically feature messages in either text or HTML formats, some marketers are turning to so-called content-rich e-mails that feature streaming audio and video in order to entice would-be customers.

This area offers huge potential for growth, as more and more computer users upgrade to systems capable of playing or displaying these messages. "The rich media is going to get better and better," says Evans. "It's certainly more visual, so it allows us to represent your brand much more powerfully. More attractive generally gets more read."

"I think (content-rich e-mail) is what you can expect to see becoming completely pervasive," agrees Forrester's Kendall.

Although catalogue companies were the early adopters of e-mail marketing, FloNetwork's client list has grown to include Fortune 500 companies like Procter & Gamble, says Evans.

These companies are realizing the potential of establishing personal, ongoing relationships with their customers, Bodnarchuk explains. "We're able to create a real customized and relevant message for each person. We're engaging the customer and we're building a relationship with them. Every time we learn something about you, the next e-mail communication is more personalized just to you–so the relationship gets deeper and deeper and the e-mail response rate grows higher and higher."

Exceeding expectations seems to be a common theme for many e-mail marketing campaigns these days. Take the December promotion by Sunoco for its e-commerce site, offering three free car washes for every purchase of a particular Sunoco.ca WebGas Turbo Pack. According to Marc Atkins, Sunoco's e-business manager, the e-mail, which was sent to between 15,000 and 20,000 customers in Sunoco's database, received a 13.8% clickthrough rate, 1.3% of whom actually made a purchase at the site. And while 71% of the total sales generated by the e-mail campaign were for the promoted product, an additional 29% were for other, more expensive packages.

"We drove traffic to the site, we drove acceptance of the actual offer, plus spillover sales," says Atkins. "For some reason, they responded to the e-mail by upselling themselves. Once they got to the site, they were enticed by other products which were more expensive than the original promotion."