By Andy Wood, Managing Director, GI Insight

Since the advent of the EU Directive on Privacy and Electronic Communications, restricting email communications with non-customers only to those people who have actively ‘opted-in’ to receiving such communications, there has been confusion amongst marketers as to how this has affected the efficacy of email as a marketing medium. Vast levels of spam in the typical email inbox have certainly fuelled this confusion.

According to the latest figures from MessageLabs global spam levels currently stand at around 75% of all email. Spam can affect people’s confidence in email and one of the greatest challenges for legitimate email marketers is to stand out in consumers’ inboxes.

When quizzed, uncertainty in the marketing community over email initiatives tends to focus on three main questions:

• How much effort should I put into asking customers for permission to email them?

• Will my customers and prospects respond to email initiatives at all?

• Does email work stand-alone, or does it need to be combined with other channels?

Answers to these questions are desperately needed by marketers. Unhelpful debates about whether one medium is better than another have been quickly recognised for the nonsense that they represent, and have been superceded by cries for evidence about which media combinations work best, and in what circumstances.

Independent statistical evidence to help clarify matters is extremely rare. Some pioneering work (Response One, Online turn-on, February 2008) has recently been published showing that direct mail and traditional brand advertising are most effective at driving web visits with serious intention to purchase. However, little else from (or sponsored by) those with no vested interest in the area has been conducted in the last eighteen months. In order to start addressing this research gap, GI Insight commissioned an independently study to look at some basic metrics:

• What proportion of the population have given, to a firm they buy from regularly, their permission to be contacted by email

• What proportion of the population have given, to a firm they have never bought from, their permission to be contacted by email

• How effective consumers feel that different business sectors are at conducting e-CRM (customer relationship management)

The results of this research were enlightening and surprising. Almost three quarters of UK adults (74.4%) confirmed that they had given their permission to at least one firm that they bought from regularly, to contact them by email with latest offers and products. This statistic provides a major validation of the efficacy of collecting permission emails from the customer base. There is evidently a great willingness amongst the UK population to allow firms with which they already do business to use email as a communication channel.

Equally eye-opening was the statistic for email permission with firms from which a consumer had not yet bought, coming in at 39.9%. These permission-givers will mainly be people who have made an enquiry through a company’s website — typically to download an e-voucher, or get a quote on a financial services product, or enquire about a holiday, and so on. In other words, they have already indicated that they might be in the market for the company’s products or services, and so may be justifiably labelled and qualified ‘prospect’, rather than merely a ‘suspect’. As such, they have already moved themselves nearer to a possible purchase than other potential customers, and have made it probably worth the company’s while to keep in touch with them. To be able to do so over email, as well as by post, makes them doubly valuable as prospects.

Some recent research work has indicated that well crafted media combinations (rather than just email, or just direct mail) are proving the most powerful at eliciting consumer response and sales. We can corroborate this point from our own experience amongst major retail customers over the last 24 months. For each of a dozen major retailers, campaign testing with existing customers has taken place over the last two years. In each instance, control cells, including mail only, email only and no-contact, have been tested versus the performance of mail and email in combination. The results have been that stand-alone email and the email/direct mail combination produce around the same return on investment. However, since the execution of email campaigns is so inexpensive, the sheer volume of revenue generated by email stand-alone campaigns is very small, relative to the sales volumes required to be produced by marketing overall. The critical average statistic from these real campaign experiences is that direct mail and email in combination produce seven to ten times the sales revenue of email stand-alone. In one case, to have simply conducted email stand-alone would have missed out on some £200,000 in.

In short, this new study underlines the importance and potential return on investment from systematic gathering of permission emails, whether from existing customers, or from enquirers who have not yet bought but who have declared some sort of interest. At the same time, marketers should not be fooled by the hyperbolic claims currently being made about email campaign return on investment. This measure is often meaningless precisely because of the low cost nature of email campaigns. ROI can be well in advance of that achieved by more expensive traditional media, but achieve only a tiny fraction of the sheer volume of business that marketing overall is tasked with creating. Too many marketing professionals have been seduced by very high ROI, and have taken their eye off the ball when it comes to generating critical business volumes. Indeed, real life experience shows that it is when email and direct mail are used in combination, that critical revenue targets are reached in the most efficient and effective way possible.

This article was written by Andy Wood, Managing Director, GI Insight – www.gi-solutionsgroup.com

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