Identifying and prioritising quick wins in email marketing and eCRM

In a recession the pressure on marketers can be intense - more bang is needed for less buck, and every penny has to be justified. Boards and Finance Directors are constrained by a natural conservatism, based on the desire in the uncertain financial climate to de-risk as much of the business as possible.

On the other hand, there's an imperative towards cheaper, more auditable marketing channels. In theory, digital presents the greatest opportunity. For example, if your company traditionally uses direct mail to communicate with your customers, there are instant savings to be made simply by switching from post to email: if you're sending 100,000 mailers out, with each costing 50p in print and postage, then the switch to email will save you an instant £40,000, and probably £45,000 the second time you do it.

But, and it's a big but, if you don't know where to start, then making this kind of switch can be fraught with costly mistakes and a fair amount of fumbling. Making decisions about what to do requires intelligence, experience and a clear view of what the expected returns are likely to be, and that's difficult for most marketers new to channels like eCRM (Email Customer Relationship Marketing). Whilst the conversion from postal to digital seems like a no-brainer, in practice, your brand and your customers may not be suited to email at all, and you may have a major flop on your hands if you make the switch without some testing. ECRM, which provides marketers with - in theory - total tracking from customer to email sent, response behaviour and eventual value, lends itself perfectly to testing and experimentation.

If you want to find out the answer to a yes/no question and you want to test it before you make a decision based on the answer, then you will need a minimum of 383 people in order to get an answer you can be 95% confident, with plus or minus 5% accuracy, reflects your entire database. So if you want to test whether you'll get the same response rate to an email version of your campaign versus your DM campaign, send the email version to 383 people in your database selected at random. If you run segmented campaigns, do the comparison between 383 people in each segment and your control. Only once you've got the answer should you roll out the change across the whole customer base... but by then you will have numbers you can show to the budget holders, which justify the change based on cost savings and minimised risk.

There are of course a number of different things you can tweak to great effect. For example, you could spend money on:

• Improving segmentation
• Improving open rates
• Improving the effectiveness of calls to action
• Switching people from call centre sales to web sales
• Expanding your database.

All of these are potentially valid ways to increase the value you get from your eCRM activities. In some instances the value can be enormous. Say you're sending a million emails a month, and getting 2,142 orders worth £50 each. Increasing your open rate from 15% to 16.5% and your click-through rate from 15% to 18.75% will take your annual revenue from nearly £1.3 million to nearly £1.8 million - an increase of around 38%. That half a million in incremental revenue is enormous - provided it costs less than the profit margin on it to make the changes required. Again, it really comes down to how you decide what to focus your energies and investment on.

In my experience, working with brands like Tesco Kitchens, Harveys, Laithwaites Wines and Sony, there are always a number of different changes you can effect. As you can probably tell, I'm a stickler for the numbers; I always want to know what levers I can pull, and what effects that will have on the revenue. Given a variety of possible improvements, all of which will come at some cost, then you clearly need to know what to focus on first. Once we have identified what these opportunities are for a given company, we will always try and attach some numbers to them, and I believe that when you are planning what you do during 2012, when your focus should be on lowering risk and increasing the returns you get from marketing, this is a critical first step.

And in uncertain, recessionary times like these, having confidence in your marketing plan is what differentiates you from your competition.

The nudge towards eCRM

ECRM is not a quick fix but requires sustained investment and patience, explains Felix Velarde, managing director at Underwired Amaze.

There are still some companies that haven’t understood the significance of eCRM (Electronic Customer Relationship Marketing). Yes, eCRM, that marketing nirvana, which comes with investment barriers that might make it impossible to buy. How could you turn down something that’s going to take a year to get right, that may cost a quarter of a million pounds but that might make you millions in new revenues?

It feels like an impossible proposition. It’s so difficult for brands to buy that many of them don’t. Those big innovators with money to burn can afford to experiment and reap the rewards, but most brands just can’t see it. Most brands have to focus on their immediate tactical requirements (sell, sell, sell!), and perhaps try social because they’ve heard they can do it for ten grand.

Most brands can’t afford to do eCRM, no matter how big the rewards, and how much it differentiates them from the rest of the market. Or can they?

Let’s go back a few years to when the first major eCRM campaigns started. In 2003 Underwired Amaze proposed to Virgin Holidays taking over an existing email newsletter campaign and building something more sophisticated.

The campaign became segmented, largely by behaviour to start with. What Customer Type 1’s preferred destination, time of year of booking, or decision making time was likely to be, informed when they’d get a special offer on a certain Florida hotel. Quite quickly the second dimension demographics came into play as well. Sending an offer for a free flight for your second child to parents of two made a big impact. The first segmented email sent generated £3million in direct holiday bookings. Virgin Holidays had taken a leap of faith and invested in a campaign that cost around £30k and justified a programme with an ROI of 100:1.

But once the initial surprise had worn off and customers got used to it, there was a long period of lots of detailed activity, lots of creative work going on, but not - it seemed - much return. It changed though, reached a critical mass after about a year, and finally the smiles started reappearing on the client’s faces. And stayed as the programme’s ROI three years later was still averaging 26:1. Fantastic.

The Virgin engagement went exactly like every other eCRM project. It started with a big bang that makes everyone very happy, and settles down. After a few months the quick wins have worn off and it starts looking like nothing is happening at all. After a long, long year though, the eCRM programme starts paying for itself again. But there’s this big, long, frustrating period of doldrums, where the project owner gets disillusioned and it all looks like very hard work for no return, and it’s this that I want to come back to. Why? Because actually it’s this period when the principles that really drive eCRM are hardest at work.

The first principle is segmentation, and if you will indulge me while I teach granny to suck eggs for minute it will set the scene for the second. Segmentation is based on a simple idea, that if you send a specific call to action (an offer, for the sake of this example) that is relevant to the right person at the right time, it’s more likely to be acted on than if you send it to the wrong person or at the wrong time. Let’s take an example. You have three hundred people, 100 are golfers, 100 football fans and 100 cricket fans. You have three offers to go see the Ryder Cup, the FA Cup and the Ashes, in an email, one after the other with a paragraph each. You send the email to everyone. 100 football fans will see the golf offer first, and a third of them will bin the email. The golf players will see golf first and be happy. The cricketers, well two thirds will bin the email before seeing the third, cricket, offer. Your maximum response rate will be 200 - because only 200 of the 300 recipients will have read the offer that appeals to them. Simple. Segmentation says, send one email with one offer to each group (yes, the right offer!), and your maximum response rate is 300 out of 300, a fifty percent improvement.

The second principle is the principle of the nudge. eCRM isn’t an advertising medium, it doesn’t work by bombarding people with messages until they buy - in fact, if you send too many emails it’s obvious what will happen: after the initial hit of increased response people stop reading, after a while they add you to their junk filter, and you never know because after too many emails they can’t even be bothered to unsubscribe.

The job of eCRM is to create relationships. So while the segmentation principle is important, it must be balanced against the need to create a relationship. What we want to do is change people’s behaviour subtly over time. Small calls to action, little asks, are what is required. I want every customer to spend a tiny little bit more every time. I want them to increase their purchase frequency by 2% over six months. I want a 0.1 percentage point increase in average transaction value. Why so little?

What the big innovator brands realised a while ago is that little nudges add up. If I suggest you double your turnover in two years you’d think it impossible. Yet if I suggest you increase it by 3% this coming month you might feel it’s much more realistic. And what happens if you increase your turnover by 3% a month for the next two years? The laws of compound interest say you’ve doubled your turnover. That’s why eCRM is, really, so compelling. Yes there’s a quick win, and yes, there’s a long dull patch, but patience pays off.

Email unbound

Everyone thinks of email as being more or less a broadcast medium. Email agencies and bureaux send millions of emails as newsletters every month to addresses lodged in databases. Some send them daily. Noone expects a reply.

But email has a richer use. With apologies for the reminder, but email was the way you had a conversation without picking up the phone. You send a message to your mate, and when they’re ready to answer they do. You can have conversations in real time, or with a delay for timezones, research or holidays. Email involves your counterpart in the decisions about how the conversation is paced, where it leads to, when it changes venue, when you meet up.

We appear to have lost sight of the dialogue. It’s easy to do so: if you’ve got 20,000 address on your database or 800,000, managing dialogue can be a daunting prospect. And notice I said addresses, not customers. More often than not the email broadcasts marketers manage go blind to everyone they can reach. So email gets a bad reputation, and newsletters have dwindling response rates. Where once it thrashed Direct Mail, now response rates are in the lowest single figures.

We all know what the solution is though. Segmentation makes response rates leap.

Imagine you’re sending an email to ten thousand people with three unbeatable holiday offers in it, one for families at the top, one for retired people in the middle, and one for singles at the bottom. And let’s assume that everyone reads the first offer, two thirds read down to the second and a third scroll down to the third. If the audience is equally split between the three target groups, the maximum possible response rate is 6,666.

If we could divide the audience into three segments, and send one email with one offer to each, the maximum possible response rate is ten thousand. That’s a huge difference in effectiveness. If you started with this three-part email, and it really is an unbeatable offer, just by segmenting it you increase your sales by 50%.

So that’s segmentation. Segmentation is a science – one which we practice and improve all the time. It can be really simple like the example above, or it can get very complex. We can segment by, for example, behaviour (what media they consume, do they request a brochure before making a decision, which wines do they prefer), or by demographics (where they live, how many there are in the family, what they earn), or by motivation (whether they are interested in their kids’ health, or the environment, or what their neighbours think). When we start working with a client this is what we address first, by looking at what data is available either in the client’s hands or commercially, because this will give us insights into what messaging might work to drive increased response.

Segmented email marketing is incredibly powerful, but it’s nothing to do with technology, and the technology vendors will always work with specialist eCRM partners with long experience in segmentation strategy to devise the campaigns they deliver for you.

ECRM adds something really special to all this. ECRM is channel-agnostic, in other words it’s concerned with reaching the customer wherever they are - email, SMS, social media or websites. A great eCRM strategy uses every touchpoint available to deliver the right messages for the right moment in the decision-making cycle to the right person. ECRM leverages segmentation through email, but creates a relationship through observing how customers behave and what they find most motivating by  tracking across every digital venue, mobile to landing pages to social media, and that’s when email marketing becomes something different, something which transforms businesses through radical changes in revenue.

What’s our story?

We’ve been doing a brand vision exercise within the wider plc my company belongs to. Someone asked me if I could contribute something that would tell the Underwired story. This, I think, illustrates what we do quite well.

McCain Foods asked us to tell them if digital can engage customers with a brand as well as TV can. We told them we’d prove it one way or the other.

We took over their eCRM programme. We optimised their segmentation, and created a comms strategy to engage brand resistors and deepen the relationship with brand engagers. We devised creative for a monthly, segmented email campaign. Finally, we created a regular survey to match the brand tracking being done by Hall & Partners on TV audiences.

In the first ten months, engagement with brand resistors went from 14% to 63%.

Brand consideration rose 11% compared with the Hall & Partners benchmark.

In six months, average transaction value went up 3%. The core segment grew 29% in volume. And sales revenue went up by a whopping 38%.

Focus has switched from proof to growth. Underwired’s now building a web-based eCRM hub to replace the brand’s website. We’re running highly targeted acquisition campaigns to build the most valuable segments. And our client, too, is thoroughly engaged.

This is what we do. I just thought I’d share it with you.