Thinking Outside the In-Box
Smaller e-mail marketing lists deliver higher open and click-through rates, according to a recent study. And response rates differ depending on what day the e-mail is sent, says Chris Baggott, co-founder and chief marketing officer of ExactTarget, an e-mail marketing firm based in Indianapolis. His firm analyzed the responses to 230,000 e-mail campaigns sent out by its 4,000 customers -- many of them small businesses -- in 2005.
The information that came from those 2.7 billion messages -- and how they were received -- is a useful guideline for entrepreneurs hoping to begin or refine their own e-mail marketing campaigns. Baggott and Morgan Stewart, ExactTarget's director of strategic services, spoke recently to Smart Answers columnist Karen E. Klein. Edited excerpts of their conversation follow.
Your clients send out permission-based e-mail marketing, meaning that recipients have opted in to their databases or lists, right?
Baggott: Absolutely. Our core premise is that our clients must have confirmed opt-ins from their e-mail list members. We don't allow any unsolicited e-mail to be sent through our systems. So our clients are sending newsletters, promotions, invitations to events, client satisfaction surveys, and so forth.
The great thing for small companies is the cost. A small business will probably pay a little more than a large corporation per e-mail, because the pricing is volume-driven, but even so, a small business might pay a penny or two per e-mail. If you're a dry cleaner with 1,000 customers, you can talk to all of them for a whole year for around $1 per person. There's no other medium that's so interactive, easy-to-use, and inexpensive.
Although smaller-volume lists are slightly more expensive, the study that Morgan conducted found that smaller lists tend to get better response rates. Why?
Stewart: It comes down to the Holy Grail of marketing: one-to-one communication. The smaller we get these lists and the more we can slice them up into particular segments, the better we're able to target the messages and make them truly relevant to the recipients.
As we all know, sending bulk e-mails to millions of people misses the opportunity to be relevant. But with smaller segments, you can speak personally to your customers and give them information on something they're concerned about or interested in.
Baggott: A lot of business owners are still very mass-marketing focused. It's a difficult transition to understand that a successful marketing campaign is not about volume and return on investment, but long-term customer return. And the great thing for a small company is that it can compete equally at that game.
The study also showed that business-to-business firms are better at getting responses from e-mail marketing campaigns than are business-to-consumer firms. Why is that?
Stewart: We believe it goes back to what we were just talking about -- the smaller marketing list segments that B2Bs tend to use. They're able to better identify the things their customers are looking for, which makes their messages more relevant.
A B2B typically has sales staff connecting with its customers, so it will have a better, more detailed database. That means it can segment its lists and tailor its campaigns more narrowly. If B2C firms start to recognize the value in doing that, they'll realize how valuable it is to collect more detailed data on their customers and segment their audience, too.
What kinds of segments would you envision small companies carving out?
Stewart: The segments could be based on what are types of things these customers have purchased in the past. Or they could be based on behavioral data the company collects on its Web site, or even on responses to quick little surveys they send out asking for customer information.
For instance, if you're selling pool supplies, you could survey your customer base about whether they have in-ground or above-ground pools, then send messages and product promotions accordingly.
One thing the survey found that was interesting, and maybe counterintuitive, was that the best day to send e-mail is Friday. At least, in terms of the chances of its actually getting opened. Yet e-mail marketing activity is still focused mostly on Tuesday and Wednesday.
Stewart: Yeah. We did a less-comprehensive version of this survey last year and we did a month-by-month comparison about open rates, but didn't find a strong trend emerging as to the best day for e-mail to get opened. But this time around, the survey showed that Friday was consistently the winner. That's probably because there are far fewer campaigns going out on Fridays, so there's less of what we call "in-box competition."
Now, that doesn't mean that everyone should jump ship to Fridays. We don't advocate that our clients just go with the flavor du jour. We recommend that they test different options and validate the results themselves.
Baggott: We also encourage our clients to weigh all their options, including whether they should send regular e-mails at all. For example, some large corporations send out promotional e-mails every week, and they become wasted communications. You're so used to getting it and having it not be relevant that you're steeled to ignore it. Even if it's something that really might interest you, you're probably going to reflexively delete it.
But one of our clients is a small music promoter. They've done detailed analysis of their customers, so they know what music they like and what concerts they attend. I happen to be on their list, and I notice that I may not hear from them for months. Then, in the space of one week I may get two or three e-mails from them. But you know what? I open every one of them because I know they're targeting me specifically and they'll have something I will be interested in.
I go to a couple of shows off those e-mails every year that I probably otherwise would not attend, except for the fact that they're notifying me. So, those e-mails become very valuable to me.
The other day-of-the-week fact that you uncovered is that the best click-through rates happen on Sundays. That's also kind of surprising.
Stewart: Right. We haven't studied the reasons behind that, but we do know that 92% of e-mail marketing is sent Monday through Friday. What I infer is that with a lot less e-mail going out over the weekend, people have more time to spend engaging with and getting involved in their e-mail.
So they're more likely to click on something that interests them. There's not the time pressure or that in-box competition pressure on Sundays. We also found that Sunday response rates are definitely seasonal, so that during the winter, click-through rates are very high on Sundays, but during the summer, Sunday click-through rates are much lower.
E-mail open rates have been declining steadily since quarter one of 2004, your study shows, with an average decline of 1.8% per quarter. Where it used to be that open rates for e-mail marketing campaigns were about 50%, that rate has dropped to about 35% currently. And yet click-through rates have remained relatively stable at about 6% during that whole time period. Why is that?
Stewart: We believe that the declining open rate has to do with the technology we use in the industry to track e-mail opens. Typically, a very small image gets displayed at the bottom of the e-mail, and once it registers we can see that the e-mail has been opened. But more images inside e-mails are getting blocked by recipients' ISPs or e-mail readers. So, they may still be opened, but we have no way to track that.
The take we have on it is that it's not so much about the open rate as it is about what happens once your client reads your e-mail. And we're seeing that click-through rates are holding steady, so that's positive.
What advice do you offer for small-business owners who may be just coming into the online marketing age and haven't tried e-mail marketing before?
Baggott: They shouldn't be intimidated or worried about being late-adopters of the e-mail technology. We find that these late-adopters are actually doing very well in terms of getting click-throughs.
The industry is maturing, and people are learning how to do it well. So best practices are emerging, and there's increasing clarity about what does and doesn't work. Someone who's a newcomer to the idea of online marketing can design their e-mail campaigns well right from the start and see results pretty quickly.