A recent, widely discussed research release by Gartner’s G2 research unit has prompted many in the industry to speculate that direct email marketing will soon “overthrow” direct postal mail as the preferred direct marketing vehicle, for both customer acquisition and retention objectives.
According to this picture, direct email marketing - which involves the delivery of standalone
text, HTML or Rich Media ads to permission-based email lists - will continue to be amongst the most cost-efficient means of customer acquisition and retention available. Furthermore, many expect that the future availability of more accurate, richer subscriber data, larger and more highly-targetable email lists, multi-list de-duplication capabilities, improved subscriber segmentation technologies, and the like will lead to further, incremental increases in direct email marketing ROI.
In the very near term, this picture is probably correct. However, in the slightly longer term (between two and three years out), we believe this picture will prove quite wrong, and that those companies that fail to appropriately evolve their use of email as a marketing tool, away from a reliance on this picture, will be at a significant strategic and competitive disadvantage.
The continuing exponential growth of unsolicited commercial email (SPAM), widely anticipated significant year-over-year increases in the number of permission-based emails each Internet user receives daily, a demonstrated, growing trend amongst email users to use dedicated email accounts to receive permission-based commercial email, and a host of related factors will place significant downward pressures on email open rates, and hence email ad clickthrough and conversion rates.
Though sizeable anecdotal evidence gathered by avant|marketer suggests that open and clickthrough rates for permission-based direct email campaigns have already decreased significantly (and that the cost of making a sale via such campaigns has increased roughly proportionately) within the last three to four years, it would appear that these changes have not yet been sufficiently large to erode ROI and necessitate a shift in strategy, for most companies - either on the acquisition or retention front. (To speak of specific numbers, we believe that the average clickthrough rate on acquisition-oriented direct email campaigns has probably fallen from a historical high of 15-25%, to a current historical low of around 2%.)
Nonetheless, two to three years out, the basic economics of email marketing for customer acquisition and retention will be quite different from what they are today. In general, we believe, direct email marketing is unlikely to continue as a worthwhile, profitable strategy for most companies.
To be sure, permission will continue as the de facto standard for email marketing on both the acquisition and retention sides of the equation, for the foreseeable future. However, within the next two to three years, permission alone will prove not to be sufficient - as it once was, and largely still is - to ensure adequate user responsiveness and positive campaign ROI. Indeed, there are already signs that permission, by itself, is losing its value: Research executed by IMT Strategies in 2001 demonstrates that 39% of recipients of permission-based email either delete it outright (2%), are annoyed by it (7%), or feel indifferent towards it (30%).
As permission pioneer, Rosalind Resnick, Founder and former CEO of permission email marketing bellwether, NetCreations, summarized the point for avant|marketer in a recent interview, “permission has become so mainstream now that while in the past there was a real difference between acquisition email lists harvested from newsgroups and permission-based lists, being permission-based is no longer the differentiator it used to be for either the marketer or the user.”
In the future, only permission-based email campaigns that are able to achieve a high degree of “inbox visibility” will provide marketers with worthwhile positive ROI both on the retention and acquisition fronts.
Although email marketers and agencies will find it tempting to conclude that improved inbox visibility can be attained through the implementation of known best practices that relate to the crafting of email subject lines, and the like, strategies based on this type of thinking will at best prove to yield short-term gains, and will ultimately be myopic.
Achieving sustained inbox visibility and positive email marketing ROI will require a much deeper change in the strategies companies and agencies pursue with regards to email marketing. Those companies that develop the competencies and relationships to implement strategies that insulate them from the above shifts in market dynamics, at an early stage, will ultimately achieve a real competitive advantage.
What are the strategies that will prove successful?
On the acquisition front, we believe that only directly anticipated email communications will provide a vehicle for worthwhile positive ROI.
By-and-large, standalone direct email acquisition messages are not anticipated by the recipient to arrive at any specific time. Furthermore, in most cases, the recipient is neither able to anticipate with any precision the nature of the offer that will be made through an acquisition-oriented direct email marketing message, nor anticipate the company that will make that offer. Thus, for these reasons, the acquisition-oriented direct email has an inherently low degree of inbox visibility; a degree of visibility that is likely only to materially worsen as inbox clutter increases (no doubt, to the detriment of open, clickthrough, and conversion rates). Fundamentally, this situation can’t be repaired.
In order to be successful in the short long term, companies and agencies must move away from this form of acquisition email marketing toward forms of acquisition email marketing that can be directly anticipated by the recipient. One of the principal strategies that should be pursued is to shift to conducting acquisition email marketing campaigns via permission-based email newsletters. We believe that top-tier email newsletters will be relatively (though only relatively) immune to growing inbox visibility problems, because their arrival (on a daily, weekly, etc. basis) is anticipated by recipients, as is their specific content. What must be recognized by marketers is that the competencies involved in crafting email newsletter-based acquisition campaigns differ markedly from those involved in running campaigns via direct email marketing lists. Therefore, companies and agencies must hone the requisite skills early.
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