Not to be outdone by its rivals caught up in the PRISM ‘scandal’, Yahoo! has decided the best way to deal with lapsed users is to give their private details to the first person that asks for it. Okay, well it isn’t really that bad but their recent announcement that they will start recycling dormant email accounts on August 15th will have significant repercussions for the both ecommerce and the email industry.
About two years ago my iTunes account was hacked using a well known Apple scam. The hackers just need your account ID, which they use to download apps. How can they download apps without the password you may ask? They can’t, but when you unlock your password those apps are downloaded to your device and they get the cash because it was their app that was being downloaded. The whole ordeal around getting this sorted is another post for a different blog, but the important thing here was the remedy I used to fix it, which was to create a Yahoo! account using a random password generator to create the bit before the ‘@’. So far so good, no dictionary attack has cracked this email account.
The problem is, that I don’t ever log into the account (clearly I will have to add this to the list of monthly tasks like cleaning out the washing machine filter and checking the smoke detector). What would happen if I missed this announcement from Yahoo!? Come the middle of August somebody could take this email address from me and suddenly have access to my iTunes account. The password reset would go to the address that they control and away they go. If I was like many people including Mat Honan of Wired Magazine, this email address would also be used for other things and I would have lost control of all of them.
This will also clearly have implications for me as an email marketer. Loads has been written over the past few years about removing data that has not opened or clicked in more than twelve months from your list. The thinking is that inactive addresses are being used as spam traps, although there has been a lot of disagreement on this by email experts such as Dela Quist. Regardless of which side of the fence you fall on this topic, you need a plan in place to be executed between the 15th of July and the 15th of August because if you email a recycled address – you will have spammed them.
Yahoo! will hard bounce all of the addresses that are to be recycled during this thirty day period, so you need to take this opportunity to tidy up your Yahoo! addresses.
There are well over 3 Billion email addresses in the world. It is not surprising that the email application providers want to start recycling them. Let’s face it, jimsmith@yahoo is a lot better than jimsmith345@yahoo. This is going to become a regular part of our world, so we better develop some strategies to address it.
Our findings last month on the Obama campaign caused a lot of debate but the bare facts of our analysis still stand – had Obama’s team optimized for improved open rates, their send volumes would have dropped and their all-important donations would have followed.
Open rates remain a widely used and hugely misleading measure of performance and engagement in the email industry. At best they give you an idea of a campaign’s performance in isolation but at worst they lead email marketers to focus on optimizing the wrong strategies for their email program.
Here we discuss how to identify if maximizing open rates is holding you back and how to go about identifying the strategies that will have the biggest impact on your results.
The open rate paradox
Using EDS Analyst we examined the relationship between open rates and total unique opens for the top 200 email senders by list size in the US for 2012.
We were confident that, like the Obama campaign, there would be an inverse relationship between rates and totals – so as rates increase, totals decrease and vice versa. We call this the open rate paradox or to paraphrase a popular sports trusim: rates are for show, totals are for dough.
Each dot on the graph below represents a single sender and we picked out some well-known brands as reference points.
Sure enough, the graph shows that for most large senders, there is an inverse relationship between open rates and the total number of opens – the higher the open rate, the lower the number of total opens. Rates are for show.
It’s also no coincidence that nearly all of the brands with the biggest lists (orange dots) also have highest number of total opens because they are sending more opportunities to open.
Although opens don’t directly correlate to revenue, even the most avid fans of open rate maximization would agree that the more people that actually open your emails, the more engaged your database and the more revenue or conversions you are likely to generate. Totals are for dough.
Keep it simple – focus on just three strategies
If your goal is only to improve open rates, then your strategy is simple: halve your list by suppressing your less active subscribers and watch those rates soar… and those total opens plummet! But if your goal is to increase total opens, then the bell curve in the graph above helps define three clear strategies:
Has the biggest impact on totals and can be improved independently of the other two.
Increase send volume: Significantly increases total opens for relatively little effort (low effort to gain ratio).
Optimize for rates
Increases total opens but requires the biggest effort (high effort to gain ratio).
Most brands are clustered towards the lower middle of the curve because it’s the easy place to be. By and large, they all put a similar amount of effort into their program and use the same undefined strategies.
The outliers, however, go above and beyond in one of three ways – those to the right have very high open rates, those to the left have high send volumes and those at the top are combining high send frequency with very big lists to produce massive send volumes.
In effect, this is the three different strategies implemented to their extremes.
Of course, there are limits to the effectiveness of each strategy and these are defined in the graph above by the orange line to the left (frequency cap) and green line to the right (optimization cap).
These boundaries exist because for any given list size there is point at which diminishing returns kick in for both frequency and open rate. And, as the big empty space to the right of the green optimization cap shows, it’s very hard to send a large volume of email while still achieving a high open rate.
So the basis of a successful email program is to continually grow your list while finding a balance between increasing send volume and maximizing open rates with better offers, targeting, subject lines, etc.
And you find that balance by ignoring your open rates…
Define your strategy by ignoring open rates
To illustrate the effect these strategies have on an email program, we have created a simple optimization chart, below. The green curves represent the impact of send volume on total opens and the brown lines represent the impact of open rate on total opens.
Each intersection represents a hypothetical 10-hour unit of resource, as a means of comparing the effort required to implement each strategy. As you get closer to each cap, the effort required to improve your totals with your chosen strategy increases exponentially.
Imagine your brand is the star in the middle of the curve and you want to take on your leading competitor, the lightning bolt.
If you use open rates to define your strategy, then you focus your resource on maximizing those, route A. Your open rate may now be much better than your competitor’s but they are out-mailing you, so they are still creating twice as many opportunities to buy or convert.
If you choose to increase your send volume, ‘route B’, then your open rate drops but your total opens more than double. However, as you approach the frequency cap, the impact of your strategy diminishes and you still trail your competitor.
If you use totals to define your strategy, then you take ‘route C’, which balances resource between increasing send volume and maximizing open rates. Your open rate drops but you are finally creating more opportunities to buy than your competitor.
Smart email marketing is not just a case of increasing send volume indiscriminately or of only focusing on ever tighter targeting. There is a balance that exists for each brand, you just have to find your own sweet spot.
Total opens the key to optimizing your program?
In this instance, we have highlighted the open rate paradox using total opens because that was the data available. However, we’re confident you will find the same inverse relationship in your own campaigns with total clicks and, more importantly, revenue. And in the end that’s the only metric that matters!
Developing a good email marketing strategy can be a daunting task. To help you get some perspective, here are 3 key stages to keep you on track.
Develop a customer centric communications strategy.
I know this can be a bit of an overused statement, but to make the email channel work in the modern environment of priority inboxes’ etc it is vital. Focusing on the needs and motivations of the customer as they would relate to your brand is a great place to start. If you are going to be talking to the customer and expect them to engage, purchase or become loyal as a response, you’ve got to say the right things. This can’t be done at a campaign tactical level, when the heats on to get more sales to hit target; it needs to be part of an overriding communications strategy. This strategy will set out more than just how many promotional emails need to be sent to achieve revenue objectives. To develop this email communication strategy, these are some of the key elements.
Understand how your customers perceive the brand and its products or services.
Research the motivations and needs that engagement with your brand satisfies.
Research the strengths that define your brand equity.
Define your customer lifecycle and set business rules to identify where each customer sits.
Focus the strategy on increasing LifetTime Value
Once you have got a clear idea of your customer and the stages the customer goes through in their engagement with you (from discovery to defection), you can start to plan. One key objective of any email communications strategy should be to increase revenue by increasing customer lifetime value. Now, don’t think this is purely a retention statement, it equally counts for acquisition too.
If you’re going to be focusing on lifetime value, it will have an impact on which sources you target for acquisition. Customers coming from sources that provide a low lifetime value customer should be avoided, or the price you pay for acquiring the prospect should reflect their future value. In the case of an email address, they are not all worth the same, so the first task would be to identify sources of prospect email addresses that will provide good future customer value. A good place to start is to look at any results you have from past activity, and look at the overall sales achieved over time, from those customers. The problem with email is that it is a cheap marketing medium that can be abused with little (apparent) cost implication. Good email prospect data, costs far more than poor quality prospect data, but can be far cheaper in the long term, as it produces good long term results.
Without the understanding of the customer (and you’ll only get this from the research suggested above) you won’t be able to sell to the customer what they want, how they want it. You’ll only be able to sell your product or service how you perceive it. Customer knowledge also allows you to tailor communications for each stage of the customer lifecycle. This will make your communications more relevant, more effective and more likely to meet business objectives. The strategy should be one that makes every marketing communication be seen as a positive experience by the customer, not a negative “interference” experience. Ensure you do this by following these key rules:
Define the commercial objectives for each stage of the customer lifecycle.
Develop a customer communication plan that reflects the customer research and meets business objectives.
Ensure research and testing is part of the strategy, to promote future development.
Make it part of a multi touch, multi channel strategy
In a connected world, where people are hooked onto the grid in multiple ways, touch points come via multiple channels. Just to take one example of a device, the smartphone can deliver a marketing message via email, web, social and SMS simultaneously. Studies have been suggesting recently that someone is likely to be watching the telly or walking round a store while access their phone, so the potential for cross media confusion abounds. Add this to multimedia spamming potential, and it makes integrated marketing communications essential for each channel’s success. Email has an important role to play in future direct marketing, with its unique strengths, it can only be effective as part of an overall cross channel strategy. Complimenting other channel activity, email often drives an uplift on other channels as well.
Taking a strategic approach to the email channel can bring lots more opportunity to the party, ultimately allowing customer knowledge to drive content, timing and targeting; nudging that little bit closer to true one to one marketing.
Every year we make them, but only occasionally do we keep them. New Year’s resolutions often represent our best intentions, which somehow get sidetracked as “real” life takes over and our time becomes filled with ticking items off “to do” lists and trying to keep our heads above water.
If you’re an email marketer, the same often holds true for the more strategic items on your list, which can be overlooked in an effort to get the next email out the door. However, as one of Return Path’s executives is known for saying, hope is not a strategy. Just wanting something to change doesn’t make it so. When thinking about the New Year’s resolutions you’d make for your email program in 2012, I recommend creating a realistic plan for sticking to these:
I will make time to test. This is a fundamental and essential best practice for any email marketer to follow. Without a testing plan, you simply won’t know the levers to pull to positively impact your email program’s performance. Instead, you’re just guessing as to what works, what doesn’t, what resonates and what misses the mark. Start by regularly testing the most basic email program elements with an A/B split test, like subject lines, and work your way up to multivariate testing of creative elements, like images, calls-to-action and landing pages.
I will define (and track) metrics to measure performance. What metrics are most important for measuring email program success? For most marketers this includes some combination of deliverability, open, click-through and conversion rates, but depending on your business model, your subscriber base and the desired responses you’re looking to generate from the email channel (i.e., purchases, leads, downloads, web traffic, etc.), creating a customized list of KPIs is essential for measuring trends over time. I continue to be amazed by the number of companies I come in contact with that are blindly sending email without any capabilities for tracking response rates.
I will be more focused on engagement. An email’s primary purpose is to drive an action. This can be anything from getting a subscriber to read what’s in an email, take a survey or walk them through a multi-step purchase process. But what about inactivity? Chances are you have a reasonably high percentage of subscribers who were once engaged and interacting with your messages, but have lost interest over time. These subscribers are likely deleting your messages without reading them or have set up rules to automatically route your messages to an “unimportant” folder, like in Gmail’s priority inbox. So what changed, when did it happen and, most importantly, why? Understanding what keeps your subscribers engaged over the long-term will be increasingly important for getting delivered to the inbox, staying there and maintaining high levels of activity.
I will reengage with my inactives. This is the next logical step. Stop focusing on list quantity and concern yourself with its quality. The health of your email program depends on it. Inactives can represent everything from true spam traps, recycled email addresses and unknown users to subscribers who once found your emails relevant and no longer do. Take action and remove the less than clean segments of your list that represent bad data or old data and create a strategy for reengaging with existing subscribers who are still valuable to your business.
I will monitor the competition. Standing out from the inbox clutter will continue to be a challenge as the volume of email increases, and this includes differentiating your brand and value proposition from your competitors. If your competition is incorporating features like geo-targeting, real-time inventory updates, offer count-downs in real-time, customized content and personalization elements into their email messages, what effect will that have on revenue and engagement, and how can you stay one step ahead? These insights are key as brands compete for subscriber mind-share in a crowded and increasingly mobile inbox.
As the saying goes, “even the best laid plans of mice and men often go awry.” However, committing to at least some of these New Year’s resolutions will ensure your email program is set up for success in 2012 and beyond. So, let’s toast to that!
Join the DMA Email Marketing Council on November 22nd 2011, for the final breakfast seminar in our four-part Email Customer Lifecycle series at 15 Hatfields in London (map). In this series we have looked at list growth, conversion, retention and in this final seminar, sponsored by e-Dialog, we are concentrating on win-back.
Speakers will show you how to create a one-off win-back campaign for your inactive subscribers as well as an ongoing reactivation programme to prevent inactive subscribers.
Brands, including Screwfix, who have done both of these successfully and will present how they did these in two exciting case studies.
e-Dialog, will start off the morning with keynote presentation looking at win-back campaigns.
You then need to chose from two sessions:
Re-lighting the flame, tested email strategies to win-back
Tim Watson, Operations Director, Emailvision
This session will define just what is meant by inactive before moving onto how to effectively message to someone who is ignoring you. Real world tested examples are used and you will gain lots of ideas for your own win-back strategy.
Keeping the flame burning, email strategies to prevent losing a customer
Gianfranco Cuzziol, Head of eCRM, EHS 4D Digital
This session looks at how we might spot when a customer is becoming less engaged with you and how you might try and get them re-engaged with ideas for your own retention strategy.
The morning will finish with a panel debate on these topics between our experts. You will also have the opportunity to ask them questions and mingle with your peers over coffee and breakfast.
“ I found the overall information very useful and now have some great ideas to use for clients. I also learnt more about the industry in general and just how important it is and the effort needed to succeed.” James Lovell, Email Marketing Consultant, dotmailer
“Very well organised, and being able to choose which session you attended helped to tailor the morning to you interests.” Caroline Hutton, Junior Account Manager, Eclipse Marketing Ltd