Making the Most of your Email Marketing

Uplift modeling can help improve email marketing effectiveness and reduce opt-outs.

In today's marketing landscape, the power of email is undeniable. It is a quick and effective way to reach a large audience, it is a green alternative to traditional direct mail, and it's free seemingly. Although there is no fiscal cost associated with pressing "send," email campaigns can be risky territory if they are not approached smartly. Often, marketers overuse the email channel without giving it a second thought. If there's no cost to the company, why not email the entire customer base with every offer, right? Wrong.

Potential Costs

Smart marketers know that overusing the email channel is a top cause of what is dubbed, "mental opt-out." This phenomenon occurs when customers automatically delete emails from a given company without taking the time to read them. Although these customers have not physically opted out of the email list, they have mentally opted out, which is just as detrimental for the company. Mental opt-out is more likely to occur if a customer receives a high quantity of emails from an organization, especially if most of those emails are not relevant for his or her needs. Each subsequent email greatly reduces the potential customer lifetime value. For those customers who don't take the time to physically opt out the first time, every irrelevant email they receive from a company is another invitation to do so and take their business elsewhere.

Another consequence of sending blanket emails to large portions of a customer base is that companies could inadvertently offer a special deal or discount to someone who was planning to purchase or renew anyway. In cases like these, marketers have unnecessarily upped the campaign fulfillment cost and lost out on extra profits for the company.

Know your Audience

How can marketers ensure that they're conducting smart email campaigns? One effective way to do this is to segment the customer audience using an analytic approach to marketing called uplift modeling. Uplift predicts the difference that a marketing campaign will make to the behavior of customers. By using customer data such as interaction history, current products/services used, and personal preferences, uplift modeling effectively categorizes individual customers into one of the following groups: sure things, persuadables, lost causes, and sleeping dogs -- based on a prediction of how each customer will react to a marketing campaign. This enables marketers to focus on contacting only those customers that will react positively.

"Sure things" are customers who were planning to buy or renew regardless and don't need any incentive or extra marketing. Contacting these customers could potentially increase campaign fulfillment costs if you're offering a product or service at a lower price. It's important to identify these customers and avoid emailing them special offers that will negatively affect profit margins. "Lost causes" are those customers who will never buy or renew no matter what you email them. Contacting this group is most often a waste of time, but these customers are not as dangerous as the final group, "sleeping dogs," those customers that do not want to be disturbed. These are the customers who will be annoyed by irrelevant emails and will likely be provoked to opt out of the contact list and take their business elsewhere. For example, a renewal reminder to this group would be a red flag to get a competitor's quote.

In today's digital world email often plays a large and important role in marketing campaigns. It is a well-developed channel that has yielded real results and certainly cannot be ignored. That said, if approached incorrectly, email campaigns can sometimes do more harm than good. Although seemingly free, marketers must take into account the incalculable costs that misdirected email could incur, such as increased mental opt-out, irritated customers, and reduced customer lifetime value, all of which impact sales and revenue in the long-term. Smart marketers know that blanket, poorly thought-out email campaigns always come with a cost. Targeting each email campaign, whether for upsell, cross-sell, or retention is a critical step that marketers must take to get the best value out of this important marketing tool.

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About the Author: Mark Smith is executive vice president of sales and marketing at Portrait Software, now a part of Pitney Bowes Business Insight (PBBI).