Building e-mail marketing expertise
July 11, 2001
As part of a wider automated marketing approach toward customer relationship management (CRM), e-mail marketing is one of the fastest growing front-office methods for establishing and continuing conversation with customers. Growth of the medium is expected to remain strong for the foreseeable future, due to its simplicity, timeliness and cost-effectiveness. Energy companies taking proper advantage of e-mail marketing can generate higher customer response and conversion rates than what is possible through various print or web communication vehicles, and can do so at minimal cost - often at less than a penny per customer. (7/11/2001)
According to the Aberdeen Group, a Boston, Mass.-based computer and communications consulting and market research organization, "e-mail marketing techniques and tactics have evolved from first generation list management, bulk mail, and spam approaches that lack integrated customer acquisition and retention strategies, to a well-built systems that combine [other CRM practices] within an e-mail system. Service offerings have developed as well. Vendors no longer rely on one-off customer requests or trail-and-error experiments as a basis for packaging service offerings. Instead, they have built in-house capabilities and expertise to provide true turnkey solutions."
Making sense of e-mail business models
For clarity sake, Aberdeen categorizes the various e-mail marketing business models into four general types. These models, the firm notes in its report, e-Mail Marketing: Relevancy, Retention and ROI, can be mixed and matched to meet current marketing needs, either across entire companies or departmentally, according to specific energy industry sectors. The four models include:
1. The licensed in-house software model
The basis of the licensed in-house software model consists of bulk mail systems
(also known as e-Message systems), wherein a marketer simply hits a "send" key to deliver an e-mail message en masse. The potential benefits increase as the volume of mail increases. Such systems provide a modest degree of customer segmentation at the database level. An energy company's marketing and IT department manages this entire e-mail process in house. For companies wanting full control over online campaigns and customer data, using licensed software may be the best approach of all.
There are a few significant disadvantages to this model, including steep IT investment upfront. Continuous need for software upgrades also is a strong possibility. Furthermore, heavy-duty in-house IT intelligence, resources and infrastructure are required.
2. The self-service ASP model
According to Aberdeen, the self-service ASP (application service provider) approach "is ideal for savvy marketers familiar with online marketing techniques". Here, as the name implies, in-house e-mail marketing staff already possess the required skills needed to effectively integrate marketing and database expertise.
While this approach keeps IT and other upfront costs to a minimum, its suitability and outcome is determined by the aptitude and commitment of in-house staff alone. Complementary in-house capabilities and staff also must be top notch. The attention paid by, and the quality of service available from an outside ASP, will be much less than that typical in full-service and collaborative working arrangements, described below.
3. The collaborative service ASP model
In the collaborative ASP model, in-house energy marketers have direct access to an e-mail marketing platform that is managed by an outside ASP vendor, which can be a true ASP, an ISP or a full-service communication agency. The marketers determine the level of service required from the ASP and modify it as needed, all the while retaining control of the operation. With a simple phone call, energy marketers can obtain help in building or managing e-mail databases, implement and evaluate e-mail campaigns and analyze results at low cost.
A potential pitfall of this model is the heavy time commitment required of all parties. In-house marketing staff may spend considerable time at the vendor's location. Is that the best use of their time?
4. The full-service, outsourced ASP model
Energy companies seeking one-stop shopping for end-to-end CRM management extending beyond e-mail marketing might want to speak with full-service outsourced ASPs. These organizations offer two key benefits: access to marketing and IT professionals who have expertise in numerous disciplines and industries, and the needed hardware and software.
Because energy companies do not need to develop or purchase the expertise themselves, they are likely to find that their e-mail programs can get underway relatively quickly. Disadvantages of this model include the need to manually transfer and reload between the ASP and the energy company and onto a CRM system.
Currently, most ASP vendors lack the ability to effectively segment customers into well-defined categories using customer profiles or purchasing behavior as basis points. Consequently, few ASPs can reliably determine when customers will be most receptive to an e-mail message, and under what circumstances.
Whether an ASP -- or in-house e-mail marketing department, for that matter -- can remain financially viable for long is questionable, particularly if that viability rests on billing e-mail services alone. It's difficult to achieve and increase profits by offering services at such low prices. After all, most are billing such services at less than a penny per customer. Their viability is worth pondering about, before considerable time and money are spent building an e-mail marketing capability. Perhaps a larger, more encompassing CRM strategy is better.
Tomorrow's profitable e-mail marketing companies will offer traditional expertise in combination with direct marketing, database and legacy system know-how. This type of expertise yields insight on how to improve the customer experience. It does, however, often require integration of customer data residing in numerous electronic systems.
Considerations across the board
Determining which e-mail marketing strategy and which business model works best is, of course, heavily dependent on customer need. Regardless of the strategy and model used, there are some common considerations that energy companies need to make as they seek to develop or strengthen their e-mail marketing expertise. Aberdeen lists the following among them:
Energy companies also may want to consider how important it will be to send specific, one-to-one messages to individual customers. While such rules-based approaches are regarded as superfluous by many in the energy industry, one-to-one messaging has become important in industries further down the CRM path.
As energy deregulation and merger/acquisition activity continue to escalate, expertise in online systems and systems integration will continue to deepen. This deepening extends to e-mail marketing and other CRM arenas, to include message development, lead management, advanced customer segmentation and knowledge management.
Constructing a custom e-mail business model, even with the help of the most skilled ASP, can be a lengthy and complicated endeavor for an energy company. This is understandable; for the most part, the energy industry largely has been shielded from the need to develop extensive marketing capabilities, both online and offline.
The importance of implementing e-mail marketing and other CRM activities well cannot be understated. Due to the low cost of the medium, it may be tempting to send e-mails en masse, to poorly defined customer audiences. Resist the temptation - at least until the risk inherent in alienating existing and future customers with what they may perceive as junk mail is understood.
Unfortunately, unsolicited e-mail is commonplace. Otherwise known as spam, unwanted e-mail not only rapidly turns customers away, but also may suggest a potential lack of security on the company's website. Permission-based e-mail, which is e-mail sent to customers with their electronic nod of approval, was supposed to take care of the problem of unsolicited e-mail. For the most part, it has. What it hasn't done, however, is address some potential security gaps in the medium.
In response, a number of privacy advocates and organizations now offer what are referred to as "double opt-in" and "private peering" options. The former enables customers a second chance to state their desire for specific information, in response to a company's confirmation of that customer's initial request for information. Private peering allows providers and customers to establish private addresses and services solely between them. Both add another step to the e-mail marketing process, but for customers concerned about privacy, it is well worth it.
Analysis
Author:Tom Scharfe