Interest Surges in E-Mail Marketing

October 29, 2001

As the anthrax scare disrupts mail-handling procedures, companies that provide e- mail marketing and Internet billing services said last week that they had seen a surge of interest from prospective clients and from current customers looking to make even more use of online options.

The Direct Marketing Association, whose members include junk-mail purveyors, has advised its members to send e-mail alerts to consumers to let them know when promotional material is about to arrive in their mailboxes. And based on the upswing in electronic billing, the Yankee Group, a research and consulting firm in Boston, has made an upward revision to its forecast of growth for this year.

The big question is whether the new interest in online mailing and billing options will fade if the anthrax crisis passes or whether a potentially fundamental technology shift has begun.

Paper mail has hardly disappeared. There has been some scaling back in the $528 billion direct-mail industry — which is what the junk mailers prefer to call themselves. "But I don't really blame that on anthrax," said H. Robert Wientzen, chief executive of the Direct Marketing Association in New York. "I think it has more to do with the economy, and the increase in postal costs."

Mr. Wientzen said he did not think the public was afraid of corporate mailings because so far the anthrax attacks had been carried out with hand-addressed parcels bearing no return address. Although he acknowledged the tactic by some direct marketers of sending letters with no return address in hopes of sparking the recipient's interest, Mr. Wientzen said these and most other direct- mail items were professionally printed, many with company markings.

He added that the high-speed production and distribution of direct- mail material made it unlikely that a saboteur could tamper with individual pieces en route.

Nonetheless, some direct-marketing companies say they have received worried telephone calls from at least a few customers with anthrax concerns. Lands' End, a catalog and Internet retailer that sent 269 million catalogs to customers last year, has had to quell anthrax fears among several customers a day, a spokeswoman, Beverly Holmes, said.

The primary concern apparently stems from the fact that until the anthrax outbreaks catalog printers like R. R. Donnelley & Sons and Quad/Graphics often used corn starch in the printing. Because many catalogs now in the mail were printed before the anthrax scare, customers may continue to find traces of powder in some catalogs. (A recipient of a Lands' End catalog in Denton, Tex., was being tested for anthrax late last week after finding an unusually large amount of white powder in a catalog earlier this month, the company said.)

To allay fears about direct-mail advertising, the Direct Marketing Association recently sent guidelines to its members, including one to consider sending e-mail messages to their customers to alert them to promotions that will be arriving through the United States mail, among other measures.

Those who conduct e-mail marketing campaigns on behalf of other companies say they are unsure whether the association's recommendations are behind the recent increase in business, but they do suspect the recent anthrax anxiety plays a role. William C. Park, chief executive of Digital Impact, which runs e-mail marketing campaigns for Dell Computer (news/quote), Gap and others, said the trend toward e-mail marketing had already begun before the anthrax mailings, as companies searched for more cost-effective forms of advertising in a weak economy.

"But safety concerns around direct mail have led to an acceleration of the adoption," Mr. Park said. "Customers are more likely now to `opt in' and receive e-mail," he said, referring to consumers who take the option of agreeing to receive promotional e-mailings from companies. "Businesses see that, and it's just accelerated their desire to switch."

Businesses that deal directly with consumers are reluctant to speak publicly about changes in their marketing or billing activities, for fear of either feeding the anthrax paranoia or setting themselves up as targets, analysts and executives said. And a spokesman for the dominant e-billing provider, CheckFree (news/quote), would not comment on recent business activity in the wake of the anthrax attacks.

But executives from some other companies that provide e-mail marketing services, like Responsys and Bigfoot Interactive, said they had had a surge in business in the last several weeks.

These executives also said their clients had stepped up efforts to obtain the e-mail addresses of their offline customers. In e-mail industry vernacular, this is known as "appending," or attaching the e-mail address to the rest of a customer's data profile.

Complicating such efforts, said David Finkel, chief executive of Brann Worldwide, a direct-marketing agency in Wilton, Conn., part of Havas Advertising (news/quote), is the fact that companies cannot buy e-mail addresses as easily as other customer data. He says there are only 20 million to 22 million e-mail names available to direct marketers, compared with hundreds of millions of names and postal addresses.

But Mr. Finkel predicted that more consumers, to avoid paper mail, will be willing to give out their e-mail addresses. "The real win will be for marketers who'll now have two ways to reach their customers" — online and through the regular mail — "if they can present it in a way that shows it's in the customer's best interest, not the company's."

Businesses that send bills on behalf of utilities, mortgage companies and others have also attracted interest in the wake of the anthrax attacks. Princeton eCom (news/quote), which helps companies prepare customer bills for the Internet and accept online payments, has had a 33 percent increase in online billing volume among existing customers in the last two weeks, a company spokesman, Tom Healey, said.

One of Princeton eCom's customers is Triton PCS, which operates the SunCom cellular phone service in the Southeast. Triton began offering online billing in March, but the biggest surge in customers signing up for it has come in the last few weeks, a spokeswoman, Melissa Nichols, said. "And we haven't been marketing it aggressively," she said. "Whether customers are specifically mentioning anthrax, I don't know. But interest in electronic billing is definitely on the rise."

Jason Briggs, a Yankee Group analyst, said enrollment in electronic- billing services had recently risen enough for him to revise the industry's growth estimates. Previously, Yankee had projected that 9.1 percent of American households would use Internet-based billing services in 2002, up from about 7 million in 2001.

Now, Mr. Briggs predicted it would be more on the order of 9.4 percent. "And that's conservative," he said. "That'll amount to a lot of bills, a lot of consumers and a lot of revenue. The industry will, unfortunately, benefit from what's going on."

Yet Mr. Briggs cautioned that even though e-billing companies might sign up significantly more customers in the short term, some consumers would probably revert to using paper bills if anthrax concerns faded. "When people feel more secure," he said, "our old habits will start to kick back in again."

The trick for billers will be to provide enough incentives for customers to keep using the online billing systems once they adopt them. "One of the biggest issues for billers is how to get people to turn off the paper," he said. Otherwise, billing companies could end up having to support the costs of both online and offline payment systems.

"This amounts to a short-term window of opportunity for the e-billing vendors and the billers themselves," Mr. Briggs said. "Once they get people online, it's really their game to lose."