Targeted Email: From Spam to Choice Part 4

Wednesday Feb 19th 2003 by Bruce McCracken
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Targeted Email: From Spam to Choice Part 4

In the February 2003 report, "What Works™: Best Practices in Marketing Technologies," Kent Allen, research director, E-business/E-CRM for the Aberdeen Group of Boston, writes, "E-mail builds brand awareness (via rich media), helps acquire new customers (via viral marketing), improves customer relationships (by creating bi-directional dialogue), and creates consumable value (via newsletter marketing). And in most cases, e-mail accomplishes these and other objectives more cost effectively than does traditional direct mail."

In the March 2002 report, "Marketing & Branding Forecast: Online Advertising and E-mail Marketing Through 2007," Jupiter Research submits, "E-mail marketers will spend $1.4 billion in 2002, growing to $8.3 billion in 2007. Retention campaigns will dominate the volume of non-spam e-mail marketing messages over the next five years. Indeed, each online consumer will receive more than 1,500 retention-based e-mail messages in 2007." The figure below details the spending growth of e-mail marketing.

Email Spending Growth

Enterprise Evaluation
It is no longer a question of if, but how to implement an e-mail game plan. Implementing a permission-based e-mail strategy involves decisions by the enterprise on which of three approaches to choose. Essentially, the choices are to buy an application and do everything in-house, sign on with an application service provider (ASP), or hand everything off to an outsource provider. Of course, there can be any combination of these three. The major key in making this decision is assessing the resources the company has internally and its core competencies.

In deciding how to implement an e-mail strategy, an enterprise must determine the relative strengths and weaknesses it has in infrastructure and competencies. Additional factors include the target audience and the nature of the business.

Kevin Scott senior analyst for AMR Research of Boston explains, "As companies are making decisions on targeted e-mail, they need to assess their core competencies. One of the follies is that everybody thinks they are a good marketer. It is hard to tell if you are not a good marketer. Companies that aren't typically marketers may have the personnel already but not have the expertise in handling e-mail, especially managing the lists. Another factor is managing the in flow that comes back."

David Daniels, senior analyst for Jupiter Research echoes similar sentiments. "The biggest problem that we see is the level of sophistication with the marketer. To date we've seen that, largely, most marketers do not have the level of sophistication necessary to advance their marketing results, and simply providing the marketer with technology is not the answer."

An assessment of the strengths and weaknesses of the organization can be found by contacting consultants, outsourcing providers, trade associations, and university business schools. Getting more than one opinion will help neutralize the ulterior motives of those trying to sell their services. Of course, talking with peers to learn from their experiences is extremely beneficial.

The enterprise must be willing to listen and have an open mind. Nobody likes to be told that they have an ugly baby, but sometimes it must be accepted that the kid is far from eye candy. The naked truth may be that the enterprise does not have the creative people on board to design an effective e-mail campaign. If that is the case, the firm must determine if they are willing to increase the head count to shore up the deficiency.

Scott adds, "Not having the creative services is one of the biggest reasons for people wanting to outsource. It takes something special to be a creative person. They might not have expertise in campaign design, customer segmentation, the preamble of the execution."

Allen opines, "It is not a hardware or a technology issue, but more tied in with the sophistication of the end user. One of the barriers and challenges, especially for small companies, is getting e-mail managed and validated. It might not be too hard to build a new database, but where it gets tricky is with larger companies that may have a large portfolio of brands. There may be a separate customer list for each brand. Marketing is getting more sophisticated and integrated in with other marketing initiatives."

The IT and infrastructure are other factors. Can IT comfortably handle the new task with the current hardware array? Do they have expertise and personnel to undertake it? Allen submits, "It is less easy to tackle the data management issues and that is why we are seeing more and more ASP offerings that deliver not only execution technology but help to deliver data management."

The figure below from the January 2002 AMR Research report "Turning E-Mail Campaigns From Trash to Cash" reflects the spending ratios in categories comparing outsourcing versus purchasing an application. By evaluating the differences, a firm can gauge which approach might be optimal based upon their strengths and weaknesses in the respective categories.

Spending Ratios


The Choices
A comparison of the three approaches; buying an application and doing it in-house, using an ASP, and using an outsourcing provider are illustrated below in a chart from the same report. (The chart refers to an outsourcing service provider as a marketing services provider.)

MSP, ASP, or license?
Internal Competencies Marketing Service
Provider
Application Service
Provider
Licensed Software
Sales and Service Model Complete provider from creative services to execution to analysis Applications rented from ISV or third party
Some consulting of creative templates may be provided
Customer buys software license
Responsible for maintenance
Marketing Resources No creative team on staff
Already outsources most marketing functions
Small number dedicated to application maintenance
Has some experience in other direct marketing functions
Large dedicated teams focused on research, creative, and analysis
Seasoned professionals from all functions of marketing
IT Resources Small staff mainly focused on maintenance and internal support Small number dedicated to application maintenance
Minimal experience in systems integration
Strong knowledge in deployment, customization, and maintenance
Portion of staff dedicated to CRM applications and integration
Timing of Deployment Need something running within a month
Limited or no time to train employees
Deployment needs to be under three months
Additional time for training is available
Project time scope three months or longer
Scope of Deployment Small team involved with e-mail marketing project A few divisions and field teams using applications
Integration used to feed results from analytical systems
Enterprise use across multiple divisions
Other departments outside marketing involved with project
Integration not only with CRM applications, but other enterprise systems
  E-mail marketing not seen as a differentiator
Security of marketing info and customer data not a top priority
E-mail marketing viewed as strategic need in the future
More involvement in creative and analytic processes
Security concerns focus on ownership of data not sharing
All marketing functions seen as business critical now and in the future
Large teams dedicated to creative services, market research, or marketing effectiveness
Security is a top issue for marketing plans, product information and customer data
Source: AMR Research, 2001

The report also indicates that in a survey of marketing professionals, 42 percent of the respondents reported using both a licensed application and outsourced services. An example of one reason for the mix would be marketing that requires advanced creative design and segmentation may be done by the outsource service provider, while simpler mailings like general newsletters require less sophistication, segmentation and/or technical expertise.

Another major factor is the volume and extent of the e-mail marketing initiatives. The report also noted that survey respondents with licensed applications reported spending an average of $21,500 per month versus $7,500 per month by those using outsource providers. Scott says, "Companies purchasing licensed products can expect to spend between $100,000 to $200,000 up front, while outsourcing start up fees will be around $10,000 to $20,000." Another consideration will involve how the project is carried on the books. Using an outsource provider or ASP allows the expenditure to be listed as an expense, while the application and related hardware are listed as assets.

The outsourcing and ASP options also provide predictable fixed budgeting and accountability in performance. The services that they provide are core competencies. They are responsible for keeping up with technology and have expertise and experience with deployments leading to a faster and smoother ramp up.

Scott suggests that companies with reduced creative abilities should think twice about purchasing an application. "If you don't have a strong competency in marketing and you buy an application, it will cost you less, but you will probably send out a bad e-mail that won't get any response."

Daniels feels that a more creative mixed approach may be the best way to go for some. "In e-mail marketing, the trend is to continue to outsource in part due to the services components offered. There is still somewhat of a logical divider between the folks doing traditional marketing and the online marketing. The folks that are more sophisticated in both use a hybrid model. Outside of that, the outsource model is quite viable and attractive due the barriers of building the technology internally and expertise."

Daniels cites trends noted by Jupiter Research. "We see a trend over time of bringing the list segmentations in-house as folks get more sophisticated. For the execution of the e-mail marketing campaign, we see that trend going more and more outside of the organization."

Scott notes, "Companies may not have the staff and may be better off leveraging an outsourcing service provider to handle the whole process, as they don't have the expertise. Smaller companies that do not have the resources and expertise can leverage the expertise and buying power of the service provider. Outsourcing allows the staff to focus on more strategic initiatives than managing e-mail listings."

Daniels points out additional considerations for outsourcing unique to e-mailing. "One of the bigger issues that we are seeing to outsource is the issue of spam and e-mails ending up in the bulk folder. Beyond the creative services, outsourcers are more adept at helping marketers to understand the triggers and filters that are going push messages into the bulk folder. Initially, they have relationships with the ISPs to be the champion on behalf of that marketer."

On the other hand, Scott suggests, "If you have the infrastructure and take on the personnel, your costs are higher but not as high in the long run as using an outsource provider. It doesn't make sense to use an outsource provider unless you are going to leverage their campaign design and creation. You should focus on doing it yourself if you can due to integration issues."

Daniels adds, "The decision to fully deploy a campaign management solution in-house is very dependent on the organizational structure and core competencies of the marketing staff. In many cases, improving marketing results requires a higher level of data analysis sophistication. Where the lists are fairly basic for the intent of the marketing campaign, and fairly rudimentary such as newsletters, it is easier for marketing to do that internally because they are not looking at vast amounts of segmentation."

Middle Ground
In the middle ground between the two are the ASPs. ASPs offer hosting and robust applications, but often do not provide the creative services and list management. Analytic reporting also tends to be much less detailed and customizable compared to the outsource service provider. An additional upside is that many are Web-based and can be connected to from anywhere there is Internet access, as no client needs to be installed.

Daniels states that Jupiter Research finds the ASP model very appealing for e-mail delivery. "Jupiter recommends that an ASP-based provider perform the last mile piece of e-mail marketing, specifically the sending of the campaign and response analysis data collection. It is far easier for a marketer to partner with an ASP-based provider that has these core competencies than it is to develop it over time. Similar to direct marketing in the offline world, where there are tremendous scale benefits for a catalog retailer to send their catalog to an outsourcer for printing and mailing, outsourcing e-mail delivery has the same merits."

Scott continues the analogy. "The ASP can be viewed as being similar to a print service bureau in that the company does the creative work and the ASP does the delivery, handles the bounce backs, and management of the campaign. The ASPs offer more options."

Like ASP offerings, some vendors are offering their products and services in different fashions to suit the customers. For those with infrastructure constraints, these offerings are worth of consideration as many offer hosting.

Allen notes, "Today, many of the leading pure-play e-mail companies have introduced a full range of solutions that couple technology with services (which can range from highly consultative handholding to the occasional 'heads up' about the latest in best practices)."

Allen continues, "Not all organizations need an enterprise-class solution. Many will continue to rely on full service suppliers, while others will embrace varying flavors of collaborative ASP e-mail marketing offerings. Some will experiment with licensing e-mail software, only to return to a more collaborative offering. Others will switch back and forth as the needs of their online campaigns dictate."

As the options increase with a greater variety of service flavors, enterprises must exercise due diligence in choosing wisely so as to be proactive and strategic as opposed to reactive and tactical. Permission-based e-mail is more than a viable marketing channel. Properly executed, the future is today.

Bruce McCracken is a business writer with specialization in outsourcing. His coverage areas are primarily in IT, eCommerce, CRM, HR, and supply chain/distribution with focus on small to mid-sized companies. He may be e-mailed at abatar@bsn1.net.

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