Targeted E-mail: A Case in Point

by Bruce McCracken

When financial services provider Charles Schwab & Co. needed to create a high performance e-mail solution in order to send its clients customized e-mail, it chose Quris.

Permission-based targeted e-mail is extremely useful in building relationships with customers. As a communicative medium and marketing channel, it can provide important information of great value to customer in an expedient fashion. Knowledge can be gained on the customer and, in some cases significant amounts of money can be saved by the enterprise while providing increased customer service.

In the late '90s, financial services provider Charles Schwab & Co. of San Francisco built a high performance e-mail system internally with John Funk serving as a consultant. Funk had founded two e-mail service providers. When Funk founded his third e-mail company, Quris (pronounced Cure-iss), in 1999, Schwab became the first client. Schwab knew that it was not a matter so much of technology but rather the creativity and expertise to use it.

Jim Nail, senior analyst for Forrester Research, explains the unique considerations in implementation from the creative design perspective. "The first thing to know is that e-mail is a lot harder than it looks. Because people deal with e-mail on a daily basis, they think that is all there is to it. It is one thing to do your daily correspondence, it is a very different matter to go to the scale of doing hundreds, thousands, millions of e-mails at a time. There are lots idiosyncrasies that require specialized expertise. As you get into the targeting of dynamically generated content to individual users and profiles, you are getting into computer programming."

Michael Raneri, senior vice president for Schwab, explains the decision to go with Quris. "Our core competency was not e-mail. We realized that there was a special expertise that needed to be developed in the marketplace. We saw e-mail as an emerging opportunity. We had a very specific problem. We had a lot of customers calling at the end of the day inquiring about news and prices for the stocks in their portfolio. That is a very expensive phone call. We wanted to create a product that would send them a synopsis of the news and closing figures for their portfolio as a cost effective way for them to get their the information they need."

Nail observes that Schwab recognized their limitations in the new medium, something many companies fail to do. "E-mail is not like direct mail. Often, a company gives the job to the direct marketing person and they pull a big list and mail a bunch of stuff. People are getting fed up with the amount of e-mail that isn't relevant to them."

Raneri continues, "A lot of the original target e-mail we did was around alerts and market data so that customers could receive an e-mail when a stock hit a certain trigger. This was in late 1995. We designed news, stock alerts, or basic market commentary on market events. We used a couple of small vendors, but there were problems in performance and production support. As we grew, though they claimed they could manage growth and scale, they could not."

Quris is a full service agency according to John Funk, president/CEO, for Quris, which is headquartered in Denver, CO. "We not only do technology but also the creative, strategic and analytics. We constantly work on enhancing effectiveness and readability. We do research collaboratively with surveys of the subscribers and focus groups. We crawl into the results to understand what is really working to create intellectual capital to get the programs right. The more we do, the smarter we get, and the greater the value to our customers."

The experience and acquired expertise in the new medium cannot be understated according to Nail. "There are new things that you can do that you could never do before. When you have a new tool, you don't really understand all of the things that you can do with it. You need somebody with experience who will think differently about what kinds of communications and campaigns you can do with this different medium."

In January 2000 Schwab outsourced to Quris. Design and execution was critical, according to Raneri. "It was not going to be to a vendor in the direct mail space, as it required a much more thoughtful approach. The mistakes that you can make in doing that are so numerous, and you only have one opportunity to get it right. So we had to test and learn to be certain that what we planned to do was going to be effective and respectful of the reader. We approached it from a very specific perspective, what does the client want from Schwab."

Nail points to wisdom of the Schwab philosophy on e-mail. "The Quris/Schwab example is a best practice. They came at it from a customer-centric perspective as opposed to the traditional direct marketing mindset of fishing with hand grenades. They understood the fundamental difference with e-mail is that it is so much more personal for people. The main thing is to approach it from the consumer perspective."

The orientation towards the needs of the customer is the driver, as observed by Nail. "What is of value to the marketer is not necessarily of value to the consumer. Getting a day end summary of your portfolio is of tremendous value. E-mail is not only a new way of doing things, but actually superior for the consumer. It is cheaper, better, faster and smarter. The medium allows delivery of something new that simply was not possible in any other medium."

Personalization was designed into the product. Every stock in the portfolio of every individual recipient would be in the e-mail. The e-mail was to be sent within an hour and a half after the market close. A template was designed to have a user interface that allows the reader to navigate around within the e-mail. Analysts and writers create the content and all information is sent to Quris over a VPN (virtual private network).

The development phase took four months and involved considerable testing, says Funk. "We have very experienced staff members and we know how to program for troublesome e-mail applications. We have a test lab to replicate all different configurations and environments to ensure they look right." The compatibility with all possible configurations was tested for presentation display value. Lists were assimilated with each individual account with data segmentation down to individual client to provide total personalization.

Nail puts it all into a simple customer perspective. "It is really crucial to test. What reinforces or undercuts the brand is the experience of the customer, not the pictures, not the words. If an e-mail arrives garbled because it was not designed for the reader, the consumer says 'these guys are idiots.' A brand is not a logo, not a product; a brand is a promise to the consumer. Every interaction with the company either proves that promise is true and delivered, or it negates it. The service reinforces the brand."

Quris ramped up informative e-mail products as they took over from the other service providers. In April 2000 the first of these were sent after careful design and testing recalls Funk. "The first launch was in April of 2000. We sent four products that were similar in content with the smallest populations, 30,000 to 40,000 subscribers. New products were added in the summer of 2000 with another dozen since."

In 2001 a special product was added to inform customers of when the equity rankings in any holding of their portfolio drop. Alerts with triggers immediately kick in and the e-mail is generated. These reports are integrated with other channels so that the branches serving the customers are aware of the downgrade alert.

Nail points to the upside and value to both Schwab and their customer. "In financial services, the customer asks, 'whom am I going to trust in these difficult times?' Schwab demonstrated that they really are doing something new and different to help." The relationship has been one that has steadily evolved, with Quris handling most everything initially, then some being handed off back to Schwab as explained by Raneri. "Initially Quris did secure e-mail and then we brought it in-house. We let them go through all of the pain of the early stage development and get the kinks out of it. Quris stays a few steps ahead of us on the leading edge of technology. We let them do all of R&D (research and development) as when you are sending millions messages, changes to the system can impact performance."

Raneri details criteria for deciding what is done in-house and what is outsourced. "The way we split what we do is based on what is closest to our core business and the most proprietary customer information. We do all of the trade confirmations, e.statements, and matters involving personal financial information that needs to be bomb proof and archived for regulatory purposes. Quris does most content including the end of the day portfolio update, mid-day update, morning call, the things that can be less secure," continues Raneri.

A system is in place for incoming e-mail replies to messages as explained by Raneri. "We have a sophisticated system that handles replies. The inbound system essentially reads the inbound e-mail with sophisticated algorithms and categorizes them. It is then put into a queue for the most appropriate representative to answer it."

The targeted permission-based e-mail program has been very successful and now serves over 1.6 million subscribers with a monthly unsubscribe rate of less than one percent. An increased understanding of the customer has benefited Schwab, according to Raneri. "We have been able to understand customer behavior by tracking these e-mails. We have become more intelligent on how to bundle the e-mails and keep open rates and readership high. We also have been able to understand not only what clients want from the e-mail but also where they go from the e-mail on the Web site. This has helped us to improve design of the Web site to guide clients down relevant paths."

Nail imparts the wisdom of truly understanding the shift in consumer attitudes and the impact on e-mail marketing. "The danger is in the changing definition of spam. Consumers are defining spam as anything that they are not interested in. Permission does not any longer mean that it is not spam. We asked a series of questions about attitudes towards e-mail. In the last four years we have seen every attitude deteriorate dramatically." This is illustrated in the figure below from the March 2003 Forrester Research report surveying 9,788 American and Canadian respondents, "Media & Marketing North America: Consumer Technographics Data Overview."

The e-mail efforts have had a very positive effect says Raneri. "By having customers subscribe to one or more e-mail alert products, we increase the net profitability of net user customers by over thirty percent. That pertains to customer revenue in trading and assets as well as reduction in attrition." Within that statistic is the savings from the lessening of phone calls. "We have been able to eliminate a number of phone calls that cost between five and ten dollars per call. We have reduced the news type calls by half." With the huge number of Schwab subscribers, that is not chump change.

The progressive and successful utilization of targeted e-mail has demonstrated the effectiveness of the new medium in a way that offers lessons to be learned according to Nail. "It is not about having a million names on a list because there are a million individuals in there. It is about understanding consumers in a much more granular way. For traditional marketers that are used to one message, one ad, they have a lot of learning to do. If you don't build a strong relationship with consumers, that channel will fail for you."

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 emailed at abatar@bsn1.net.

  This article was originally published on Wednesday Apr 30th 2003
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