A considerable proportion of the costs involved in traditional marketing are incurred through publication, for instance printing product catalogs, mailing charges, or for placing adverts in the press or on TV. Further, staff costs are incurred through enveloping and franking mailshots. Although electronic marketing (e-marketing) via e-mail is not free of costs – online texts need to be drafted and incoming e-mails answered – the cost benefits of this medium as compared to classical forms of customer information and advertising are clear. By way of a comparison, a standard letter in Germany currently costs €0.55, a fax costs around €0.05, and an e-mail somewhere in the region €0.0015. A company can therefore send 360 e-mails for the same price as a single sales letter. Georg Blum, MD of the Commundia consultancy firm and deputy chairman of the CRM Council within the German Direct Marketing Association (DDV), estimates that e-marketing can generate savings of around 30 percent compared to traditional forms of advertising such as sales letters, catalogs, or press adverts.
Optimal cost-value ratio
There is no doubt that no other medium “exhibits such an impressive cost-value ratio while also providing both a high distribution speed and comprehensive layout opportunities,” writes Dirk Ploss in the “Handbuch E-Mail-Marketing” (E-Mail Marketing Manual). The e-mail newsletter is thus an effective and above all cost-efficient sales technique for midmarket companies. E-mail marketing takes three main forms:
Newsletters: These generally contain short items, such as company or product news, and are sent periodically to a group of addressees. The recipient can access more comprehensive reports or offers on the company website(s) via links.
E-mailings (“stand-alones”): These are the electronic counterpart of traditional direct mailing. Unlike the newsletter, an e-mailing is often sent in connection with a specific promotion.
E-mail requests: In this case, the customer requests delivery of the advertising or information by sending an e-mail to a specific address, whereupon a message saved there is received as a reply.
The medium of e-mail is characterized by the interactive opportunities it affords and its ease of handling in terms of adapting campaigns to customers’ individual information needs and testing them in advance. E-mail marketing is mainly used to improve and intensify dialog with customers and as a customer loyalty tool. Further, the response rate of e-mail campaigns is considerably higher than sales letters or other forms of advertising in direct marketing. The recipient simply needs to click a hyperlink to read the message. According to a benchmark report published in 2004 by the e-mail service provider Emarsys, around 56.5 percent of all addressees did in fact open their electronic advertising mails, as opposed to 32 percent in 2002. Total click rates increased from 10.6 percent in 2002 to 26.8 percent. It is therefore hardly surprising that over three quarters of companies regard e-mail marketing as important or very important, as a study by the European School of Business (ESB) Reutlingen and Commundia business consultants discovered.
Exploiting the full potential of e-mail marketing
“E-mail marketing is a key component in midmarket enterprises’ marketing mix,” explains Georg Blum, “because for the first time it enables small companies to send information regularly and at low cost to prospects and customers. In the past, printing and mailing costs posed a considerable obstacle for such firms.” An e-mail newsletter, on the other hand, enables supplementary information, and thus added value, to be produced and sent simply, quickly, and cost effectively. Midmarket companies can also use e-mail for marketing tests with different prices, offers, and product illustrations. The results of these are immediate and can be followed up quickly.
However, as the ESB Reutlingen and Commundia study adds, few midmarket companies fully exploit the real and potential opportunities afforded by via e-mail-based sales marketing. A third of companies omit to address customers personally, they do not cater for individual customer groups, and many companies also fail to send their marketing mails at a favorable time for their target group(s). Blum, an expert in dialog marketing, identifies a general problem in that the contents of many company websites and e-mails are not structured logically. “All too often information is sent that is poorly structured, and companies rarely apply the classic guidelines for dialog marketing. There is no thread for the reader to follow, as reading behavior or images aren’t properly used as anchor points,” Blum criticizes. In many cases, the contents of a brochure are simply put online or sent as a PDF file. This approach neglects the opportunities for dialog and interaction afforded by the medium.
Observe the legal framework conditions
Common shortcomings in e-mail newsletters start with the apparently “simple” formal layout. This was shown in a study by Absolit Dr. Schwarz Consulting, which specializes in e-mail marketing. In July 2004, the company evaluated 278 newsletters according to four formal criteria: subject line, salutation, unsubscribe function, and imprint. The surprising result was that only two newsletters were free of errors.
When sending newsletters, midmarket businesses are required to adhere to a series of legal guidelines. It is absolutely essential to ask for the addressee’s permission beforehand (permission marketing). This is stipulated in the German “Act against Unfair Competition”, which has been in force since July 2004. Recipients must also be informed of the content and frequency of mails and, at the time their permission is sought, they should also be made aware of their right to cancel. This also includes the means to unsubscribe to the newsletter, for instance by clicking a hyperlink. At the same time, the sender of the newsletter must observe the relevant data protection guidelines (such as the German Federal Data Protection Act (BDGG) or the German Teleservices Data Protection Act (TDDSG)) and inform recipients about how their data (e-mail address, name, address etc.) will be handled.
“There is also widespread ignorance about the information the sender must provide by law,” explains Torsten Schwarz, head of the Absolit consultancy agency. The German Teleservices Act (TDG) requires that the imprint contains information that enables contact to be made quickly. This includes an e-mail address or a telephone number in addition to a postal address. Around 34 percent of the newsletters examined by Absolit contained no contact details at all. The company has published five rules to assist companies in sending newsletters in a form that is legally compliant, thus avoiding potential penalties.
No panacea for success
E-mail newsletters that fulfill the legal requirements (including observance of relevant data protection regulations) are just the first, albeit important, precondition for the subsequent success of an e-mail marketing campaign. Additionally, click and opening rates provide valuable information about users’ preferences, as do unsubscribe requests. “The prerequisite for this is a well structured and up-to-date e-mail database that is constantly updated and enhanced,” explains Blum. This forms the basis for the segmentation and individualization of e-mails. Further, addresses that are permanently unreachable should be automatically stripped out (bounce management).
“However, there is no panacea for the success of an e-mail marketing campaign,” Blum warns. “The difficult thing about e-mail marketing is striking the balance between marketing and providing information that is factually correct and legally compliant,” he explains. “SMBs that can overcome this obstacle increase their chances of success and thus gain a competitive advantage.”
For further information:
General: http://www.bfd.bund.de/information/engl_corner.html (German Federal Data Protection Commissioner, with further information on e.g. international regulations)