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Reactions to stock carnage: "The bubble has burst"
Believers in a prosperous "new economy" weigh in on the market's relentless decline.
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Column
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We put our clients' customers into three main buckets. The first bucket is untargeted -- yours might address you by your first name, mine might address me by my first name, but otherwise it's pretty much the same newsletter. The second bucket is targeted: Given the gender difference, Victoria's Secret would send me gift suggestions around the holidays, while they might suggest microfiber underwear to a woman. The third bucket is individualized communications: You and I would get very different communications completely based on who we are, where we live, how long we've had a relationship with the company and what actions we might be taking. For instance, if you make a purchase and I don't, you would get a sequence of follow-up e-mails while I wouldn't.

Untargeted communications gives you a 6 to 10 percent response rate; targeted doubles to 17 percent. And when you get to individualized, our average response rate is about 32 percent. If you're doing a good job, if you miss a week or whenever your regular mailing is, your customers should be e-mailing you asking, "Where's my e-mail?"

But are companies really thinking that way, or is it, "OK, we've got these customers, we've got their e-mails -- now, let's sell them more products!" What's the general modus operandi? Most of the e-mails from companies I get are very product oriented.

I think the challenge is moving to relationship management, which is what I just described. If I look at our total customer base, I would say that less than 20 percent of them are doing what I would consider to be service-oriented relationship management. The rest are basically doing direct e-mail. And direct e-mail is the majority of what you receive today.

It still can be of value as long as you're in control and unsubscribe if you don't like it, and maybe specify your areas of interest. You sign up for a natural health store, and you say, "I've got spring allergies, and I'd like tips on yoga" -- you specify a little bit of a profile, and they update you with information. But every time they give you information, they're also going to try to sell you something. And then there are the ones that say, "Screw the information, we're just going to try and sell them something."

One of the challenges we have is that those programs, in spite of being annoying if they're overused, work really well. We have clients whose e-mail programs drive more revenue than any other program. And so we come in and say, "But you're sending too many messages to your customers," or "You're pissing them off," and they say, "What do you mean? They work. We're making millions of dollars." So how can you argue with success?

How, indeed?

You have to be able to take a longer-term perspective with these people and show them. Give us 5 percent of your customers for three months, and we will show you that by being smarter about segmenting these customers, they will be more valuable. When I signed up for a program we developed for Music Boulevard/N2K, I could specify my favorite artists, and I'd get an e-mail every week telling me about new releases. In the first month of that program, I spent $350 on CDs. It was personalized enough so it was my only source of music acquisition for a while -- it was great!

The age-old principle is, "Well, let's just broadcast and get a 1 to 2 percent response rate -- it's so cheap to contact people we can afford to do it." That's problematic. It's going to cause the industry response rates to go down. Customers are going to get sick and tired of it and unsubscribe or filter the messages out.

What if there was a price for sending e-mail, like a tax on each e-mail, so companies would strive for a better return? Would that help?

The problem you have with pricing is that it actually [gives people the wrong incentive]. Say you're selling herbs online, and you have 100,000 customers and prospects. I charge you $1 for every e-mail, and you get a 5 percent response rate; you send out 100 e-mails, five people respond. So it's costing you $20 to get someone to respond. What are you going to do? Every one of those e-mails needs to be promotional in nature. Are you going to send them a newsletter about growing herbs when it costs $100 to send out 100 e-mails that may get no response? What happens when you put that kind of mentality behind these programs is that they get even more promotional.

Maybe in a socialist country, you could levy a tax on any e-mail that was purely promotional in nature. That could be one way to use economic incentives. But I don't think that will happen in this country.

Next page | Why isn't the "opt-out" system working?