Tasty spam?

If companies served up e-mail right, consumers would beg for it, says Hans Peter Br

By Lydia Lee
Published April 17, 2000 4:00PM (EDT)

Post Communications sends out millions of e-mails each week, for Web retailers like Petopia and CDNow. You might consider these commercial solicitations just another form of spam, contributions to the deluge of "get rich quick" missives, pornographic solicitations and other motley messages that fill e-mail boxes everywhere.

But talk to Hans Peter Brxndmo, 37, founder and chairman of Post Communications, and you might be persuaded that this e-mail is a great service to you. Brxndmo may be an e-mail marketer, but he's as passionately anti-spam as any frustrated user could be. "Spam is unsolicited, unwanted, unexpected and soon to be unlawful e-mail," says Brxndmo. "What we do is help companies establish communications with existing customers -- everyone has signed up and given permission for the company to communicate with them." But even legitimate companies, Brxndmo adds, send too many e-mails." If companies keep sending users so much mail, then users will stop responding, just as they stopped clicking on banner ads."

Prior to Post, Brxndmo focused on technology for video editing. In the '80s, he worked on digital video at the MIT Media Lab. He started a video editing software company called DiVA, which he sold to another video company, Avid, before founding Post in 1996. Next on his career path? Authordom: His book, "Engaged: The New Rules of E-mail Marketing," will be published in August by HarperCollins.

E-mail marketing doesn't sound all that glamorous for an MIT Media Lab guy. How did you get into this business?

After I left Avid, I didn't want to start something just because it was a really cool technology. I wanted to find a need in the industry, a pain in the market. And what companies were saying four years ago was, "We're collecting more information about our customers; we have 3 million names in our database; we're worried about privacy and spam; we want to have an effective dialogue."

You've said companies misuse e-mail. What's wrong with the way they use e-mail?

What a lot people are doing is saying, "Well, we have direct mail, so let's do direct e-mail." And direct e-mail works pretty well. It is better, faster, cheaper -- it's got a higher response rate, it's cheaper to contact people, it's got a faster turnaround time. But it's just doing exactly what we've done in the past, instead of engaging customers in an ongoing dialogue.

What's a good example of one of these dialogues?

There's a great company called Wegmans, a grocery chain out on the East Coast. Wegmans is a very customer-oriented company -- they help people with menus, they have a nutritional advisor on staff, they have very loyal customers. So we developed an e-mail marketing concept: Let's not use the Web to sell customers, since you want them to come into the store. Let's use e-mail to service your customers.

As a customer, you tell them the number of children, any dietary concerns -- maybe Junior has diabetes -- whatever the primary issues are for your family. And then, every Monday morning, Wegmans sends you an e-mail that says, "Here's your suggested meal plan for the week."

How targeted is targeted e-mail?

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.

What's your position on opt-in/opt-out?

I do believe that the onus should be on the marketer to ensure that the customer understands the terms. There should be a "Check here if you agree to the terms" -- so the customer actively says, "Yeah, I know what's going on." There's a big difference between positive opt-in and negative opt-out. You could argue that negative opt-out, as some sites do today -- where you have to uncheck a box to not receive stuff -- isn't really giving the consumer easy choice. You'd want something in place to make it harder for companies to do that.

And, by the way, I have the numbers to prove to companies that they're better off if they use positive opt-in. They might have slightly fewer names in the database, but the total economic return of positive opt-in is way better.

So should positive opt-in be not only for e-mail but for other types of targeted promotions, like banner ads?

That one I'm less concerned about. I think the DoubleClick thing was, frankly, blown out of proportion. [DoubleClick was planning to merge users' names and purchasing history with their surfing profiles until privacy advocates blew the whistle.] What DoubleClick was saying that they would do is no different from what marketers have been doing for decades: collecting information from different sources and combining them into one profile.

Now, of course, you have even more information online. Say you went to a site to investigate a story on child pornography, and 17 years later you're running for mayor of Chicago and someone digs up your profile -- you get the drift. So clearly there are some implications. However, if you buy child pornography by mail, these companies will keep lists, and that information will get consolidated into other databases.

Now you could argue that all of that is wrong, but I think singling out what has happened online is a little alarmist. If I can go to DoubleClick, or any Web site, and click on a link that says "Check my profile" and see what they have on me -- this kind of full disclosure will alleviate some of people's concerns.

Post clients may be good marketing citizens, but there are all these other companies who aren't and are flooding people with e-mail right now. What can the industry do to stop this?

I believe that there should be federally mandated privacy legislation. I don't believe this industry self-regulation stuff is going to go anywhere. What's happening is that because there's no real federal regulation, every state is coming up with its own mishmash of laws. The marketers are doing themselves a disservice because it's going to be so hard to navigate all 50 states' and the European initiatives -- you're going to get to the point where you have to send different e-mails to every state with different disclaimers if you're going to remain legal.

But would this stop spam?

When you get spam today and you respond by saying "unsubscribe," you don't know what is actually going to happen. They might be checking to see if your account is a valid address. But if you own your own data, then nobody can use it if you tell them not to; if you instruct the company not to do something, then they're legally obligated to do that.

That could be tricky to enforce.

Somebody could set up "complaints@us.gov" and if you cc'ed them when you unsubscribed, they could keep a record. Then you could turn around and file a complaint. It would give anti-spam organizations legal recourse to pursue. It's not that spam wouldn't happen -- the spammers could go offshore or something -- but if you relegate spammers to doing something illegal it makes it more difficult for them.

Is there an industry group that could have a lot of impact if it came out with best practices -- "Do not bombard your customers with more than X number of e-mails a month?"

I don't believe there is. This is the problem I have with self-regulation. All it takes is one big guy to break the rules, and you've got a problem. If there are no penalties involved, then it isn't going to be long-term effective. If someone sees a reason to break the rules, they will -- even if it is shortsighted and the whole industry will suffer for it.

Lydia Lee

Lydia Lee is a San Francisco writer


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