It’s time for e-mail marketers to shape up.


That seems to be the message suggested by a new round of research measuring click-through rates. E-mail lists, which once looked like a cheap silver bullet for marketers and publishers, are proving to be less effective than once thought. But that doesn’t mean the strategy should be abandoned. “There’s no question e-mail marketing can work if companies were to use it judiciously, to wait until a really good offer came along,” said Wharton marketing professor Peter Fader. “They’re just way overusing it, and in the process killing it as a media form.”


The [Third] Party’s Over


At first glance, the latest numbers from New York research firm eMarketer look bleak. Click-through rates on opt-in e-mail lists plummeted from 3.2% in 2001 to 1.8% in 2002, according to senior analyst David Hallerman.


But similar research from marketing firm DoubleClick, vouched for by Hallerman, tells a different story. According to DoubleClick, click-throughs on marketers’ email lists were a respectable 8.03% in Q1 2002 – down from 9.73% in Q1 2001, but up from 6.75% in Q4 2001.


The difference is in the definitions. There are four kinds of e-mail marketing. Unsolicited commercial e-mail is spam, the scummy stuff that respectable marketers say is damning their industry. Opt-out is almost as bad. While approved by the Direct Marketing Association, opt-out lists show up as spam and put the onus on consumers to, somehow, get off mailing lists. Neither of these marketing methods are measured by eMarketer and DoubleClick.


First-party opt-in is the e-mail that consumers are most comfortable with and that marketers find most fruitful. These are mailings that consumers consciously sign up for, from a site they were visiting anyway, and they are the source of DoubleClick’s strong numbers.


The real click-through crash has been among third-party opt-in e-mail, according to eMarketer’s Hallerman. When a web surfer goes to a site, there are usually two check boxes: “Do you want to receive our newsletters?” and “Do you want us to rent out your address willy-nilly to an undisclosed list of potentially irrelevant marketing partners?” Many people check the second box unconsciously or out of curiosity. That’s third-party opt-in. The discouraging eMarketer numbers mixed together both first-party and third-party opt-in.


Click-through isn’t the be-all and end-all of e-mail marketing; it’s just one popular arbiter. Some marketers look at direct sales conversions from e-mail links; others use more nebulous concepts of branding. But the general decline in clickthroughs, experts say, shows that Americans are no longer willing to click on an e-mail just because it’s there.


The lessons appearing for e-mail marketers are clear, says Joseph Turow, professor of communication at the University of Pennsylvania’s Annenberg School of Communications. “Don’t overload people with messages, get to them with exactly what you think they want to know, and don’t bother them too much with it.”


Ski Deals in December


Online travel agent Travelocity follows Turow’s advice because their business depends on the goodwill of their audience. “We want to make sure the touch points for the customer are at a minimum, and that we have something relevant and timely to say to them,” says Jason Pruismann, Travelocity’s director of advertising.


To that end, Travelocity’s e-mails are super-personalized, relying on the company’s extensive database of customer buying habits. For instance, if one of Travelocity’s 33.8 million customers looked at trips to Denver last February, the company may surmise that she’s a skier – and would send her an e-mail of ski deals the following December.


Similarly, when customers sign up for Travelocity’s Fare Watcher service, they specify airline routes they’d like to track – and only get e-mails when there are special deals on the specific routes they prefer.


Travelocity does send out a general newsletter twice a month, but that’s less to create direct sales than to grab placement revenue from travel firms who want to reach the company’s huge customer base. The super-targeted nature of Travelocity’s other e-mails has kept e-mail marketing effective for the firm, Pruismann says, noting, “There hasn’t been a decline in what we would call the effectiveness of e-mails.”


It’s difficult to gauge the success of Travelocity’s marketing efforts in 2002, as the travel industry’s depression has lowered all boats. But Travelocity managed to eke out $74 million in earnings for 1Q 2002, an increase of $1 million over 1Q 2001.


Personalization can be a good strategy for online marketers, says Wharton marketing professor David Schmittlein. But it’s got to be smart personalization. “If it’s personalized in the sense that I remembered your birthday, sent you an e-mail birthday card six months ago and now want you to buy my product, no, there’s not much evidence that works. Good personalization is … extending an offer that is known to be a good offer relative to the current situation. Customize the nature of the service itself, or customize the ‘key reason why’ [a customer should buy it].”


The reward for companies is e-mail marketing that can not only drive immediate sales, but can promote brand loyalty. For example, an orchestra could use its mailing list to tell subscribers about concerts, offer exclusive opportunities to meet performers, and solicit opinions that would actually affect the next season’s schedule. Truly interactive e-mail campaigns can create a strong emotional bond with an organization, Schmittlein says. “That’s powerful marketing. That kind of use of e-mail is going to be growing, and it’s going to have a real economic return for organizations.”


The Direct Mail Route


Many companies don’t have the advantage of Travelocity’s powerful database of customer shopping histories or the resources with which to conduct an interactive e-mail campaign. But there’s still a way those companies can succeed online, Fader suggests – by segmenting and intensive testing, rather than customizing.


Online marketers need to learn from the direct mail industry, which sends out “scattershot but carefully controlled experiments” to determine which kinds of mailings best appeal to customers.


“It turns out that a lot of that behavioral stuff, while it’s nice to know, is not nearly as predictive about future interests as people would like it to be. People’s behavior is just so darn random,” he says.


E-mailers may not feel they need to test their messages because of the cheapness of e-mail. The average cost to send a marketing e-mail is 20 cents, compared to up to $2 for a piece of postal direct mail, according to the Direct Marketing Association’s Christina Duffney. But the Emarketer numbers show that for too many lazy companies, that’s 20 cents wasted.


According to Doubleclick’s Genevieve Malgrove, testing pays off big time. Recently, a Doubleclick customer tested untargeted emails with two different subject lines. Using the subject line “The number one guilty pleasure of 2002” rather than “A free gift from the capital of comfort” produced a 26% lift in sales, Malgrove says. That lift didn’t require extensive databases of customer habits, only a willingness to test various options and see which one worked best. “It’s just direct marketing. It’s just another channel.”


You’ve Got Spam


E-mail marketers must realize that the novelty factor is gone, Fader notes, adding that flashy technology previously covered up the basic inadequacy of most online campaigns. “The fact that the numbers were so high until recently is purely due to the novelty of it all. It was really clear that people were just saying, ‘huh, what’s this?’ They were even clicking on plain old spam, just because they didn’t know better.”


Marketers and academics all agree that the crush of e-mail in people’s inboxes is trying Americans’ patience. And the lunatic fringe of the marketing industry, the spammers, are only making things worse.


The amount of spam in Americans’ e-mailboxes is skyrocketing, according to numbers from e-mail filtering company Brightmail, which saw 13.8 million spam attacks in Q2 2002, compared to only about 2.5 million in Q2 2001. Each spam attack may involve thousands of messages. “The first thing I do during the day is, I eliminate 30% of my e-mail basket because it’s stuff I haven’t asked for,” says Travelocity’s Pruismann.


Marketers need to face up to the fact that what they call ‘third-party opt-in’, users consider spam and are deleting en masse, Fader says. “Let’s first of all acknowledge that a lot of times, when people are opting in, they don’t realize that they are.”

Spam presents a challenge to legitimate marketers, but it doesn’t have to be a fatal one. Marketers need to focus on learning from their mistakes and deliver effective pitches rather than flabby softballs, Schmittlein says. “The direct mail industry has a 20-year history of accumulated learnings; what in the online setting is the analog to that?” he asks. “The great thing about direct-response media is that it lends itself to learning … [companies] that are committed to e-mail marketing just haven’t been doing it long enough.”