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what you don't know can hurt you:
email marketing

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Mr. Arnowitz: So, in addition to building a relationship with your customer through a newsletter, you can acquire customers through renting an opt-in list or by advertising in an E-zine or newsletter. Let's take one of our case studies now, from Dell Wilkinson, Director of Membership Marketing, and Kevin DeWalt, Online Product Manager, of The Motley Fool.

case study 1: the motley fool

Ms. Wilkinson: There's a lot we can say about email, but since we only have a few minutes we'll make it brief. The Motley Fool is up to its ears in email. Ours is a major Web site with about 80-100 million page impressions per day, so part of the problem we encountered at first was that the last thing the programmers wanted was millions of emails going out per day and potentially making the site unstable. What has won everyone over is the success of the email marketing. For us, email marketing is both about selling our products and about selling our site and its content. We have a number of subscription products, and they have been so successful that we're seeing sign-ups now in the neighborhood of about 50,000 a week. We predict that in the next several months, email impressions will outpace Web impressions. The growth is phenomenal, and the advertising CPM rates are going up, up, up.

The newsletters are targeted. We have one on Women And Finances, another on Investment Clubs-all different specific areas-and advertising on these products has been very, very popular. One example I'd like to mention is Club Fool, a part of our site that deals with investment clubs. It was only getting about 6,000 impressions a day, so it hadn't warranted a lot of attention. When we began to offer it as an email product, however, subscriptions just jumped through the roof. In less than two months, subscriptions rose to about 120,000. Now we're starting to evaluate what kind of content we put on the site based upon email subscriptions as well. This particular newsletter comes out quarterly, for example. If we were to switch it to, say, monthly rather than quarterly, we know we would make an extra $20,000-$30,000 a year with current subscription levels. Then you start thinking, if this were a weekly newsletter, there would be an extra $70,000 just from one email, so you start looking at your content in a completely different way. Yet it's also been a very painful process. My colleague, Kevin DeWalt has looked at almost all of the products and outsourcing services in the Email Marketing Resource Guide (http://netpreneur.org/connect/am/emailres.html).

Mr. DeWalt: I agree with Rosalind's remarks that it's easy to get into email. Over the past three years, I've worked on seven different enterprise-wide email technical solutions. The space is exploding, and the number of vendors and options you have is becoming overwhelming. The Email Marketing Resource Guide is a good starting point, and, off the top of our heads, Dell and I could name 15 or 20 other vendors or options you have. It's becoming more and more difficult to figure out where to start, and I would imagine that a lot of you are in the same position we are-very overwhelmed. One thing I would say is, don't rule out the possibility of having someone build you a customized solution with inexpensive Linux solutions such as SendMail and Q-mail. They can be very easily modified, and you can get a consultant to build you something very quickly.

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the audience & guests: questions, answers & case studies continued...

Mr. Arnowitz: Thanks, Dell and Kevin. Another question from the audience?

Audience Member: My target market is outside of the United States, specifically in German-speaking countries. Does your company have any expertise outside the U.S.? The privacy laws are very different in other countries regarding direct mail and mail in general.

Ms. Resnick: Yes, absolutely. This is something we do all the time. One of the great things about an email address is that it's very easy to see where it comes from, and that ".com" could be outside the U.S. as well. About 20% of our database is non-U.S. email addresses. Let's say, you're mailing a health offer. You could pick one or several of our health lists, and you could go in and do what we call "selects." You might do a select to narrow the field to people in Germany with a ".de" extension. I know the European community made waves when it announced a directive that would require all forms of direct marketing to be opt-in, in other words, to require prior written permission from the people who were being marketed to. We thought that was great, of course, because we're double opt-in, so our mailers have nothing to worry about. Actually, what's happened since then is that the Direct Marketing Association in this country and its counterparts in Europe have prevailed upon the European commission to water down their directive. The standard is no longer opt-in, it's opt-out. Our view, for what it's worth, is that we're opposed to any regulation of email marketing or commerce on the Internet. At the same time, however, I'm a little disappointed to see the European community back down from a position that I thought was a worthy one.

Mr. Arnowitz: In addition to privacy, what else do people have to worry about? What about when people change their email addresses?

Ms. Resnick: Believe it or not, that's one of the biggest challenges we face. When we started doing this, everybody thought that people would get sick of our email and opt out. Actually, far fewer than 1% of the people on our lists opt out of any given mailing. Our problem isn't so much that people get too much mail and no longer want to be in our database, it's that they change their email addresses all the time. They go from one ISP to another. People change their email addresses a lot more frequently than they change their postal address. In the world of postal mail, there's something called an the National Change of Address (NCOA) database. If I'm a direct marketer sending out a mailing in the postal world, I can match up my file against the NCOA database and get updated on all the address changes of the people on my list. Unfortunately, on the Internet every ISP essentially has its own little customer database. If I were to close my AOL account and go over to Prodigy, there would be no way for a company like ours to have any idea it had happened. A lot of our list members ask to change their email addresses voluntarily, but for people who don't do that, we have no way of finding out about it. The next time we send them an email it just bounces. It's one of the biggest challenges that we and other email marketers face, and I'm hoping that one day some enterprising company will set up an ECOA, an "Email Change of Address" database which will help us as direct marketers on the Internet reach more people as they go from place to place-there's a business idea.

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Mr. Hawley: Good morning, I'm John Hawley from Netwhistle.com (http://netwhistle.com). We've been building our list over the last couple of months, although we haven't done extensive selling or marketing from it yet. How important do you think it's going to be, today and in the future, to have extensive demographic data along with the email addresses, both for your own house file and putting lists on the market?

Ms. Resnick: I think demographics are going to be more and more important. When we began doing this three years ago, all we were capturing was the person's email address. That was fine at the time, but ho could I tell then that the most popular request we get for selects today is zip code? That's because the Internet has always been great for reaching people in Tanzania, but it hasn't always been so great for reaching people in suburban Washington. We've been encouraging our list owners very strongly to capture name, zip code and, if possible, age, income and gender about everybody who comes to their site.

Having said that, there is a debate going on between companies like ours from the Internet marketing side of things that believe consumer privacy is paramount. Our view is that, if a list owner puts up a form asking for demographic information and all the person wants to provide is his or her email address, we won't go to one of the companies that do things like "append through overlays" to try to find information that the person hasn't given us voluntarily. At the same time, however, there are some companies from the postal side of the business who are doing precisely that. My view is that the best and most politically correct way to gather demographics on the Internet is to ask. You can certainly entice people who come to your site by making certain fields required as conditions of entering a contest or signing up for a newsletter, but I still very much believe that demographics need to be collected on a voluntary basis.

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Mr. Arnowitz: Here's a question from the Netpreneur Program's Ad/Marketing discussion group (http://netpreneur.org/connect/am). "Should we send newsletters in HTML or plain text format?"

Ms. Resnick: That's a great question. We have been seeing a lot more demand for HTML mailings these days, but there's really no right or wrong answer to that question. The people who should be making that decision are the people who receive your newsletter. Even though there's technology that lets you "sniff out," so to speak, who has the capability to receive HTML mail and who does not, we've decided not to automatically assume that just because you can receive HTML mail, you actually want to. There are plenty of people who don't, especially time-pressed business users who get several hundred email messages a day. They don't necessarily want to spawn a browser for each one. We've encouraged our list owners to put an additional question on their sign-up form asking people whether they want to get HTML mail. I would say that the best policy is to leave it up to the subscriber.

Mr. DeLorenzi: Hi. I'm Bob DeLorenzi with PatriotNet (http://www.patriot.net/patriotnet). As an ISP, I have a different perspective on this. First of all, I do not understand people's inability to use the "delete" key, but, be that as it may, I have so many situations where customers of good conscience are trying to use opt-in programs like yours. Every time they send out their emails, however, I receive complaints that characterize it as spam or abuse. It's one thing if it comes from one of our larger margin customers, like a T1 or DSL customer, but it's frequently the person who's paying $16 a month for a dial-up account and I've got to answer the 8-15 problem emails. I can't ignore them because people will do nasty things to our system if I do. What advice do you have for somebody in my position who supports the idea of opt-in conceptually, but has to deal with it from a different perspective?

Ms. Resnick: Yes. I think the answer is to encourage your users to adopt a double opt-in policy, even though some of them are not going to like it since it will cut down on the number of people on their lists. The reason we switched to double opt-in was because our ISPs started getting complaints about us and started giving us a hard time. I told you, we actually became topic number one on the NetAbuse newsgroup one day. Actually more than one day. One of the things people advised us to do was to emulate the confirmation processes of email discussion group software like ListServ or MajorDomo. They said, "We don't think you're spammers, but you have no way to verify whether these people ever really opted in."

Yes, we still get complaints, but far fewer than we did. Maybe we get a complaint from somebody who says, "I got a woodworking offer from Home Depot, and I never signed up for this. It's spam." We can go back into our database, retrieve their subscription request and say, "Well, actually on this date and time and from this IP address, you actually did sign up for the woodworking list. That's why you got the mail." Not only do they apologize, but, if the ISP tries to block us, it gives us the ammunition to say, "We're the good guys and here's the subscription record." That just makes it a lot easier both for us and our mailers. By the way, we've never been blocked by any major ISP or online service provider, just by some smaller ones.

I would go to the people you're having a problem with and tell them that if they want to continue to be on your service, they need to switch to double opt-in.

Mr. Arnowitz: I think we'll take another case study now. Joining us this morning is Lisa Perlbinder, Director of Marketing at National Geographic Interactive, who will talk about Mother's Day.

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case study 2: national geographic international

Ms. Perlbinder: The Internet is a dream for every direct marketer because of its ability to personalize and speak directly to an individual. In the early 1980s, I planned all the advertising for the Military Book Club at Doubleday, where the best we could do was to buy subscription lists from Soldier of Fortune magazine and Guns & Ammo, addressing our mail, as Mitch read, to "Dear subscriber or current resident." Yesterday, I was able to engage in a conversation with a gentleman named Maurice J. Epstein, a colonel from the 345th bomb group who flew over the southwest Pacific and a subscriber since 1952. Yes, the Internet enables you to do some amazing things through email. I'm one of the people who tries to sell products and services over the Web, so it's not just the click rate for me, it's the conversion rate. I wanted to talk about Mother's Day because it involved a program that was less than successful. It's important for us was to be relevant in our marketing programs, and, unfortunately, with that one we weren't.

We have had a very strong membership database that was started in 1888. For the email side, this is our 1888. We need to do everything possible because, if it wasn't for that list, National Geographic wouldn't have gone from a small research institution with a magazine to a corporation of many hundreds of millions of dollars in annual revenue. It's as important for us on the email side as it is on the direct mail side of the house. The people on that membership list are predominantly male, older, affluent, white-close to the Internet demographic target, but NationalGeographic.com tends to be much younger. It's 70% male and 18-44 years old versus our average print audience that's almost 50. When we did our Mother's Day promotion, it was for female-skewed products-books, magazines, videos. It went out May 3 to 111,000 people on our registration list and 107,000 email messages were delivered-a 96% hit rate, however we got a .04% response. We were all groaning. You see, we had chosen to ignore the demographics, wanting instead to capitalize on Mother's Day, a strong retail holiday, with the good looking stuff in our print catalog. We figured we could make it work in email, but we couldn't. It's one of the things I 'd advise you not to do, and I would like to offer some other tactics and the lessons we have learned.

First, target the message to the customer. Everyone has spoken about capturing names in different ways, but if you don't say something relevant to these people, they will turn you off. People do know how to use that "delete" key. The fundamentals of direct mail apply to email, and anyone who's trying to make the transition from direct marketing to email marketing will tell you that. The offer is key in direct marketing. It was drilled into my head: offer, list, creative. In the Mother's Day promotion we said, "Here are some nice products. They said, "No thanks." Anything you can do, such as free shipping or a discount has to be a key component. Next, be creative. We found that HTML mail generates a higher response, but it depends on your audience. People may not want to spawn another browser, but if it's a consumer mailing, I would at least test or give people the option to get HTML. Also, measure your clicks and conversions. A lot of people are sending things out and hoping that it works. A lot of great companies have technology to do counting and measurement. We're doing email to drive traffic to a dinosaur story and, if it works, we can charge more and generate higher advertising revenue.

Be aware of your subject line. We did a mailing once and half the list got mail from "unsubscribe@nationalgeographic.com." If I told you only the good things we did, you wouldn't learn, and I wouldn't feel so humble. Since that mailing didn't generate much response, we learned. Also, personalization is key. You have a lot of data available. Use it, use it wisely and get it right. Somebody who is interested in jazz probably doesn't want to be told about the latest in heavy metal music, so have a good handle on the data. Have a relationship with the customer and maintain it after. If you've contacted them once, follow up if they've ordered. Back-end email is just as important, if not more important, than making the first contact. Make it easy for consumers to unsubscribe, as Rosalind said, and test the days of the week in which your email is delivered. Eighty percent of all the email responses come within the first three days. The conventional wisdom is that Tuesday morning receipt works the best.

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the audience & guests: questions, answers & case studies continued...

Mr. Arnowitz: Lisa, thanks so much. Let's take another question.

Ms. Resnick: If I could just add my two cents. Our experience has been that the best day to send a business-to-business mailing is Tuesday or Wednesday, but the best day to send a consumer mailing is Friday. The weekend is when consumers are home with their computers.

 

Mr. Doyle: Hi, I'm Jim Doyle from FDI Services and an instructor of direct marketing at American University (http://american.edu) in the evening. By the way, we call that "seasonality." We're conventionally interested in days of the month and seasons of the year, not hours of the day and days of the week, but that's the term we use for the most appropriate time to send an offer. On behalf of the industry, I would just like to say welcome. We knew email belonged as one of our tools, and thank you for recognizing our skills. I would like to follow up first on the question of HTML versus plain text email. Do you create two different offers, one for each? The rule of thumb I've heard is about that 30% of browsers can now accept HTML email. Can you also briefly explain your partnership program works?

Ms. Resnick: Thank you in the direct mail industry for welcoming us.

I don't think anybody really knows the percentage of browsers that handle HTML for sure, but I think it's probably more than 30%. We're not really involved in the creative end of it, we get that from our mailers, but typically when we send out HTML there will be the HTML portion at the top and text portion at the bottom. If the person can't receive HTML, at least they see the text part.

As to our partnership program, you're talking about our network of sites that builds lists for us. Essentially, the partners in our network are what we call the list owners. They're the ones who have the Web sites and the traffic, who put up the forms and build the lists. We act as the list manager and broker. It's a simple business model that we brought over pretty much wholesale from the postal world with a few modifications. Basically, the list owner, Internet.com (http://www.internet.com), for example, owns a list of names, say 100,000, in our database. They own the names, and we have no right or title to them. If they ever want to cancel their contract with us, they could take those names and walk.

We have a big server farm and an Oracle database with 50 million records, including those 100,000 records collected when people checked boxes and filled in forms at Internet.com. That data goes into our database; we store it, send out the mailings, handle the unsubscribes, make the lists available in our online store, handle the sales and marketing and send the list owners a check at end of the month.

We work on a revenue share basis. We rent our lists on a CPM basis and split the revenue 50/50 with the list owner. For example, if we rented names from the Internet.com list to Dell for $1,000, we would get $500 as the list manager/broker and Internet.com would get $500 as the list owner. We've always believed in partnering from day one, and one of the things we learned very quickly about the list world is that brokers like to get a 20% commission on every sale. Since we wanted to reach out to brokers, we told them that if they brought us an order, we'd give them a commission. If a broker brings us the order, as opposed to our sales force bringing it to us directly, we'll pay the broker a 20% commission. In the case of that Dell example, the revenue would be split $500 to Internet.com, $200 to the broker who brought us the business and $300 to ourselves.

Even though it's a business model that's as old as the hills, it's working extremely well on the Internet. Currently we're turning our database—that's how we measure our success as a list manager—at a rate of $4.50 per name per year. That's calculated at an average list price of 20 cents a name times 22 or 23 rentals a year, so you're looking at $4.50 gross sales, of which half goes to the list owner. We have list owners making $100,000 a month from our program.

Mr. Doyle: Does each partner's opt-in categories remain the same?

Ms. Resnick: Not necessarily. We have 3,000 categories they can build, ranging from very broad topics like the Internet or business or travel, to very specific topics like gothic novels or aromatherapy or woodworking. We allow each list owner to decide which list would be most appropriate and most relevant to the people who come to their site, then they can build as many or as few lists as they want on a topic.

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Mr. Driscoll: My name is Mike Driscoll with CustomInk.com (http://customink.com). What is your opinion of the AllAdvantage.com (http://alladvantage.com) business model? With all the revenues you're talking about, should consumers be compensated rather than the marketers?

Ms. Resnick: That's an interesting question. In fact, a guy wrote to me from the U.K. recently about AllAdvantage.com and we were batting this issue back and forth. Why not pay the consumers? After all, they're the ones letting their names be rented. Why pay the sites that collect the names? I believe that at some point in the future there's going to be a court case which will decide that consumers actually own their own intellectual property and should be compensated in some way.

At this point, however, the logistics of making micropayments to four million consumers would be relatively daunting. If you take a look at how it's being handled at MyPoints (http://mypoints.com), Netcentives (http://netcentives.com), Web Stakes (http://webstakes.com), Cybergold (http://cybergold.com) or any of the incentive marketing programs, they are giving points, frequent flyer miles or some kind of incentive, bonus or reward for joining and responding to their lists. In those cases, consumers are being paid not in cash, but in credits they can use for products and services.

We've taken a more traditional list management and brokerage approach, saying that it's the Web site owner or aggregator of the names that deserves the payment. To be honest, we see our business as bringing buyers and sellers together. We believe that the reason why four million people sign up for our lists is because they are getting information and news about valuable services, products and discounts. They are getting value, even though they're not getting a cash value. If it ever went the other way, either in court or because it's what the Internet community wanted, we would write the software and develop the technology to make it possible for every single one of our list members to be paid. Having said that, I can tell that you that I don't think it's ever going to be cost-effective for an individual list member to go around to ZD or Dell or Compaq or the thousands of mailers that we work with and individually offer up their names. The companies we work with will always need to go through a broker or middleman like us that can give them not just one or two or three names, but a million names at one time. If some day we're writing checks to the list members as opposed to the list owners, that doesn't really matter to us. At the end of the day, the important thing is putting buyers and sellers together and aggregating a large database of qualified names.

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