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Can e-mail be saved?

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Tragedy has befallen e-mail marketing and it’s anyone’s guess if the medium will recover. Tom Gaither, team leader of the Sales & Marketing Solutions division at D&B, likens it to the "Tragedy of the Commons," a scenario first described by mathematician William Forster Lloyd in 1833. "The Tragedy of the Commons" involves the idea of opening a common pasture to all herdsmen. In theory, the herds will remain at a manageable level because of tribal wars, poaching and disease. Unfortunately, the scenario compels each herdsman to pursue his own interests and continually increase his herd, which leads to overgrazing and, eventually, the ruin of the common.

E-mail may be on a similar path to destruction. The medium’s response rates have dropped steadily as mail volume has ballooned.
"The analogy with e-mail is pretty straightforward," Gaither said. "Marketers eventually spoiled it for everyone because we destroyed the commons."

Other marketers are equally contrite. "As marketers, all of us are about to kill the best thing we have to keep in touch with customers," said Monica Luechtefeld, exec VP-global e-commerce at Office Depot.

The new federal legal restrictions imposed on e-mailers as a result of the anti-spam law that went into effect in January round out the bleak picture.

According to a study released last month by direct marketer Harte-Hanks, click-through rates for general marketing e-mail campaigns dropped from 1.3% in the second half of 2002 to 1.0% in the second half of 2003, while click-throughs for seminar invitation e-mails dropped from 1.0% in the second half of 2002 to 0.4% in the second half of 2003.

Luechtefeld said she has seen a "dramatic decline" in open rates to about 32%. As a result, the office supply giant will "spend less on e-mail until some law and order occurs in that space," she said.

E-marketing on hiatus

Some marketers have stopped e-mail marketing altogether, at least temporarily. AT&T Business Services is one of them.

"We actually have our e-marketing on hiatus," said Dawn DiMartino, director of integrated marketing communications for AT&T Business Services. She said the medium is missing from the company’s current marketing mix, adding that viral marketing is also on hiatus because of the anti-spam legislation.

Despite all the advantages inherent in e-mail marketing, such as cost-effectiveness, some say it will never be what it once was."I don’t know if it will ever be the same," said Seth Romanow, director of worldwide analytics at Hewlett-Packard Co. "I think, as people begin to look at the overwhelming amount of stuff that gets into their in-boxes, it’s much harder to break through, even with targeted responses."

Others are slightly more optimistic. "It will be great again, but it will never be like the first time," said Ed Henrich, president of Yesmail, infoUSA’s e-mail marketing service provider. "It can be better than it currently is, but it’s highly unlikely that the average marketer will ever get back to the 20% click-through rate in the mid ‘90s."

David Hallerman, senior analyst at online researcher eMarketer holds a more optimistic view. "It’ll be great again," he said. "To see it as a central online marketing tool might have been shortsighted at the beginning." Hallerman described e-mail as an "add-on" to maintaining communication with customers.

Indeed, e-mail is deployed by the smartest marketers as a tactical tool that uses precision targeting to achieve a high degree of relevancy to the recipient.

Dave Shinnebarger, chief marketing officer at energy company Star Gas Partners, said customers will always dictate how they want to hear from you, both in consumer and b-to-b. "It’ll evolve into something useful to marketers based on customers’ preferences," he said, noting that relevance and permission carry far more weight for recipients than attention-getting subject lines.

Spyro Kourtis, president of the Hacker Group, a marketing services company, agreed, saying the "e-mail sweet spot" is selling something else to existing customers, while at the same time sending them only the most targeted, relevant offers.

But HP’s Romanow was more skeptical, given what he sees as the continued decline in open rates, click- throughs and conversion.

Retention, not acquisition

Current users of e-mail marketing—excluding spammers—are nearly universal in using it for customer retention rather than acquisition.

That’s the approach at Canon U.S.A., which found that e-mail is often the preferred vehicle among its customers. "We’re finding that a lot of our customers who wish to receive communications from us will immediately say, ‘Send e-mail,’ " said David Hughes, manager of database marketing at Canon. "But for acquisition, I think those days are over."

Others agree. "The vast majority of the e-mail marketing we’re doing is to existing customers," said D&B’s Gaither.

List managers who once thought they’d have an eager audience among marketers seeking to rent e-mail lists have not really seen this idea bear fruit. "There’s no overwhelming growth yet," said Ed Mallin, president of Walter Karl, the list management division of infoUSA.

Among marketers using e-mail to acquire customers, one clear trend is a reliance on affiliates and partnerships rather than rented e-mail lists.

For instance, Pitney Bowes sends e-mails to its customer base from hand-picked partners endorsed clearly as a communication "brought to you by Pitney." This gives Pitney Bowes a source of revenue and the partner a way to acquire new customers via e-mail.

But Pitney Bowes doesn’t do much e-mail marketing on its own. "It doesn’t seem to work for us," said Neil Metviner, president of PB Direct, its direct marketing division. "I don’t want to throw good money after bad."

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