How E-mail Became a Direct-Marketing Rock Star in Recession

As Search Gets Cut, Retention-Focused Retailers Find Value in Channel's Cost-Effectiveness and Trackability

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NEW YORK (AdAge.com) -- It's likely the least sexy tool in your marketing arsenal, but it could be the one that delivers real results.

E-mail has emerged as a recession darling, as retailers look to proven programs that are cost-effective and results-oriented. That's led to increasing investment in technologies that better target customers and serve up more enticing messages.

FRIENDLY REMINDER: Consumers can opt in for e-mails about holidays from FTD.
FRIENDLY REMINDER: Consumers can opt in for e-mails about holidays from FTD.
"The economy has energized this channel," said Ryan Deutsch, VP-strategic services and market development at StrongMail. "It's become the rock star of direct marketing in a lot of these retail organizations because it's the most cost-effective and most trackable."

Thanks to its cost-effectiveness and retailers' recession-era emphasis on retention -- Shop.org says that the number of companies focused on retention has nearly doubled in the past year -- experts say few cuts are being made to e-mail budgets, while areas including paid search, affiliate marketing and social marketing are coming under scrutiny.

A Shop.org study shows that 30% of retailers are spending less than originally planned on their web businesses overall while 24% are spending more. Of those spending less, more than half said search spending is being affected, while about a quarter said affiliate marketing and social marketing are taking a hit. By contrast, only 4% of retailers said budget cuts would affect e-mail marketing. Of those increasing investments, e-mail marketing will be the beneficiary at 65% of retailers.

"It's not sexy, but it delivers results, and it's focusing on existing customers," said Scott Silverman, executive director of Shop.org. "E-mail technology continues to advance and allows retailers to be smarter. It's not about sending more e-mail; it's about more-targeted and more-relevant e-mail."

Solid ROI
Indeed, retailer Zappos.com said it is in the process of building out a more robust e-mail program because it's found that e-mails have a noticeable impact on sales. "Right now, it's just a mass mailing," said Michelle Thomas, brand-marketing manager. "We're getting more sophisticated in our segmentation approaches. ... We're investing more."

Experts say investment is flowing into the area because optimizing e-mail lists and upgrading to new technologies can be done quickly and offers a solid return on investment. In the Shop.org study, e-mail also emerged as retailers' most successful marketing tactic.

"Because of the economy and how efficient e-mail is, it's definitely taken precedence over other projects that were longer term," said Mr. Deutsch. "It's low-hanging fruit. Dollars go into the e-mail channel [and companies] know that in four to 12 weeks they'll see a return."

Enhancing e-mail lists with demographic data, for example, can improve performance threefold, Mr. Deutsch said. That upgrade can happen in less than eight weeks. Retailers are also revamping e-mail templates to stress value and discount offers, and they are looking to integrate social-networking tools into their e-mails. That involves adding a link to allow recipients to share the e-mail with friends.

Preference centers, which allow customers to opt in to receive communications, are another area retailers are embracing. Flower retailer FTD, for example, allows customers to choose to receive e-mail reminders to send gifts for just about every holiday in existence, in addition to custom settings for birthdays and anniversaries.

"That one is really exciting," said Mr. Deutsch, whose company counts FTD as a client. "I'm telling them to remind me to buy from them. Talk about a high-conversion program."

The venture-capital community has also taken notice of email's position of relative strength: Last week e-mail provider ExactTarget received one of the year's largest rounds of private investment -- $70 million from firms such as Battery Ventures and Scale Venture Partners.

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