When used as a retention tool to communicate with existing customers, e-mail marketing has a customer conversion cost of just $6; that's one-third the price of traditional direct mail, according to the Jupiter report, "E-Mail Marketing: Closing the Loop from Acquisition to Retention."
`CRITICALLY IMPORTANT PLATFORM'
"The Internet has emerged as a critically important platform for not only acquisition marketing, but for customer retention," said Patrick Keane, Jupiter's director of online advertising.
The study shows that companies using e-mail to communicate with existing customers avoid production and shipping costs associated with direct mail, can launch a campaign in just a few weeks and receive the majority of responses in two days compared with the three weeks it takes to get initial results with a traditional direct mail campaign.
Retention e-mail -- including sponsorship messages sent as part of group newsletters -- will account for $6.3 billion in e-mail marketing revenue and 88% of the 268 billion unique commercial messages sent to consumers in five years, Jupiter predicts. But as companies use
e-mail marketing, fueling a forty-fivefold revenue hike from the $164 million spent in '99, advertisers should expect response rates to drop and customer conversion costs to rise.
Online mailbox clutter will force marketers to make their messages more creative and cultivate a large, loyal and up-to-date customer database since consumers are always one click away from ending a relationship, Mr. Keane said.
PART OF THE MARKETING MIX
"It points to the need for aggressive efforts by commerce players to mine their own database and get an idea of who their customer is and target them," he said. "It's not about the initial sale anymore. To be successful, businesses have to increase the order size of their existing customers. E-mail has to be seen as another part of the overall media mix that people are using."
Jupiter's recent "Executive Survey" projected the online responses of 32 high-level executives. It found that 31% spent 1% to 2% of their marketing budgets on e-mail last year, 34% spent 3% to 5%, and 13% spent 6% to 10%. Nine percent spent 11% or more on e-mail endeavors.
Jupiter projects online ad revenue will hit $11.5 billion in 2003, which excludes $2.6 billion in e-mail marketing.
Last year, money to fund e-mail projects came from online advertising budgets (39%) and direct marketing budgets (32%), the survey found.
Customer acquisition, however, will continue to be more cost-effective using direct mail than e-mail since direct marketers have large, well-established mailing lists whereas e-mailers have a far more limited pool from which to pull, the study found. The cost to reel in that first-time customer, a must for fledgling dot-coms, is just $66 for direct marketing vs. $114 for e-mail. The direct marketing industry, however, has the most to lose in the e-mail marketing boom, the study found.
Jupiter estimated e-mail marketing will sap 13%, or $7 billion, of direct mail's U.S. revenue during its five-year spurt, a projection made using Direct Marketing Association data.
The ability to quickly test creative, incentives and the strength of mailing lists is the key to e-mail marketing's success, Jupiter concluded. Companies able to shore up high e-mail response rates will use a variety of channels to gather customer information, Mr. Keane said. "The biggest hurdle for these companies is acquiring names."