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Psst! Have you heard the news?

E-mail marketing is hot. You can send a message to someone and, get this, he'll respond. Better yet: You can send a completely different message to everyone else on your list.

But don't tell anyone. As soon as everyone finds out, it won't work anymore.

Companies such as online wine retailer Virtual Vineyards are singing the praises of

e-mail marketing. According to a March report from Forrester Research, more than 70% of companies believe

e-mail is important or very important to their marketing or sales strategy. Click-through rates for e-mail campaigns are 14% to 22%, compared to banner ad click rates that hover around 1%, Forrester also reports.

At just pennies a message and offering immediate response,

e-mail marketing scores big points compared with traditional direct marketing campaigns.

"E-mail is one of our key customer retention tools," said Cyndy Ainsworth, VP-marketing at Virtual Vineyards (

Digital Impact, a San Mateo, Calif., e-mail marketing company, says it delivered more than 17 million messages for clients in March alone.

The company added 10 new customers in the first quarter and now has more than 30 clients, including Virtual Vineyards, and eToys.

While e-mail marketing is peaking, there's a big risk of everything toppling the wrong way just as this business is taking off. Overfull in-boxes are just the beginning.


E-mail messages from companies such as Digital Impact ( can now be targeted using sophisticated database marketing techniques. Software can detect whether someone can receive HTML-or multimedia-e-mail, and whether someone opened his or her mail. Messages can be tagged to determine not only how many bottles of wine were sold via a marketing message in an e-mail, but who bought them.

On the back end, marketers can study the data to know how many bottles someone bought before, what other merchandise they bought and whether they are more inclined to buy expensive vintages.

"We think of one-to-one marketing not as being able to direct a message to an individual," said William Park, president of Digital Impact, "but as being able to track responses down to the individual."

Digital Impact charges clients based on the amount of customization and the number of messages sent. It provides clients daily and weekly reports, as well as a quarterly in-depth briefing.

All this segmenting results in a new mound of data to deal with, on top of the already massive data generated by a Web site.


On the consumer side, there is the very real danger of privacy backlash. If people fear digital cookies, which only identify a computer and not a person's identity, the prospect of a marketer knowing exactly how they respond to an e-mail message is something else entirely. Digital Impact and Virtual Vineyards are sensitive to these issues.

E-mail is "a way to keep Virtual Vineyards top of mind," Ms. Ainsworth said. "In our experience, people are very open to getting" the newsletters.

Virtual Vineyards sends out an every-other-week online newsletter to 75,000 people who have requested it. The missive touts product specials, with links to the site, and features commentary from Peter Granoff, Virtual Vineyards' founder. Half the subscribers get plain text; half get an HTML version.


The company has doubled the size of its list since it began working with Digital Impact last fall. Click-through rates run as high as 10%, slightly lower than the average reported by Forrester. More important, sales generated by the

e-mails account for at least 10% of Virtual Vineyards' revenue, Ms. Ainsworth said.

A significant percentage of those sales are for products that weren't even mentioned in the newsletter, meaning people aren't just clicking through to a particular page, they're looking around.

Virtual Vineyards is proceeding cautiously when it comes to targeting e-mail messages. It is testing various product mixes to target people who have purchased either expensive or inexpensive wines.

Occasionally, the company has sent individual messages to its best customers, offering wines not available on the site.

Working with Digital Impact, Virtual Vineyards tested the idea of offering sampler sets in addition to single bottles of wine. Because the sampler sets generated a 12% higher response rate, the company began offering more samplers in its e-mail messages. In one case, a three-bottle set of robust red wine accounted for 20% of all the click-throughs in that particular e-mail.


Soon, Virtual Vineyards will ask subscribers to fill out an optional profile so the company can target messages more precisely.

This kind of targeting and analysis "is just database marketing," Mr. Park said. "The amount of knowledge-gathering that we do is no more than any other marketing channels."

Yes, but this is the Internet and there may be backlash. As more marketers develop more e-mail newsletters, the overall click-through rate will surely decrease.

For now, companies like Virtual Vineyards are reaping the rewards of e-mail newsletters. The revenue generated "pays for itself in covering the cost of Digital Impact's services," Ms. Ainsworth said. And the company is learning how to craft marketing messages that get immediate response.

That's valuable experience in any medium.M

Debra Aho Williamson is a Seattle-based writer focusing on Internet business issues. Send Internet case study ideas to her at [email protected],

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