By Sapna Maheshwari and Matt Townsend on December 18, 2012
Even as retailers debate the efficacy of social-media marketing on Facebook and Twitter, they have no doubts about the power of a decades-old technology to drive sales. The killer app is called e-mail.
Retailers as disparate as Williams-Sonoma Inc. (WSM) and Home Depot Inc. (HD) have become much better at tailoring e-mails to specific customers rather than the one-size-fits-all blasts that once dominated this type of marketing. Measured by sales per dollar spent, e-mail outperforms social-media advertising three to one, according to the Direct Marketing Association, a trade group founded to provide accurate marketing data. That explains why retailers will send 19 percent more e-mails this year.
Compared with social-media, e-mail marketing will never be sexy, said Ted Wham, a vice president at Responsys Inc., a San Bruno, California firm that helps companies build digital relationships with customers.
“But it depends on what’s sexy to you,” he said. “In my opinion, making a high profit rate and bringing in a lot of incremental dollars is very sexy.”
Competition is fierce this holiday shopping season as the National Retail Federation predicts sales will rise 4.1 percent to about $586.1 billion in the period, compared with a 5.6 percent increase in 2011. Online sales may grow to a record $43.4 billion in the last two months of the year, a 17 percent increase from last year, according to ComScore Inc.
At the same time, the number of Black Friday and Cyber Monday shoppers making purchases after clicking through from social networks such as Facebook, Twitter, LinkedIn and YouTube declined by at least 26 percent this year from 2011, even as online sales soared, IBM Digital Analytics Benchmark said last month. So-called social sales contributed less than 0.5 percent of online revenue both days.
Major retailers are on track to send subscribers an average of 211 promotional e-mails in 2012 compared with 177 last year, according to Responsys. The boom in smartphones means consumers check e-mail more often, at a time when data and web tracking are becoming more mainstream and easier to use.
The numbers drive a compelling case for that — e-mail provided $39.40 in sales per dollar of advertising this year, followed by $22.38 through Web search, $19.71 from Internet display ads and $12.90 from social networks, according to the Direct Marketing Association.
Home Depot has been honing its targeted marketing, sending e-mails that incorporate customer preferences and previous behavior, because it’s 10 times more effective than blasts to a general audience, Chief Marketing Officer Trish Mueller said in June.
For instance, if customer data shows electricians are no longer sub-contracting the painting portion of remodeling jobs and doing it themselves, an electrician that just bought copper wire may soon receive an e-mail for a discount on paint, she said. In the past, that person would just get an e-mail offer relevant to their known skills, she said.
Williams-Sonoma’s e-mail and browsing data is so expansive the company can use it to drive product recommendations by customer to specific stores, Patrick Connolly, the San Francisco-based company’s CMO said in October.
While stores still use old tricks including limited-time offers — a Bloomingdale’s e-mail on Dec. 12 read “FINAL HOURS! Mystery Savings” — they’re increasingly tailoring message content and timing to demographics, previously purchased or viewed products and items left in virtual shopping carts.
Williams-Sonoma’s West Elm urban furniture chain has sent e-mails to customers who have forgotten about items in their shopping carts with subject lines asking if they are still thinking about that particular merchandise. In the body of the e-mail, customers are warned: “Get it before it’s gone,” and “Don’t miss out on the things you love.”
They’re also using e-mail as a “portal” to a flurry of ads across the Web, said Chris Saridakis, president of EBay Inc.’s GSI Commerce, which provides e-commerce services to hundreds of retailers.
Once a user clicks from an e-mail to a retailer’s website to see that forgotten organic cotton duvet at West Elm, say, or to browse the 30 percent-off shoes at Asos Plc, third-party trackers called cookies recall the activity. Later, while visiting a news website or Googling “clothes,” consumers may see banner or Google Inc. (GOOG) ads designed to lure them back to those retailers’ sites.
“It extends the life of an e-mail and we see that driving an incredible amount of return behavior back to the retailer’s site with a higher conversion rate,” Saridakis said in a telephone interview.
Williams-Sonoma may use as many as 200 different Internet advertisements per brand to retarget customers after they leave the company’s websites, which, while potentially surprising, is “very effective,” Connolly said in October.
It can take a lot of e-mails to hit the mark. A successful e-mail campaign may result in a 20 percent open rate with 5 percent of people clicking through and 1 percent making a purchase, though figures vary around targeted messages and holiday specials, Chad White, research director at Responsys, said in a telephone interview. On the other hand, about half of consumers will read postcards, the most effective form of direct mail, which is pricier, according to a report from the Direct Marketing Association.
Facebook Inc. (FB) has signed on retailers including Brookstone Inc. and Dean & DeLuca Inc. to a new gifting service this year as the company looks beyond advertising to monetize its more than 1 billion users.
Facebook Chief Operating Officer Sheryl Sandberg said in an October earnings call that a third-party analysis showed that more than 70 percent of 60-plus marketing campaigns on its website generated a return on ad spending of three times or better. Separately, data from Nielsen show that click-through rates are not correlated to returns on marketing investments, Elisabeth Diana, a spokeswoman for the Menlo Park, California- based company, said in an e-mail.
While the social network’s power as a sales driver remains unclear, letting customers use their Facebook accounts to sign onto a retailer’s website is an effective way to harvest e-mail addresses, according to Matt Kritzer, vice president of e- commerce for underwear maker Tommy John.
Facebook and Twitter “are more awareness activities,” Kritzer, the former director of e-commerce for L’Occitane, said in a telephone interview. “That’s why you need this glue of e- mail that ties it all together.”
That means retailers are keen to gather as many e-mail addresses as they can, a task made easier by mobile checkouts and e-mailed receipts. They’re also running sweepstakes and offering discounts to get shoppers to cough them up.
J.C. Penney Co. (JCP), which generated less than 10 percent of sales in its latest fiscal year from the Web, is aggressively acquiring e-mail addresses by shifting to mobile checkout and through its holiday sweepstakes. The department-store chain is giving away more than 80 million buttons with codes on them for a holiday sweepstakes, and customers are asked to enter their e- mail address or log in with Facebook to find out if they won.
This holiday season, some retailers are also taking advantage of shipping confirmations or order receipts, with higher open rates, to offer recommended items or additional discounts, GSI’s Saridakis said.
Retailers are more aggressively trying to persuade shoppers to keep accepting their e-mails than in the past, said Charlie Graham, the founder and chief executive officer of Shop it To Me Inc., which partners with retailers to send tailored discount alerts to more than 4 million members who have signed up for the service.
Instead of hitting “unsubscribe” and being done with it, customers are asked if they want the e-mails less frequently, or even if they want to take a three- to six-month break and reconsider, said Graham, who started his business in 2005 as part of a summer internship at Harvard Business School. At some retailers, such as J.C. Penney, customers are told that unsubscribe requests can take as many as 10 days to process.
The growth in mobile phones and tablets bodes well for e- mail. This holiday season, 45 percent of e-mails are being opened on mobile devices, according to Experian Hitwise, an Internet-tracking firm in New York. Shoppers are 29 percent more likely to open personalized promotional e-mails than untailored messages and are even more likely to click on them and go to a retailer’s website, the firm said.
E-mail has “gotten this bad reputation in the past of being spammy and people misusing it,” Kritzer said, explaining why more companies aren’t talking about it as a marketing tactic. “But it’s also because it’s the secret sauce that works so well. So people might not want to talk about it because it’s kind of like the golden goose. They don’t want to ruin the golden goose.”
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