Doing Email Right

Recently a Fortune 1000 retailer worked with Quris to create a comprehensive email program for their customers. The company had not used emails extensively before. The goal was to show a general increase in store activity and total net revenue through emails to opt-in email customers.  They wanted to prove that they could influence customer behavior through emails. In the process of this experiment, they created one of the most comprehensive and valuable exercises in the whole direct marketing industry.

To test their program, they set up a test population of just under 220,000 customers who had previously provided the company with their emails, and permission to use them.

Barriers to success

• Two Step Process.  The company does not sell products through the mail or through their website. Customers have to come in to the stores to buy.  So, to find out if the email was doing any good, they had to measure store activity by the folks that got the emails.  A lot of store transaction data had to be analyzed.
• Setting up a Control Group.  Some people asked the company to send them emails about new product releases. To prove the value of the emails, they had to withhold emails from about 16,000 people who had asked for them.
• Data Formats and Location. As is common with large corporations, data was in different formats and in different places.
• Channel Overlap. There were many channels touching the customers.  The same customers who got emails, also saw print ads, direct mail, websites and TV news about their products. How could the impact of email be determined, while controlling for the influence of other channels?
• Electronic Coupons were new to the company’s customer. Technology and procedures for both distribution and redemption had to be developed, and customer acceptance/familiarity developed.

In doing their planning they learned that:

• Email programs have different goals from direct mail.  While both are directed at increasing store activity, direct mail is offer-based while email has an information, entertainment and long-term relationship-building purpose.  Both channels are directed at increasing store activity, but direct mail is more overtly offer-based and coupon redemption related.  Email has broader objectives, focusing on ongoing customer contact aimed at building a relationship.
• Email recipients had to receive consistent communications. To track the email success it was necessary to measure the store activity of the targeted customers before and after the emails.
• Direct mail has unknown recipients until the campaign list criteria are specified. Email requires opt-in to receive the communication, but the recipient does not necessarily even have to be a customer. The company found that the recency of the opt-in had a significant impact on the customer’s behavior. Those whose opt-in was over a year old had an overall response (at least one email open) during the program of 20%. Email opt-ins newer than one year old had a response of over 85%.
• What customers received was a newsletter about the products. Quris also set up an interactive Web page where customers could become subscribers to the newsletter. Members could also sign up for the newsletter at the stores, through partner agreements and through sweepstakes.

Setting up the test and control groups

The sample of just under 220,000 was divided into nine different groups for testing purposes. A control group of nearly 16,000 opt-in email customers was assigned at random before the program began. This group got no email messages.

Customers with op-in’s over a year old (nearly 90,000) got a reconnect message to which they could opt-out. Then the total test universe of over 170,000 was divided into four basic groups of about 43,000 each. Cells 1 and 2 got a constant message every two weeks. Cells 3 and 4 two got messages based on their prior month store visits. Cells 2 and 4 received eCoupons, while Cells 1 and 3 did not.

The coupons tested three offers:

• Get one product, get one free anytime
• Get one product, get one free in a 5 day period
• Get one product, get one free Monday through Thursday

A particular difficulty involved how to measure customer activity. Was it total expenditures, total number of transactions, frequency of transactions, etc. The company emerged from this test with valid quantitative measures to demonstrate the lift from email on an ongoing basis.

The company determines ROI based on incremental total net revenue (TNR) – Quris augmented this traditional analyses by isolating the source of the lift: i.e., did email drive new customers to the store? Or the same customers more frequently? Or the same customers to spend more? Also, Quris looked at the purchase propensities (e.g., comparing different types of transactions).

Results

• The lift for the entire test population compared to the control sample was 28%. In other words, sending emails twice a month increased sales by 28% over sending nothing.
• The total lift for customers who received electronic coupons was higher than for those with no coupons. The coupons worked.
• Previously active company customers had a higher lift in ROI than less active customers.
• The emails were successful in reactivating inactive members.
• It appeared that those who got regular messages responded better than those who got messages based on behavior.

This is a very interesting and valuable study. Quris and the company used all the techniques available to do a really thorough job of exploring the relationship between emails and customer behavior.  There are too few companies that have rigorously used control groups to prove that what they were doing was working. This analysis validated the email channel to the company’s senior management. As of 2003, the company sends out 8 newsletters and over 1.5 million emails per month.

Arthur Middleton Hughes, vice president of The Database Marketing Institute, has presented 28 seminars on database and email marketing.  Arthur has also authored several books includingStrategic Database Marketing 4^th Edition (McGraw-Hill 2012). He and Andrew Kordek, chief strategist and co-founder of Trendline Interactive, are hosting a two-day Email Strategy Study Group in Fort Lauderdale  March 26-27, 2013, featuring group competition for email marketers responsible for subscriber acquisition, lifetime value, ratings and reviews, boosting their email budget, and doubling their ROI.  To learn how to attend the Study Group, click here