E-Mail to Hurt Offline Direct Marketers

Cost-conscious businesses increasingly are turning to the Internet in lieu of traditional direct mail campaigns, according to findings from research firm Gartner Inc.’s GartnerG2 unit.

GartnerG2 research projects that email advertising revenue will reach $1.26 billion in 2002, up from $948 million in 2001. By 2005, email advertising revenue is forecast to total $1.5 billion.

That’s still a drop in the bucket for traditional direct marketing – which is poised to take in close to $200 billion this year. But the growth should worry firms that make their money from offline direct marketing services, since Gartner predicts the trend will coincide with an overall decrease in offline direct spending as advertisers move to the Internet.

“Direct mail has reached its peak and will account for less than 50 percent of mail received by U.S. households by 2005, down from 65 percent in 2001,” said GartnerG2 media industry research director Denise Garcia. “As email use, familiarity and trust increases, consumers will become more comfortable with accepting advertisements through their computer.”

Growing consumer familiarity and trust will account for part of the move, but marketers will also gravitate to the online channel because of the relative inexpensiveness of an email campaign, versus the costs of an offline mailing. Specifically, offline campaign expenses include not only the design and development of creative, but the costs of printing and mailing. The more a campaign is tweaked – that is, optimized based on responses – the greater the costs.

On the Internet, obviously, expenses associated with printing are irrelevant, while postal costs give way to cheaper email rates. Gartner priced email campaigns at about $5 to $7 per thousand, while it said direct mail costs range from $500 to $700 per thousand.

Additionally, several recent and pending U.S. Postal Service rate hikes don’t make offline direct mail any more attractive.

There are still sizable costs that arise from the process of trafficking and tweaking online campaigns — which several Internet firms, like DoubleClick, are working to reduce – but on the whole, marketers are finding email is cheaper.

There are other benefits, as well: email marketing campaigns can execute, elicit responses and be measured almost immediately. Offline direct campaigns, meanwhile, can take weeks to see a consumer response or to be tracked.

“Within days of launching an email campaign, response can be measured and actions taken. Marketers can gauge response quickly and react by making adjustments on an email campaign before delivery of a direct mail campaign is complete,” Garcia said. “Thus, the entire cycle time of the email campaign from creation to delivery and response is one-tenth the time of traditional direct mail.”

Gartner said that email marketers could best utilize the medium by focusing their efforts on opt-in email – since clickthrough rates typically reach 6 percent to 8 percent. Opt-out email, like traditional direct mail, has about a 1 percent response rate at best.

Ensuring that email marketers have explicit permission would not only boost results, but it could also address one of the largest problems facing online direct marketing: spam. A host of leading email marketing firms, advertisers and advertising industry groups have said that the continuing growth of spam hurts the industry by dissuading consumers from opening commercial mail.

Similarly, Gartner advises that marketers cap their mailings, at two per day for consumers, and three per month for business audiences.

The news come on the heels of efforts by several email and industry-backed privacy associations to shore up the email marketing space by establishing privacy and data-sharing rules. Recently, the Direct Marketing Association also released standards of its own governing appropriate email marketing practices.

Reprinted from internet.com’s Internet Advertising Report.