Let the E-Mail Marketing Onslaught Begin

As e-commerce marketers discover the effectiveness of email as a tool for boosting customer retention and increasing sales, the email marketing industry will soar to a $4.8 billion industry by 2004, according to a report by Forrester Research.

Marketers will send more than 200 billion emails in 2004 to take advantage of the medium’s potency, said Forrester’s report “The E-Mail Marketing Dialogue.” To maintain visibility, companies will outsource strategic and technical elements of their email marketing initiatives, thus creating a $4.8 billion market.

“Marketers are hunters — following the tracks of consumers and scattering promotional bait to lure elusive dollars out of hiding places,” said Jim Nail, senior analyst in Media & Entertainment Research. “E-mail turns marketers into herders: once they trap consumers, they must learn to tame and cultivate them as ongoing sources of nourishment. But email is not direct mail minus the paper and postage.”

According to Forrester, there are three distinct differences that, if not handled correctly, can thwart email’s potential and change the customer relationship. First, marketers must stop broadcasting to customers and instead begin a dialogue on a one-to-one basis. Second, marketers must offer value in the form of service and ease-of-use instead of simply pushing products. Third, marketers need to measure the depth and breadth of their relationships with customers by the amount of information shared, rather than the traditional measurements of timing, frequency, and monetary value of purchases.

Marketers who turn to email service bureaus with specialized expertise achieve purchase rates four times higher than marketers who keep all their email operations in-house. As a result, demand for email-marketing services will accelerate to create a $4.8 billion industry by 2003, $3.2 billion of which will be spent on companies helping marketers retain their customers by mailing to their in-house lists. The remaining $1.6 billion will go to outsourcers helping marketers acquire new customers through email.

The high cost of direct mail and the broad-based nature of traditional media such as TV and radio ads have forced marketers to focus on customer acquisition, according to Forrester. E-mail, however, changes the economics of the marketing equation by eliminating postage, paper, and printing costs that account for 60 percent of direct mail’s response. The low cost of email means that promoting lower-cost items and communicating with less frequent buyers can be profitable.

“By 2003, the number of marketing emails will equal the volume of direct mail forwarded by the US Postal Service, and by 2004 the average household will receive nine pieces of marketing email per day,” Neil said. “To remain prominent in what will become a sea of email, marketers are going to need the right people, partners, and structure in place to build successful customer relationships.”

For its report, Forrester surveyed 50 retail marketers; 22 from traditional companies and 28 from Internet pure plays. Sixty-four percent of the marketers outsourced one or more elements of their email operations. On average, marketers had 205,000 names on their in-house email list and sent each name two emails per month.

The “eMail Marketing Report” by eMarketer reached a similar conclusion to Forrester, predicting a $4.6 billion market for email marketing by 2004. eMarketer’s report also predicts that email advertising’s share of total US online advertising spending will increase to 15 percent by 2003. Spending stood at 3 percent in 1999. In 1999, an estimated 20 percent of all email received in the US was commercial, equally divided between spam and opt-in email.

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