William would like to thank Madhur Limdi, managing consultant from Xpedior, for his assistance in writing this month's column.

Every marketing director is charged with crafting ways to acquire new (likely profitable) customers, retain profitable customers and up-sell and cross-sell products or services to existing customers in a cost-efficient manner. Before e- mail marketing emerged on the scene, the marketing team would craft and execute marketing campaigns via direct mail, telemarketing channels, TV, radio, newspaper and banner ads on the Web. The inherent limitations of these channels preclude any opportunity to foster a timely, cost-efficient, interactive dialog with the customer. These campaigns yield low response and conversion rates and are often perceived as overtly intrusive. They also have long implementation cycles.

With the proliferation of e-mail addresses worldwide and e-mail usage being the number one online activity both at work and at home, it is hardly surprising that marketing departments are looking to add this channel to their arsenal. E-mail marketing not only offers a cost efficient ($0.01 - $0.25 per message) way to craft and execute one-to-one campaigns, but also provides the opportunity to engage customers in an interactive dialog. Responses are rapid – typically under three days versus anywhere from 5 to 10 weeks for campaigns on other channels. The response rate for e-mail marketing campaigns falls in the range of 5 to 20 percent in contrast to the 1 to 10 percent for traditional channels and under one percent for banner ads. Additionally, e-mail marketing provides the ability to capture a wealth of customer information such as personal interests, opinions, invaluable feedback on products and services, the ability to track customer behavior (response to campaigns or lack thereof) as well as the prized ability to influence customer purchasing behavior over time. E-mail marketing is fast emerging as the medium of choice for customer retention campaigns and is the hottest use right now of a CRM-ready data warehouse.

There are two ways of establishing an e-mail marketing relationship. An opt-in relationship is permission-based where the customer volunteers his or her e-mail address to receive promotional information from the vendor or its affiliates. Under the opt-in relationship, the customer has the privilege and right to initiate participation. On the other hand, what is often practiced today – called spam or unsolicited commercial e-mail (UCE) – is targeting of customers without permission. Some purveyors of this practice do provide the option to opt-out of such solicitations or campaigns. Needless to say, the opt-out link in the e-mail does not always work. Since spam messages cost a couple of cents per message, this practice is not likely to die soon. In a nutshell, spam is viewed negatively by its recipients and will usually result in customers opting out of establishing a relationship with its purveyor.

Any e-mail marketing solution is incomplete without the campaign management capabilities. Companies which already have a customer dimension in their data warehouse with campaign management and list generation capabilities will really need to look into a product which can enable outbound e-mail campaigns and e- mail response management. Alternatively, if you are starting from scratch, you definitely want to consider putting into place a basic campaign management and list generation capability before acquiring any e-mail marketing capability. A fully functional solution will additionally include a centralized data warehouse which captures the pertinent aspects of customer interaction and a content management component which will house the creative content of the one- to-one e-mail campaigns. Most e-mail marketing software packages include campaign management functionality.

One can choose to host the entire e- mail marketing solution offsite at an ASP for a monthly fee. Depending on the services included, the cost can range from $5,000 to $30,000 per month. Current market conditions may warrant this approach for many corporations since it's a low-cost approach. Of course, external hosting means the corporate data security policy has to be revisited. In the long run, this can become more expensive than buying the software.

Purchased software is an expensive option. It is also risky, since skilled individuals are required to manage the resulting e-mail responses. Poor response management can effectively kill any e- mail marketing effort's high response.

An agency typically provides a full-service option with e-mail lists (opt in or otherwise), creative campaign designs, content management and data management capabilities, with some providing an added focus on customer acquisition campaigns.

In conclusion, permission-based e-mail marketing certainly offers higher response rate and a cost-efficient way to establish profitable relationships with customers. However, establishing, growing and maintaining a permission-based relationship is a time-consuming effort. Implementation options are diverse and each corporation must weigh their selection criteria carefully. Given the current low cost and the cultural adaptation issues many corporations face, now may be the time to outsource.

This is the first of two columns covering e-mail marketing. Next month's column will cover outbound e-mail campaigns and e-mail response management as part of Web marketing.

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