For reaching customers, businesses find email outdraws Facebook

Measured by sales per dollar spent, email outperforms social-media ads 3-to-1

Bloomberg NewsDecember 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 email.

Retailers as disparate as Williams-Sonoma and Home Depot have become much better at tailoring emails to specific customers rather than the one-size-fits-all blasts that once dominated this type of marketing. Measured by sales per dollar spent, email outperforms social-media advertising 3-to-1, according to the Direct Marketing Association, a trade group founded to provide accurate marketing data. That explains why retailers will send 19 percent more emails this year.

Compared with social media, email marketing will never be sexy, said Ted Wham, a vice president at Responsys, a 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.

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 emails in 2012 compared with 177 last year, according to Responsys. The boom in smartphones means consumers check email more often.

The numbers drive a compelling case: Email 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.

Uses of personalized email

Home Depot has been honing its targeted marketing, sending emails that incorporate customer preferences and previous behavior, because it’s 10 times as effective as blasts to a general audience, Chief Marketing Officer Trish Mueller said in June.

Williams-Sonoma’s email 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 such as limited-time offers, they’re increasingly tailoring message content and timing to demographics, previously purchased or viewed products, and items left in virtual shopping carts.

They’re also using email as a “portal” to a flurry of ads across the Web, said Chris Saridakis, president of EBay’s GSI Commerce, which provides e-commerce services to hundreds of retailers.

Once a user clicks from an email to a retailer’s website to see that forgotten organic cotton duvet, say, or to browse the 30 percent-off shoes, third-party trackers – “cookies” – recall the activity. Later, while visiting a news website or Googling “clothes,” consumers may see banner or Google ads designed to lure them back to those retailers’ sites.

“It extends the life of an email, and we see that driving an incredible amount of return behavior back to the retailer’s site with a higher conversion rate,” Saridakis said.

It can take a lot of emails to hit the mark. A successful email 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, said Chad White, research director at Responsys. 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.

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