New Research Sends Retailers Urgent Message To Segment Email Campaigns

The learning curve for retail email usage has been interrupted. Several new reports show declining email metrics for the category, and analysts are urging a return to data basics to revive ineffective strategies and tactics.

The evidence for the decline comes from several sources. The most telling comes from email infrastructure provider Return Path. Its survey of 45 online retailers shows a surprising preponderance of irrelevant and broad-based messages. According to the report 31% of companies added purchasers to their email lists without requesting permission; just 15% of the companies in the study took advantage of data they received during the purchase process to target their promotional messaging to buyers; only 40% of companies included promotional content in their transactional messages and 58% of the retailers studied sent the same first promotional email to buyers as to inquiries.

The trend is not limited to the US. The UK Direct Marketing Association’s (DMA) Email Marketing Council has issued a report suggesting that retailers are among email marketers increasing their campaign focus on retention and contact frequency as they tailor strategies to adapt to the tough economic climate. During Q2 2008, retention campaigns accounted for 82% of all email marketing campaigns (up from 76% in Q1 2008). At the same time, the proportion of acquisition campaigns fell from 24% in Q1 2008 to only 18% in Q2 2008. Over the same quarter, contact frequency increased from an average of 4.21 consumer contacts per month to 5.44.

The increase in email contacts per month shows that retailers are doing what is cheapest and easiest, which is returning more often to their core in-house customer lists. What concerns many email suppliers and analysts is that the Return Path study shows that simple segmentation and purchase data analytics may have fallen victim to the budget axe. 

Consistent with the ReturnPath research, Acxiom Corp. has also been seeing an increased need for segmentation as part of its Retail Consumer Dynamics (RDS) study. Based on the findings of the RDS, Acxiom has been pushing for more pinpoint marketing tactics, directed at specific consumer segments, such as “Potential Rebounders” and “Full Spend Ahead” groups.


Although he is more optimistic about his client’s sophistication than those that were surveyed, Jim Harold, General Manager of Acxiom’s retail group, says the “spray and pray” email tactics described in the reports generate declining returns. In fact, he says response rates for unsegmented emails may be negligible at this point.

“I think the reason this may be happening is because segmentation and analysis takes discipline and investment,” says Harold. “And if you’re going to segment you need to spend money on personalization and versioning. You need different creative for different groups of customers. Retailers may have fallen behind on this, and it is frustrating.”

He recommends that retailers struggling with the staffing or budget available to restart email campaigns should at least get back to some basic principles. If microsegmentation is not available, purchase data can at least inform emails sent to loyal and high value customers. If large scale testing isn’t possible, small samples can be used to infer response rates.  “Surveys can be scaled back too,” he says. “Maybe you can’t ask 15 questions but you can ask five. Simple affinity analysis can still be effective.”

Other analysts believe email must and can return to its sophisticated practices. A recent Merkle study found that simple high-spend and low spend customer segmentation can be effective. Although 55% of all emails are deleted without being opened, the survey found that analytics and segmentation could increase high-spend customers overall spending by 59%.

“It’s easy to define higher purchase frequency customers,” says Merkle’s Lori Connolly. “It’s very important to at least know as much about their email preferences as possible.”

The upside for email is still huge. The Return Path report examines a hypothetical retailer with one million email addresses in its database, sends out three email messages per week and whose deliverability and click through rates has been. If sender reputation could increase deliverability from 80%
to 99% (a reasonable goal according to the report) the average click-through rate of 4.5% could be achieved and an average purchase rate of 2% and an average (hypothetical) sale value of $50, that company could increase sales by $1.3 million in a year. 



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