November 2001
  

Dialog Marketing Elevates E-mail Effectiveness

BY JANET LOGAN, REVENIO, INC.

As the Internet has matured, marketers have seized upon e-mail as the cure-all for direct marketing for good reason: e-mail is cheap, direct and personal.

But the golden goose of e-mail marketing could look more like a dead duck if things don't change rapidly. Overuse and improper use of e-mail are causing response rates to fall, and today's e-mail marketing risks sliding down the same slippery slope into oblivion that banner ads did just a few years ago. In fact, according to Jupiter Research, the average number of commercial e-mail messages that U.S. online consumers receive per year will increase from 40 in 1999 to more than 1,600 in 2005. Jupiter also estimates that commercial e-mail spending will grow from $164 million in 1999 to $7.3 billion in 2005.

The challenge for marketers is to find a way to employ e-mail marketing so it is personalized, unobtrusive and nurturing to the customer relationship. 'Businesses are beginning to perceive e-mail marketing as the silver bullet for acquisition and retention strategies; it's fast, cost-effective and provides immediate feedback,' said Michelle Slack, senior analyst with Jupiter, in a report published on CyberAtlas.com. 'As a result, the volume of opt-in commercial e-mails continues to rise at a furious pace. However, consumers will not have the resources or tolerance to maintain the high response rates that are driving businesses to e-mail in the first place. Businesses must focus on delivering value from the first e-mail contact, because opt-out is just a click away.'

Further compounding the problem is the fact that e-mail marketing today exists in a vacuum and is not coordinated with the rest of the marketing mix (phone, fax, direct mail, etc.) For e-mail to become a true customer relationship-building tool, it must be integrated with these other marketing channels, so companies can optimize their customer contacts by communicating the right message across the right channel at the right time.

How do marketers buck the trend of rising opt-out rates and fully exploit e-mail as a mechanism for building stronger, more profitable relationships? The answer lies in a new methodology known as dialog marketing.

Dialog Marketing Makes E-Mail More Meaningful
Statistics, such as those from Forrester Research, Jupiter and other firms, show us that traditional 'segment, batch and blast' e-mail is not a plausible long-term strategy for building more profitable customer relationships. Indeed, in its 'Effective Email Marketing' report, Forrester Research found that even new e-mail users -- those who have used e-mail for less than a year and are theoretically still in the 'honeymoon' stage with the technology -- have grown weary of 'inbox overload.' The survey found that 54 percent of new users feel that they receive too many e-mail messages, a 21 percent increase over one year ago. As a result, almost all e-mail marketing solicitations today take a one-way trip to the trash bin without being read.

These trends are causing many marketers to rethink how to integrate e-mail into the marketing mix. Savvy marketers understand that e-mail is not a silver bullet, but rather a highly effective interactive channel that needs to be integrated with other channels. They are seeking to elevate e-mail to a new level of interactivity by using it to engage customers and prospects in long-running, automated two-way 'conversations' or 'dialogs' to nurture each individual customer through every step on the way to a sale or some other desired result.

This new notion of dialog marketing is fundamentally different from traditional 'blast' e-mail campaigns in that it is:

• Event-driven. Dialogs are triggered by customer 'events' such as a request for information, a sale, etc., so interactions occur when customers are most receptive to them.
• Long-running. Dialogs can range from simple one-time correspondences to ongoing interactions that span months. The former might be used for a simple promotion, the latter could be for a more complex sale, such as an automobile or financial services.
• Catered to the individual. Dialogs create 'learning relationships' between companies and customers. With each interaction, companies learn more about their customers and vice versa, ensuring that future correspondences are always relevant and valuable.
• Cross-channel. Dialogs span the Web, e-mail and other communications channels, enabling companies to use the most effective channel for each interaction. For example, a Web registration might trigger an e-mail sales qualification dialog, which ultimately triggers a sales phone call.

There are new software tools on the market today that enable marketers to adopt dialogs as their methodology for building customer value. These products let marketers build stronger, more profitable relationships by deploying event-driven, two-way, long-running marketing interactions for each customer that are coordinated across multiple channels, such as e-mail, direct mail, call centers and the Internet.

Practical Applications
The goal of dialog marketing is to create relevant opportunities to interact with the customer and provide a simple and reasonable opportunity for the customer to respond. The customer interaction and ensuing data collection could be triggered by something as simple as registering for a newsletter with an e-mail address, and then followed-up immediately with interactive opportunities. This follow-up could be as simple as 'did you like this newsletter?' or 'are we sending you e-mail too frequently?' or some other message designed to gather information so future interactions are more relevant.

From this point, dialog marketing uses each previous response as the aggregated framework for all future correspondence. Each customer response gives the marketer a new reason to get back in touch with the customer. As a result, the customer is always getting information that is relevant and useful, which greatly reduces the risk of opt-outs.

Let's look at a fictional example of how dialog marketing might help a financial services company, ABC, Inc., take advantage of an opportunity that almost all businesses miss: using confirmation e-mail messages to gather information.

ABC wants to find a more effective way to qualify leads coming in through its Web site. To solve this problem, the company deployed a 'lead qualification' dialog in which a request for information (RFI) for its insurance and investment products would trigger the dialog. Each RFI is greeted with an automatic e-mail confirmation that includes questions designed to further qualify the prospect.

For example, were a prospect to request life insurance information, the confirmation e-mail might ask if the prospect has a time frame for making a purchase, or if he or she currently holds a policy from another company, or if the customer is only doing preliminary research. Depending on which response option the prospect chooses, other relevant interactions would follow and, if the dialog reaches a point where the prospect meets the appropriate criteria, a live telephone call from a service rep would be queued up. If the prospect makes a purchase, additional cross-selling dialogs could be triggered. For example, purchasers of life insurance are usually parents with young children, so a life insurance purchase might trigger a college savings program lead qualification dialog.

Using traditional e-mail marketing tools, companies cannot use correspondences like confirmation messages to learn more about their customers, simply because they are optimized for one-way communications, not ongoing 'conversations.' This represents a squandered opportunity, because confirmation messages are sent at a time when customers are intensely interested in the marketer's company and likely to respond to a follow-up e-mail, provided it gives them an easy mechanism to do so.

New Medium, New Methodology
ABC, Inc. is only a simple example of how powerful dialog marketing can be and how it can help marketers seize opportunities that are being lost today due to the limitations of first-generation e-mail marketing tools. Today's new dialog marketing tools allow companies to use every customer touch point -- from site registrations, to confirmation messages, to point-of-sale systems in offline stores -- to continue the 'learning relationship' and strengthen the bond with the customer. Because each interaction is highly relevant to customers, the notion of opting out will most likely never cross their minds.

In the early days of television, marketers simply 'ported' radio-advertising methodology to this new communications medium. Advertising amounted to little more than show sponsorships and simple ads involving spokespeople reading scripts. Over time, marketers came to understand the full multimedia capabilities of TV and developed entirely new methodologies for exploiting it.

E-mail marketing is undergoing a similar transformation now. It started with marketers simply porting offline direct mail to the online world. However, with customers growing weary of e-mail overload and response rates plummeting, marketers are beginning to understand that this new interactive medium also demands a new methodology such as dialog marketing.

Janet Logan is vice president of marketing for Revenio, Inc.

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