When it comes to discussing her budget with her CFO, e-mail marketing manager Carey Marston Kegel says she has it pretty good.

“I’m lucky,” says Kegel, who works for online equestrian-supply retailer SmartPak. “It’s so inexpensive to send e-mail, especially compared to some of the other marketing tools, like paid search and social media. There, you’re always having to justify the spend.”

While social media has gobbled up the media spotlight, e-mail remains the most popular thing people do on the Internet. According to Ipsos, a marketing research firm, 85% of global Internet users use the web to check e-mail; 65% use it for social networking.

Checking e-mail is also the number-one thing people do on their mobile devices, according to Pew Research Center. And when it comes to driving sales, a September Forrester report describes e-mail as a far more reliable medium than social media: 30% of the 77,000 transactions documented by the research firm between April 1 and April 14, 2012, began with a customer clicking on an e-mail.

Conversely, less than 1% of transactions could be tracked back to a social network. “E-mail remains very much alive, and to thrive companies need to continue to focus on e-mail acquisition as well as e-mail optimization,” says Forrester analyst Sucharita Mulpuru-Kodali, author of the report. “E-business professionals should continue to keep their eyes open for a possible breakthrough social-marketing concept, but they should not neglect more effective tools such as paid search and e-mail.”

Experiment with Social Media
“Social is definitely not about revenue,” Mulpuru-Kodali says. “E-mail is very much about revenue. Social is more useful for customer service [than for sales]. Some social tools, like Pinterest, have some promising aspects related to product discovery, but that’s the very top of the [sales] funnel and it remains to be seen how much Pinterest’s momentum has stalled.” Therefore, she says, social-media initiatives should be funded from a business’s experimental budget only. Cash should never be diverted from e-mail or paid search.

SmartPak has seen between 125% and 150% revenue growth since 2009, according to Kegel. Perhaps not coincidentally, in 2010 it partnered with Silverpop, a provider of e-mail marketing automation. Silverpop and e-mail service providers like it (including Salesforce Mass E-mail, Constant Contact, or Mail Chimp, which, like Silverpop, works mainly with small businesses) help businesses align and time campaigns to customer actions (such as clicking on a link).

Ideally they present potential buyers with product offers at a moment when they’re most likely to buy. Silverpop’s software-as-a-service offering merges customer data into a single database, and then mines it to create campaigns based on user interactions with the site, such as past purchases and preferences (whether or not the customer wants to receive coupons, for instance).

“Collecting data to target customers based on their needs and wants increases the chances of making a sale,” says Ellen Valentine, Silverpop’s e-mail marketing leader and a former chief marketing officer. “Over time, you build up this great database and can start to drive a more relevant conversation with customers.”

Automated e-mail marketing vendors, says Mulpuru-Kodali, provide a host of ancillary products that leverage the e-mail platform. Like Silverpop, they often offer analytics to create and schedule e-mails in a more targeted manner. Indeed, automation enables marketing managers like Kegel to control their campaigns with minimal IT involvement. They boost the manager’s agility and reduce time-to-market, thus allowing for more timely campaign launches and controlling marketing costs. And because there are so many low-cost e-mail service providers, Mulpuru-Kodali maintains, “there’s absolutely no advantage to doing this in-house.”

E-mail Marketing Evolves
When SmartPak started e-mail marketing in 2000, it was sending out one to two promotional campaigns a month to subscribers in the form of “e-blasts”: messages that had no tracking capabilities. Because the company couldn’t track responses, there was no way it could gauge if its campaigns were worth the money or IT resources they consumed.

“Now we have really good visibility into who purchases from our e-mails,” says Kegel. “We have all sorts of tracking information: opens, clicks, if customers buy or don’t buy, and unsubscribers” (people who choose to stop receiving e-mails).

Further, says Kegel, “we’re currently tying that data into our website analytics to create a marketing database so we can see what campaigns drove a particular purchase.” Once SmartPak finishes doing that, it will be able to link specific revenue to specific campaigns. It can subtract the total cost of the campaign from the retrieved revenue then, and determine a cost-of-sale with a more precise return-on-investment figure than marketing historically delivers.

Today SmartPak sends out up to 10 promotions a month to customers, with each e-mail tailored to at least 15 customer segments determined by their past behavior: Did the customer open the e-mail? Did he click on the content? How many times has he visited the SmartPak website, and what were his past purchases and interactions with salespeople and support staff?

Kegel estimates that about 35% of online marketing revenue from new customers comes from its e-mail marketing, with the rest coming from display ads, search, and social media. The company does have a social-marketing department, Kegel says, mostly managing the company’s Facebook page in order to engage SmartPak’s 260,000 Facebook fans. But, she says, the company neither retrieves nor expects much of a financial return. “We use it more for brand awareness and content versus revenue,” she says.

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