The Customers Always Write

Although E-mail promises to save money and boost revenues, most companies are struggling to meet expectations.
Alix StuartJuly 1, 2001

Two years ago, as customers and prospects began to use E-mail to contact Verisign Inc., the Mountain View, California-based software company came up with what it thought was a slick way to respond: It kicked back a file that contained the answers to the 10 most frequently asked questions it received.

That idea, which was intended to give customers some basic information while a service rep drafted a reply to each E-mail, proved not only inadequate but downright disastrous. “Customers were livid,” says Bo Wilson, senior director of customer service for the encryption software vendor. They interpreted the canned response as a brush-off, and some were quick to reply with angry E-mails. “We had to stop that approach immediately,” says Wilson.

That left open the question of what might work better, and Verisign spent considerable time and resources working out the answer. The results appear to have been worth it. Wilson says that customers now applaud the speed and accuracy of the firm’s automated E-mail responses, which take advantage of technology not available two years ago. And the company has saved considerable money on manpower, reducing the staff it devotes to E-mail even as the volume has increased to more than 500 messages per business day. Response time has been cut from four days to 24 hours or less, and the quality of the responses has been made more consistent.

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Many companies are in the midst of a similar odyssey, grappling for ways to harness the potential of E-mail before they collapse under the sheer weight of it. Companies that make CRM (customer relationship management) software are looking for ways to improve the E-mail components of such products, because E-mail has emerged as a critical customer “touch point.” Makers of software specifically designed to handle customer E-mails are also emerging, often touting leading-edge technologies that can “read” the E-mail and produce smart responses with little or no human intervention.

Some companies have already had success, but for many E-mail is currently a headache rather than an opportunity. Yet companies that approach it smartly are not only saving millions of dollars but also creating stronger customer relationships that should translate into top-line growth. For some, such as Verisign, E-mail is often preferable to phone contact, because questions tend to be highly technical, and E-mail allows for a detailed, hard-copy response that customers can save and refer to.

Customers have come to expect a lot from E-mail, including quick and accurate responses from the companies they send it to. But a recent survey by Jupiter Media Metrix of 225 well-known companies that offer an E-mail option on their Web sites found that a third took three days or longer to get back to customers, and 25 percent never replied at all. A similar study by Norwalk, Connecticut-based CRM strategy consultancy Peppers and Rogers Group backs that up: It found that 20 percent failed to respond to a basic query.

The problem stems in part from the fact that E-mail service is often a byproduct of Web-site design, with no procedures or technology in place to integrate customer E-mail with other forms of customer service. Even when E-mail is handled by of a CRM package, it’s often not aligned with call-center data or accounting systems within the organization. “Many companies take a product or channel-centric approach, where there’s one person who handles the Web site, someone else who handles telephone calls, and yet another person who manages E-mail,” says Martha Rogers of Peppers and Rogers. “The real issue, though, is can you respond in a way that works for your customer?” Forrester Research senior analyst Bob Chatham agrees. “Second to call-center staff turnover,” he says, “inbound E-mail is probably the biggest point of pain companies are feeling today.”

Often it’s a resource dilemma: While E-mail contact may reduce the number of customer calls coming in, phone centers still need to be staffed and E-mail needs to be answered. The logical solution is to move away from an individually crafted response to each E-mail and toward various forms of auto-response. Even Verisign, which incurred its customers’ wrath for its initial, crude form of autoresponse, believes that the answer is not to flee from that approach, but to improve it.

The company now uses software from Jerusalem-based Banter Software Ltd., which taps a database of answers created by E-mail staffers to accurately autorespond to 15 percent of incoming E-mails. Initially, employees audited almost all the autoresponses to be sure they were suitable, but the firm has scaled that back to just 25 percent. “Self-learning” from natural-language queries in the software allows it to gain a better understanding of customers’ inquiries as it processes more of them.

Even with that success, however, Verisign isn’t resting. The company plans to add a satisfaction rating to its responses so customers can immediately let Verisign know “if we did it right, or if we’re just fooling ourselves,” says Wilson.

Verisign hasn’t yet integrated its E-mail efforts with its call-center data or the internal databases that handle orders. Wilson says once that heavy lifting is done, an additional 40 percent of E-mails can be handled via autoresponse.

Can It?

But some experts say that much of today’s E-mail automation software provides only a stopgap solution. The technique of matching keywords or patterns with possible answers for reps to cut and paste is one of the most popular, says David Daniels of Jupiter Media Metrix, “but that’s never going to be efficient, because it’s certainly not scalable.” As volumes increase, he says, so must the number of customer-service reps. And companies that rely on canned responses may find themselves canned by customers: Daniels has found that fewer than 2 percent of E-mail autoresponse systems reply accurately to basic requests.

He is, however, more bullish on new products from Banter, YY Software, and others that tap artificial intelligence techniques such as natural language processing (NLP) and statistical modeling, and can spit out relevant responses up to 85 percent of the time. “Even with these tools, you’re not going to take the human element out entirely,” says Daniels, “but you can reduce your service staff and focus those who remain on your most valuable customers or the more complex problems.”

Verizon Wireless cut the average cost of an E-mail inquiry in half, and Chad Kluko, executive director of E-service operations and development, hopes to drive it down further as Verizon’s system expands to address such areas as billing information. The more important ROI measure for the company, though, is payroll. Because reps can now handle far more E-mail messages than before, the company recovered the cost of its Kana system within seven months; without the software, Kluko says, he would have had to add an astounding 3,000 staffers by 2005.

Leading CRM vendors have made E-mail automation a priority, with many either licensing or acquiring smarter artificial intelligence technology. San Mateo, California-based Siebel Systems Inc. is launching a product this summer that “solves all the problems every other E-mail automation tool has encountered,” claims Matt Malden, head of service products. He says the new product, which incorporates both NLP and statistical modeling, can accurately classify 90 percent of messages, including negative ones like “Don’t ever send me E-mails again.” Messages like those often slip through the cracks of word-matching technology, because it misinterprets negatives, sarcasm, and common misspellings.

While the technology behind E-mail systems is one issue, the technology they run on is another. “Given the trend toward personalization,” says Daniels, “these systems should ultimately be the hub for everything else, including the accounting system. In order to maximize that, you have to have a technology base that’s open and extensible.” Companies that have not made significant investments in a Web-oriented IT infrastructure face an uphill battle in getting all necessary systems talking to one another.

Security may also pose limitations. ABN Amro, for example, has technology in place that can automatically notify customers via E-mail, phone calls, or wireless messages every time a check is deposited in their account. However, “legal issues make it problematic to send sensitive financial information over the Internet in plain E-mails,” says Matthias Autrata, senior vice president of the Netherlands-based company’s Information Technology Services Co. “For that reason, we typically use E-mail only sparingly.”

Chicago-based Allstate Insurance Co. faces a similar dilemma. In response to the CEO’s directive to become more customer-centric, the insurer synchronized its customer databases across the organization and centralized many of its support functions at the corporate level, in an effort to get that “single view” of the customer that so many companies are pursuing. Allstate has been using software that relies on a “semantic processor” to “read” and classify incoming E-mail for the past four years, and has found it to be 95 percent accurate.

Given that the firm has so many of the pieces necessary for a fully automated response, and given that more than 80 percent of all incoming E-mails are requests for rate quotes, assistant vice president Rich Heneberry would like to move away from the current, time-consuming system of having agents approve each response before it goes out. But the risk of a botched computer-generated response has kept him cautious. “Our attorneys always remind us that we’re legally responsible for whatever we send via E-mail, so we’re always looking at that trade-off between efficiency and risk,” he says.

Mail Bonding

In theory, handling inbound E-mail well should enable a company to make the most of the marketing potential in outbound E-mail. Customer service data from those E-mailed complaints and questions, for example, should wind up in a company’s marketing database, providing plenty of detail for highly targeted, personalized E-mail campaigns. “If you’re using E-mail as a mass medium, you’re missing the boat,” says Rogers of Pepper and Rogers.

Done right, such campaigns are more effective than any other media in driving online purchases, according to 50 marketers recently surveyed by Forrester. When Los Angeles­based Ticketmaster Corp. targeted its E-mail ads for Bruce Springsteen’s most recent tour based on users’ buying history and geography, it achieved a 47 percent response rate and a 20 percent buy rate, compared with an average 1 percent response on previous campaigns.

E-mail campaigns are cheap, resulting in a cost per sale as low as $2, says Forrester analyst Shar Van Boskirk, compared with $18 per sale from paper-based direct mail to an in-house list (that is, customers already on a company’s database). Not only that, they’re trackable, allowing a company to discern which ads elicited which sales, and to calculate an ROI based on real data. Since customers can respond so quickly, many marketers test ads on a sample group before launching a full-scale campaign, thereby optimizing returns.

While some CRM products do help companies tap the marketing potential of E-mail, many firms begin with a rudimentary, homegrown approach. That was the strategy at San Rafael, California-based Autodesk Inc., which sells dozens of design software products to architects and other professionals. Frustrated by a direct-mail response rate that had dwindled from 5 percent to 2 percent, and unsure what to do with the 350,000 customer E-mail addresses he’d collected, marketing manager Bryan St. Amant decided to take a flier. Using the company’s MarketFirst software, he sent an E-mail to all 350,000 addresses, offering to tell customers about a new product as soon as it launched, along with news on any other topics they might check off from a list he provided. “It was the softest marketing I’d ever done,” he says. “So I was shocked to get a 9 percent response rate.”

That effort also helped scrub the list, letting St. Amant know who was no longer interested and which E-mail addresses were defunct. Now, using the same software, Autodesk can send out tailored newsletters with little effort, and easily decide which customers to invite to which online trade shows or product demonstrations. As a result, he has been able to focus more effort on the costlier task of acquiring new customers without increasing his staff, and sales have increased enough to cut the cost per new trade-show lead from $200 to $80.

E-mail holds great promise, both as a cost-cutter and a revenue-generator, but it’s just one part of an increasingly complex company-customer relationship. Companies that simply put an E-mail link on their Web site or an E-mail address on their literature and assume that customer-service staff can handle the results are probably in for an unpleasant surprise. “Companies need to manage the preferences of each customer,” says Rogers. Augmenting basic E-mail functionality with the technologies that can help manage it is probably essential, and while companies may not welcome the added expense, the cost of not doing it may be considerably higher.

Alix Nyberg is a staff writer at CFO.

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