Marketing: Get Personal with Your Customers

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Email Marketing:

Get Personal with Your Customers

June 2008

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© 2008 Aberdeen Group. Telephone: 617 854 5200

Executive Summary

Research Benchmark Aberdeen’s Research Benchmarks provide an in- depth and comprehensive look into process, procedure, methodologies, and

technologies with best practice identification and actionable recommendations

This report identifies best practices in email marketing personalization by isolating the strategies, technologies, and processes that lead to superior email campaign performance in top performing organizations. The findings represent the views and intentions of over 550 organizations.

Best-in-Class Performance

Aberdeen used three key performance criteria to distinguish Best-in-Class companies, which achieved:

• 51% average annual increase in email open rate on email campaigns

• 42% average annual increase in email click-through rate on email campaigns

• 26% average annual increase in email conversion rate

Competitive Maturity Assessment

"When subscribers decide on what to opt-in for, they end up getting the most relevant information, and at the same time, it helps us build on customer communication and increase the different types of relevant newsletters and alerts we can offer."

~ Brent Laderoute, Director of Advertising, West49 Survey results show that the firms enjoying Best-in-Class performance

shared several common characteristics:

• 67% have published rules and regulation governing who is allowed to communicate to customers and prospects via email

• 46% have processes in place to identify high value customers and market to them uniquely over email

• 37% use advanced personalization techniques in email campaigns

Required Actions

In addition to the specific recommendations in Chapter Three of this report, to achieve Best-in-Class performance, companies must:

Identify high value customers who willingly create a relationship with a company by opting-in, registering, or providing feedback on forms or surveys. Stop trying to market to the customer based on what the company wants the customer to hear and start listening to the customers' explicit and implicit signals. Email personalization should create an intimate relationship between a customer and the organization.

Collect, measure, refine. The foundation of email personalization is a robust customer database. Best-in-Class companies constantly optimize and refine email campaigns by measuring performance. Email effectiveness and long term improvement in email performance requires messaging that will impact and have relevance to customers and prospects.

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Table of Contents

Executive Summary...2

Best-in-Class Performance...2

Competitive Maturity Assessment...2

Required Actions...2

Chapter One: Benchmarking the Best-in-Class ...5

What is Email Personalization? ...5

The Maturity Class Framework...6

The Best-in-Class PACE Model ...7

Best-in-Class Strategies...8

Chapter Two: Benchmarking Requirements for Success ...10

Best-in-Class Segmentation Tactics ...10

Best-in-Class Advanced Personalization Tactics...11

Competitive Assessment...14

Capabilities and Enablers...15

Chapter Three: Required Actions ...20

Laggard Steps to Success...20

Industry Average Steps to Success ...20

Best-in-Class Steps to Success...22

Appendix A: Research Methodology...24

Appendix B: Related Aberdeen Research...26

Figures

Figure 1: Top Challenges to Email Personalization- All Respondents ...6

Figure 2: Strategies to Support Email Personalization...8

Figure 3: Companies Currently Using Personalization...10

Figure 4: Currently Track Email Performance with a Landing Page...17

Figure 5: Use of Dynamic Message Delivery ...19

Tables

Table 1: Personalization Trends- All Respondents ...5

Table 2: Top Performers Earn Best-in-Class Status...7

Table 3: The Best-in-Class PACE Framework ...7

Table 4: Definition of Personalization ...10

Table 5: Top Segmentation Attributes...11

Table 6: Best-in-Class Performance as a Result of Leveraging Email Segmentation...11

Table 7: Top 10 Attributes Used by the Best-in-Class in Personalized Emails ...12

Table 8: Performance Variance after Personalizing Individual Email Campaigns...12

Table 9: The Competitive Framework...14

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© 2008 Aberdeen Group. Telephone: 617 854 5200 Table 10: The PACE Framework Key...25

Table 11: The Competitive Framework Key...25 Table 12: The Relationship Between PACE and the Competitive Framework

...25

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Chapter One:

Benchmarking the Best-in-Class

Fast Facts

√ 6% the 551 participating organizations indicated they were not "very satisfied"

with the sophistication of their email marketing practices

√ 57% of organizations allocate 1% to 10% of their outbound marketing dollars to email (20% of organizations allocate 11% to 25%) Ninety-six percent (96%) of organizations believe that email personalization

can improve email marketing performance. This study explores the role of email personalization and identifies the processes, technologies, and best practices that enable Best-in-Class organizations to deliver superior email campaign performance.

What is Email Personalization?

There are various degrees of email personalization. The most common form of email personalization includes the use of a customer's name in the

salutation of an email. Sixty-three percent (63%) of all respondents leverage this form of “light personalization” to send the same email message to all prospects. Table 1, outlines the levels of personalization explored in this research. Note: Respondents were asked to select all that apply from the choices provided in Table 1.

Table 1: Personalization Trends- All Respondents Level of

Personalization Definition

Percentage Currently

Using*

Mass emailing The same email goes to all prospects 43%

Light

personalization Same email goes to all prospects,

prospect name is personalized 63%

Medium personalization

Email content is personalized by segment,

prospect name is personalized 33%

Heavy personalization

Individual emails are personalized with name and/or other profile information, information on purchase history, product or service recommendations, etc.

16%

*Respondents were asked to select all that apply.

Source: Aberdeen Group, June 2008

Heavy personalization techniques allow organizations to develop highly personalized relevant marketing campaigns by incorporating customer profile information, segmentation or demographic behavior, channel behavior, purchase history, personalized product or service

recommendations, online activity, and other attributes from customer databases. One in three companies segment customers by demographics or behavior and market to these segments uniquely over email campaigns. One in five companies send personalized customer-specific emails based on individual profiles, purchase history, product recommendations, and other attributes which will be explored in Chapter Two.

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© 2008 Aberdeen Group. Telephone: 617 854 5200

Top Challenges to Email Personalization

The top challenges to developing more advanced personalized campaigns stem from a lack of technology, lack of training, and organizational resources (developing personalized marketing content). As a result, over 60% of respondents personalize using nothing more than the customers' name (Figure 1).

Figure 1: Top Challenges to Email Personalization- All Respondents

“Purchasing third party information for use in

segmenting and targeting can be hit or miss. We have used a few very reputable sources that consistently delivered quality data. I recommend sticking to a provider that has worked well in the past. Also, we try to maintain the most robust database possible, so we don’t have to rely on third party information as often.”

~ Mark Rechner, Director, Marketing Communications, Experient 27%

30%

44%

46%

0% 10% 20% 30% 40% 50%

Lack of technology Lack of expertise in email

personalization Access to data for use in

personalized emails Creating personalized marketing

content

All Respondents

Source: Aberdeen Group, June 2008

The Maturity Class Framework

Aberdeen used three key performance criteria to distinguish the Best-in- Class from Industry Average and Laggard organizations:

• Open-rate: The ratio between opened and sent emails

• Click-through rate: The ratio between the number of clicked links within the email and sent emails

• Sales conversion rate (attributed to email): The number of individuals to purchase a product or service (conversion can also include consumption of information, form completion, etc.) over the total number to receive the message

In this study, organizations that achieved the highest performance in these three metrics represent the Best-in-Class, as shown in Table 2.

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Table 2: Top Performers Earn Best-in-Class Status Definition of

Maturity Class Mean Class Performance

Best-in-Class:

Top 20% of aggregate performance scorers

ƒ 51% average annual increase in email open rate on email campaigns

ƒ 42% average annual increase in email click-through rate on email campaigns

ƒ 26% average annual increase in email conversion rate

Industry Average:

Middle 50%

of aggregate performance scorers

ƒ 24% average annual increase in email open rate on email campaigns

ƒ 16% average email click-through rate on email campaigns

ƒ 10% average annual increase in email conversion rate

Laggard:

Bottom 30%

of aggregate performance scorers

ƒ 17% average annual increase in email open rate on email campaigns

ƒ 9% average annual increase in email click-through rate on email campaigns

ƒ 3% average annual increase in email conversion rate Source: Aberdeen Group, June 2008

The Best-in-Class PACE Model

The research proves that email personalization is a critical component to Best-in-Class email campaign performance. However, Best-in-Class companies also demonstrate that superior performance requires a combination of strategic actions, organizational capabilities, and enabling technologies summarized in Table 3.

Table 3: The Best-in-Class PACE Framework

Pressures Actions Capabilities Enablers

ƒ Need to improve Return on Marketing Investment (ROMI)

ƒ Integrate email, web analytics, CRM, and other marketing technologies

ƒ Improve the quality of data in the marketing / customer database

ƒ Published rules and regulations governing who is allowed to communicate to customers and prospects via email

ƒ Processes in place to segment email lists for improved message relevancy

ƒ Individuals accountable for list quality and database accuracy

ƒ Email marketing manager is involved in conversations about integrating web analytics and CRM

ƒ Email marketing

ƒ Segmentation and targeting tools

ƒ Web analytics

ƒ A/B tests or multivariate testing

ƒ Event triggers / rules

ƒ Dynamic content messaging

Source: Aberdeen Group, June 2008

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© 2008 Aberdeen Group. Telephone: 617 854 5200 The top pressure driving all organizations to focus on email personalization

is a desire to maximize Return on Marketing Investments (ROMI); cited by 54% of the Best-in-Class and 39% of all others. The need to increase online revenue comes as a secondary pressure for 41% of Best-in-Class

organizations and 37% of all others.

Best-in-Class Strategies

Technology integration is a key challenge for all organizations when it comes to personalization. More advanced levels of email personalization require robust data from a plethora of different sources: web analytics, ERP, CRM, email marketing, customer feedback tools, etc. Seventy eight percent (78%) of Best-in-Class companies leverage a customer database (versus 63% of all other companies). The Best-in-Class have already integrated disparate data sources and, as we will see in the capabilities section, have a relentless focus on data quality (Figure 2).

Figure 2: Strategies to Support Email Personalization

54% 49%

41%

51% 53%

52% 48%

62%

29%

0%

20%

40%

60%

80%

Integrate Email, Web Analytics, CRM, and

Other Marketing Technologies

Improve the quality of data in the marketing/customer

database

Up-sell and Cross-Sell Initiatives

Best-in-Class Average Laggard

Source: Aberdeen Group, June 2008

Best-in-Class companies achieve superior performance because they focus on developing a personal relationship between the company and their customers. Forty-eight percent (48%) of Industry Average companies are currently focused on up-sell and cross-sell initiatives to improve email performance. If these initiatives do not include data quality efforts, up-selling and cross-selling will be premature and will likely continue to accelerate mediocre email campaign performance.

Aberdeen Insights — Strategy

In order to increase revenue, organizations need to truly understand customers. How do they purchase? When do they purchase? What do they purchase and why? Best-in-Class companies can answer these questions about their customers.

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Aberdeen Insights — Strategy

More importantly, the Best-in-Class demonstrate their understanding of the customers by creating intimate interactions through personalized offers and messaging. The Best-in-Class are three times more likely than their peers to personalize emails using advanced techniques; delivering personalized product recommendations, profile information, purchase behavior (for up-selling and cross-selling) or online behavior.

Forty-four percent (44%) of all organizations are still leveraging mass email techniques and 37% personalize emails with nothing more than a name. The top two challenges to email personalization include:

1. Gaining access to customer profile and behavioral information for use in personalized emails (41% all respondents)

2. Creating personalized marketing content (45% of all respondents) Fifty-percent (50%) of Best-in-Class companies use the information collected within their customer profile database to personalize email campaigns (the Best-in-Class are two times more likely to leverage a customer database than Laggard organizations).

The Heart of Best-in-Class Email Personalization

Best-in-Class companies constantly learn from customer behavior and more importantly from the information customers willingly provide (through forms, surveys, and across customer channels like the call center, customer service, etc.). Top performing organizations are 2.3- times more likely than their peers to identify high value customers and market to them uniquely over email. High value customers are not the customers who have the highest sales. For the Best-in-Class, the high value customers are the ones who willingly interact with the company providing valuable feedback on how the company can meet their needs most effectively; this in turn leads to repeated opportunities to sell to these individuals at the right time and place.

Best-in-Class companies recognize that their customers have a choice;

and when they opt-in to being contacted by the company or take the time to provide feedback, they become the most valuable customers the company could ever have.

For Best-in-Class organizations, it's about more than an opt-in list, it's about how their opt-in list wants to interact. Not everyone wants an email every week or a promotion for a great deal every other week. The Best-in-Class are constantly listening to find out how they can meet the expectations of the organizations that willingly interact with the company (through purchases, explicit information, etc). The heart of

personalization is the voice of the customer. Best-in-Class companies listen to their customers and anticipate customer expectations. In return, these customers remain loyal to the brand delivering the highest lifetime value for Best-in-Class organizations.

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© 2008 Aberdeen Group. Telephone: 617 854 5200

Chapter Two:

Benchmarking Requirements for Success

Fast Facts

√ 72% of Best-in-Class currently use or plan to use event based triggers and rules to automate email campaigns

√ 7% all respondents sent mobile specific email campaigns

Best-in-Class companies are three-and-a-half times more likely than all other organizations to personalize email campaigns using the information they collect on customer behavior, interactions, purchase history, and profiles.

This represents a significant finding as the Best-in-Class demonstrate consistently higher performance in email click-throughs and conversion rates (Figure 3 and Table 4).

Figure 3: Companies Currently Using Personalization

10%

34%

66%

12%

39%

71%

38%

48%

66%

0% 20% 40% 60% 80%

Heavy Personalization

Medium Personalization

Light Personalization

Laggard Average Best-in-Class

Source: Aberdeen Group, June 2008

Table 4: Definition of Personalization

Key Scope

Light Personalization

Same email goes to all prospects, prospect name is personalized

Medium

Personalization Email content is personalized by segment, prospect name is personalized

Heavy Personalization

Individual emails are personalized with name and/or other profile information, information on purchase history, product or service recommendations, etc.

Source: Aberdeen Group, June 2008

Best-in-Class Segmentation Tactics

Best-in-Class companies heavily leverage their customer databases to achieve superior performance. The Best-in-Class have processes to segment and target customers based on behavior, demographics, and other

components. Best-in-Class companies also assign individual resources accountable for maintaining the quality of customer data.

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The research suggests top performing organizations use a number of key attributes to maximize performance in segmented email campaigns. Table 5 represents the top three attributes Best-in-Class companies use to create more targeted, relevant, emails specifically for customer segments.

Table 5: Top Segmentation Attributes

Attribute Percent of Best-in-Class Using Attribute in Segmentation Email Campaigns

Promotional offers 41%

Product or service offers 36%

Demographic specific offer

/ information 35%

Source: Aberdeen Group, June 2008

Measurable Benefits of Segmenting Customers in Email

By correlating the change in performance metrics after implementing segmentation techniques and companies that currently leverage customer segmentation in email campaigns (but, not personalized individual offers), Aberdeen revealed the measurable benefits of segmentation techniques realized by Best-in-Class companies. Table 6 demonstrates the measurable impact of using segmentation techniques in email marketing campaigns.

Table 6: Best-in-Class Performance as a Result of Leveraging Email Segmentation

Metrics Performance as Result of Segmenting Customers

with Email Campaigns

Click-through rates Improved by 9%

Open rates Improved by 6%

Conversion rate Improved by 9%

Customer retention rates Improved by 5%

Opt-in rate Improved by 5%

Source: Aberdeen Group, June 2008

Best-in-Class Advanced Personalization Tactics

The research revealed that Best-in-Class companies were three times more likely to personalize emails on an individual basis than Industry Average and Laggard organizations. The attributes in Table 7 represent the 10 most common attributes used to personalize email campaigns on an individual basis. As the list suggests, the Best-in-Class are well aligned to leverage a host of attributes within their customer databases and business applications.

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© 2008 Aberdeen Group. Telephone: 617 854 5200 Table 7: Top 10 Attributes Used by the Best-in-Class in

Personalized Emails

Attribute Percent of Best-in-Class Using Attribute in Individual Emails

Prospect name 92%

Company name (B2B) 62%

Promotional offers 52%

Product or service offering 50%

Other profile information (state, email) 48%

Demographic 45%

Date of purchase activity 45%

Customer purchase history 43%

Customer behavior 37%

Email layout 37%

Source: Aberdeen Group, June 2008

Measurable Benefits of Personalizing Email Campaigns

Best-in-Class organizations leverage a full scope of email tactics to

communicate with prospects; mass email (newsletters), segmentation, and personalized individual emails. What is important to note is that the Best-in- Class have the technology, processes, and data requirements necessary for more advanced personalization tactics. However, analysis shows that all parties that leverage more advanced email personalization benefit from these capabilities.

Table 8 isolates the performance gains from companies that are leveraging more advanced email personalization to individual prospects. These companies are using one or more of the attributes in Table 7 top personalize individual emails to customers and prospects. The research shows that companies that send individual personalized emails to prospects achieve the highest performance increases in key performance metrics after incorporating these tactics into their email campaigns. Note: Table 8 depicts performance improvements for all respondents, not just the Best-in-Class.

Table 8: Performance Variance after Personalizing Individual Email Campaigns

Metrics Performance as Result of Personalizing Individual Emails

Click-through rates Improved by 14%

Open rates Improved by 6%

Conversion rate Improved by 11%

Customer retention rates Improved by 8%

Opt-in rate Improved by 5%

Source: Aberdeen Group, June 2008

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This research demonstrates the measurable impact of more advanced personalization techniques. Organizations that are currently mass emailing without any form of personalization are not maximizing their email marketing dollars.

Case Study — West49

West49 Inc. is specialty retailer of apparel, footwear and accessories related to skateboarding, snowboarding, and surfing. They operate over 115 stores under banners such as West49, Billabong, Off The Wall, Amnesia/Arsenic, D-Tox, and an online presence under the domain name www.boardzone.com.

West49 needed a way to increase in-store revenue with the tough to reach Generation Y audience (individuals born between the years of 1982 and 1997). West49 was constrained by a cumbersome limited marketing system that could only send one message to all customers with limited personalization capabilities; it got the job done, but West49 needed a better way to develop personalized relationships with their customers.

“E-mails were primarily distributed based on the province in which the subscriber lived, rather than by the tastes and buying habits of the person,” said, Brent Laderoute, advertising and creative director for West49. "We really needed to start getting the right message to the right customers. The company turned to an enterprise email marketing

provider to help segment, target, and personalize their outbound campaigns in an effort to drive customers to their website and brick-and- mortar stores.

West49 started by gathering information about customers. "As a unisex retailer our goal was to get the right product information out to the right subscribers, so the first step for us was to gather gender information from our customers and then market the gender-specific products to the right subscribers," said Laderoute.

Within the first three targeted email marketing campaigns the company saw a 200% increase in click-through rates and growth in key metrics like open rates and conversion. Personalization delivered immediate results and helped West 49 deliver the right content to the right segment within their email marketing list. But, West49 didn’t stop at simple demographic segmentation, "We can go further than just gender segmentation and send follow-up e-mails to our customers based on their interests, like board hardware, clothes, or events."

The research reveals that Best-in-Class organizations have processes in place to identify high value customers. For Best-in-Class organizations, high value customers are not just the customers that purchase often, they are the customers that articulate how they want the organization to market to them through newsletters, products, website behavior, forms, surveys, etc.

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© 2008 Aberdeen Group. Telephone: 617 854 5200 Case Study — West49

West49 highlights the importance of building a relationship with customers through a customer loyalty program.

"When subscribers decide on what to opt-in for, they end up getting the most relevant information, and at the same time, it helps us build on customer communication and increase the different types of relevant newsletters and alerts we can offer," said Laderoute.

Automation is paramount for marketing organizations. Technology helps West49 save time and money by managing list maintenance issues (double opt-in, deliverability, unsubscribes, etc.) Overall, West49 achieved an average of 15% higher open rates and dramatic increases in conversion rates from campaign call-to-action. Most significantly, West49 achieved a 100% increase in revenues for loyalty program members.

Competitive Assessment

Aberdeen Group analyzed the aggregated metrics of surveyed companies to determine whether their performance ranked as Best-in-Class, Industry Average, or Laggard. In addition to having common performance levels, each class also shared characteristics in five key categories: (1) process (the approaches they take to improve email performance); (2) organization (corporate focus and collaboration among stakeholders); (3) knowledge management (contextualizing data and exposing it to key stakeholders);

(4) technology (the selection of appropriate tools and effective deployment of those tools); and (5) performance management (the ability of the organization to measure their results to improve their business). These characteristics (identified in Table 9) serve as a guideline for best practices, and correlate directly with Best-in-Class performance across the key metrics.

Table 9: The Competitive Framework

Best-in-Class Average Laggards Published rules and regulation governing who is allowed to communicate to customers and prospects via email

67% 37% 31%

Processes in place to segment email lists for improved message relevancy

53% 39% 23%

Processes in place to identify high value customers and market to them uniquely over email

Process

46% 25% 18%

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Best-in-Class Average Laggards Individuals accountable for list quality and database accuracy

56% 50% 41%

Email marketing manager is involved in conversations about integrating web analytics and CRM

Organization

46% 33% 28%

Centralized database populated with multi-channel data and used for email personalization

46% 31% 25%

Web analytics data used to segment lists and gain insight on customer buying behavior

Knowledge

36% 34% 25%

Technology that supports email personalization:

Technology

ƒ 85% email marketing

ƒ 78% landing page

ƒ 57% form and survey tools

ƒ 49% segment- ation tools

ƒ 36% event triggers / rules

ƒ 83% email marketing

ƒ 75% landing page

ƒ 40% form and survey tools

ƒ 36% segment- ation tools

ƒ 19% event triggers / rules

ƒ 75% email marketing

ƒ 40% landing page

ƒ 34% form and survey tools

ƒ 20% segment- ation tools

ƒ 10% event triggers / rules

“We are constantly measuring open rates, click throughs, form completion rates, landing page effectiveness, and qualified leads captured. These help us determine the effectiveness of marketing messages to our list segments.”

~ Mark Rechner, Director, Marketing Communications, Experient Track email campaign performance with landing pages

79% 69% 38%

Measure and benchmark email campaign performance Performance

74% 68% 44%

Source: Aberdeen Group, June 2008

Capabilities and Enablers

Based on the findings of the Competitive Framework and interviews with end users, Aberdeen uncovered some of the best practices that allow the Best-in-Class to achieve the highest click-through rates, conversion rates, and open rates.

Process

For many organizations, multiple parties are involved in sending outbound email communications: internal marketing groups, agencies, sales,

operations, and sometimes channel partners. Without proper standards and guidelines, these parties can inadvertently deliver inconsistent branding and messaging. Best-in-Class companies are twice as likely as Laggards to leverage formal, published rules and regulations governing the ownership and delivery of email communications. More importantly, Best-in-Class

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© 2008 Aberdeen Group. Telephone: 617 854 5200 companies demonstrate an aptitude for identifying and nurturing high-value

customers. High-value customers at Best-in-Class organizations are the customers who are communicating with the organization. They may opt-in to being contacted, fill out surveys, repeat purchases, etc. These customers are the gems in the coal, because they are willing to help companies understand how to interact with them. Best-in-Class companies listen to their high-value customers by delivering unique marketing messages to touch them personally, encouraging them to invest in the company brand and an ongoing relationship with the company.

Organization

The number one Best-in-Class strategy for improving email personalization involves integration between email, web analytics, CRM, and other

marketing technologies. The Best-in-Class are 60% more likely than Laggard organizations to encourage email marketing managers to get involved with integration discussions. For many organizations these individuals are focused on marketing, messaging, and relevancy; not necessarily technology

integration discussions. Best-in-Class organizations reveal that the individuals in charge of email marketing play an integral role in optimizing and consistently improving the ability to deliver higher email click-through and conversion rates. These individuals help understand which information is worth integrating and why, saving time and resources around integration efforts.

Additionally, the Best-in-Class assign accountability and ownership to data quality efforts. The customer database is the core of all personalization strategies. The Best-in-Class are 30% more likely than Laggards to ensure someone within the organization is responsible for list quality and database accuracy.

Knowledge Management

Personalization starts with a robust customer database. The Best-in-Class are twice as likely as Laggard performers to maintain a centralized database populated with multi-channel data; which is used for email personalization.

Multi-channel data is a critical component of Best-in-Class customer databases. Organizations can only begin to truly understand customers when they can anticipate behavior across multiple channels. This is how Best-in-Class companies demonstrate superior performance with advanced personalization techniques. The Best-in-Class use the data they collect on customers to target and segment customers and to help understand customer buying behavior. Best-in-Class organizations can articulate their customers buying cycles in great detail and the email personalization campaigns they deploy help nurture their customers and prospects along this cycle. Best-in-Class capabilities and tactics revolve around the customer;

understanding the customer, helping the customer, and meeting the customer's expectations. This is only possible with the support form a centralized robust customer database.

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Technology

Email marketing technology adoption trends are almost identical among Best-in-Class (85%), Industry Average (83%), and Laggard (75%)

organizations; yet these maturity classes achieve dramatically different performance. The Best-in-Class are three-times more likely to personalize emails by segmenting and delivering targeted content based on purchase history, product recommendations, or user behavior. This level of

personalization requires segmentation tools, customer feedback tools and the ability to measure and optimize performance (through landing pages).

Despite the fact that all organizations demonstrate similar adoption of email marketing tools, Best-in-Class realize higher performance; an indication that all of the capabilities outlined in Table 3 enable Best-in-Class performance.

Seventy-four percent (74%) of Best-in-Class organizations are using or planning to use dynamic email message capabilities to leverage email templates that are capable of delivering personalized content to individuals based on user behavior or segmentation rules. Aberdeen research

consistently reveals that organizations are constantly looking for ways to automate marketing processes. The Best-in-Class are four-times more likely than Laggards to leverage an event trigger or rules engine on email

campaigns.

Performance Management

Email marketing requires constant optimization and measurement. Unlike Laggards, Best-in-Class measure and refine marketing campaigns on an ongoing basis. The number one tool Best-in-Class use to measure marketing campaigns is a landing page (typically it's specific to the campaign and often even specific to the segment or target group).

Figure 4: Currently Track Email Performance with a Landing Page

79%

38%

69%

0%

20%

40%

60%

80%

100%

Best-in-Class Average Laggard

Source: Aberdeen Group, June 2008

Landing pages allow organizations to measure click-through rates on email campaigns. The Best-in-Class are two-times more likely to track email campaign performance with landing pages. Likewise, top performing organizations measure and benchmark campaign performance to identify commonalities in customer behavior, seasonal influences, customer segments, cross-sell and up-sell initiatives, etc.

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© 2008 Aberdeen Group. Telephone: 617 854 5200 The Best-in-Class are 68% more likely to measure and benchmark email

campaign performance. The most common metrics used by Best-in-Class include:

Open rate. The ratio between opened and sent emails. When benchmarked over time, open rates represent a leading indicator of message relevance and subject line effectiveness.

Click through rate. The ratio between the number of clicked links within the email and sent emails. This metric helps the Best-in- Class determine the effectiveness of segmentation and targeting.

The Best-in-Class are 2.3 times more likely than Laggards to have formalized processes in place to segment lists for improved message relevancy and higher click through rates.

Conversion rate. The number of individuals to react in a certain way (consume information, fill out a form, purchase, etc.) over the total number to receive the message. The maturity classes in this research were defined by the sales conversion rates on email campaigns. However, conversion can take on many forms. The Best- in-Class pre-define measurement metrics prior to campaigns and adjust campaigns in real-time based on performance.

Click through / open rate. This is a measurement of campaign success given the number of individuals who actually open the email.

This metric can provide insight on how the marketing message actually resonates with individuals.

It's important to note, on average, approximately half of Laggards do not measure any of the aforementioned metrics.

Aberdeen Insights — Technology

In the March 2008 study, The CMO Strategic Agenda: Automating Closed- Loop Marketing, Aberdeen explored best practices in marketing effectiveness and message relevancy. The study revealed that all

organizations are looking for ways to automate the process of delivering more relevant messages to customers.

Dynamic content delivery, or dynamic message assembly, is an email marketing technique / feature that allows marketers to create email templates to deliver different, personalized emails to customers based on specific customer preferences, behavior, demographics, segments, or purchase history. With dynamic message assembly, organizations can deliver extremely relevant emails that are personalized to individual customer interests. Today, most if not all of the largest email marketing technology providers have dynamic message assembly capabilities.

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Aberdeen Insights — Technology

Given the market's strategic focus on automation and marketing effectiveness, one might anticipate technologies like dynamic content delivery would be popular. While the Best-in-Class are three times more likely than Laggards to leverage dynamic message assembly (Figure 5), adoption of these capabilities remains relatively low for two reasons:

1. Dynamic content is dependent on the level of granularity and detail that exists in the customer database. The success and level of personalization are contingent on a robust database which Industry Average and Laggard organizations struggle to maintain.

2. Dynamic content capabilities are relatively new; requiring new skills for marketers, and new technology adoption for many Industry Average and Laggard organizations.

Figure 5: Use of Dynamic Message Delivery

36%

14% 12%

59%

81% 82%

0%

20%

40%

60%

80%

100%

Best-in-Class Industry Average

Laggard

Currently Use Planning on Using

Source: Aberdeen Group, June 2008

Figure 5 demonstrates that all organizations are predisposed to

leveraging dynamic content in the future. Given the fact that the number one challenge around email personalization stems from a difficulty creating personalized content, dynamic message assembly will likely represent a powerful tool in the marketing arsenal because marketers can create single templates for email marketing campaigns and automate personalization through technology.

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© 2008 Aberdeen Group. Telephone: 617 854 5200

Chapter Three:

Required Actions

Fast Facts

√ 28% of Best-in-Class leverage marketing service agencies to outsource one or more email campaigns (versus 5% of Laggards)

√ The average order value increased by 57% as a result of personalization - for all organizations leveraging email personalization techniques

Whether a company is trying to move its performance in email marketing from Laggard to Industry Average, or Industry Average to Best-in-Class, the following actions will help spur the necessary performance improvements:

Laggard Steps to Success

Identify high value customers and communicate to them uniquely. High value customers are the customers who willingly communicated with your company, through email, surveys, forms, and various other channels. High value customers will provide a wealth of implicit information about how to communicate with them on their terms. This is the pinnacle of personalization; to create a personal relationship with these individuals.

"Personalized" communication is not the same as

"personal" communication. Six in 10 organizations "personalize"

mass email campaigns using the customers name in the salutation of the email; it's a "personalized" touch on a generic message. The research proves that personalization (even with nothing more than a name) leads to higher performance in click-through rates and conversion. However, the highest performance, achieved by the Best-in-Class, is attained by moving beyond personalized

communication and into the realm of "personal" communication.

More advanced email personalization techniques allow organizations to market to individuals or segments based on the customers individual needs, desires, and expectations. These techniques help establish personal relationships between the customer and the organization.

Start segmenting and targeting customers. Laggard organizations are equally as likely as the Best-in-Class to use light personalization techniques in outgoing email campaigns. The research proves that even simple segmentation of lists leads to higher performance in click-through rates, open rates (with effective subject lines), and conversion rates. Segmentation does not have to involve advanced criteria or even a highly robust customer database.

Laggards can improve email campaign performance today by simply segmenting their lists based on demographic region, products purchased, or other attributes that already exist within the CRM or marketing database.

Industry Average Steps to Success

Formalize rules and regulations governing who is allowed to communicate to customer and prospects via email.

These rules and regulations should be passed to all members of the marketing and sales value chain (agencies, partners, sales, etc.). Best-

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in-Class companies are two times as likely as Industry Average and Laggards to control email communications through standards and regulations. It's important for organizations to maintain consistency in how they interact with customers and to ensure partners, agencies, and outside consultants also maintain this same consistency when email campaigns are outsourced.

“The challenge with email personalization lies in the data.

It’s essential to make sure you use quality data in

personalization. You certainly don’t want to send emails to people using the wrong name or messaging that won’t resonate with them.”

~ Mark Rechner, Director, Marketing Communications, Experient

Watch out for pitfalls. Over 50% of Industry Average companies recognize the need to maximize data effectiveness by focusing initiatives on collecting and cleansing customer data. The customer database is the foundation for any personalization initiative. While personalization can rapidly enhance email campaign performance rates, it can just as rapidly erode customer loyalty. The following pitfalls are common among all organizations that currently personalize email campaigns:

o Using the wrong name or a misspelled name.

Inaccurate personalized data can negatively impact email performance. This highlights the lack of knowledge the company has about the customer and can erode the customer's perception of the company, the brand, or the products - even if the copy is extremely personalized.

o Consistency in the formatting of mail-merge text. It is best practice to capitalize the first letter of customer names in the salutation. Best-in-Class companies have tools or individuals assigned to scrub and cleanse data to maintain data quality from all data collection sources (online, forms, list purchases, etc.)

o Sending the wrong offer due to inaccurate database information. Be careful about making assumptions based on implicit data such as user behavior. Computers can be used by family or friends so it's important to use

personalized attributes that have been collected from reputable sources and that can be tied directly to an individual. Best-in-Class practices include collecting online behavior from individuals after they have logged-in or registered on a website.

Use dynamic message assembly to automate email personalization efforts. Dynamic message assembly is a more advanced form of the same mail-merge technique used to insert a person's name in the salutation of an email. Best-in-Class are three times as likely to leverage dynamic content than both Laggards and Industry Average companies. Industry Average organizations have the technological capabilities to leverage dynamic content.

However, Industry Average companies indicate that a lack of technical or email expertise prevents them from using more advanced email personalization tools. Industry Average organizations without email expertise should consult an email service provider or seek professional services to help get the ball

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© 2008 Aberdeen Group. Telephone: 617 854 5200 rolling on implementing dynamic content in email. The performance

gains realized by Best-in-Class are a clear indication that it is worth the effort.

Best-in-Class Steps to Success

“You need to focus on being relevant; getting the right message to the right person is essential."

~ Brent Laderoute, Director of Advertising, West49

Use dynamic content capabilities. Seventy percent (70%) of Best-in-Class companies still don't leverage dynamic content capabilities. Automation reduces the complexity of personalizing emails. In addition, dynamic content uses easy to use and maintain templates which can be repurposed saving production costs and time to market on email campaigns. Dynamic content helps the Best-in-Class continue to maximize the return on email marketing campaigns.

Continue to leverage event based triggers and rules to automate email campaigns. Thirty-six percent (36%) of Best-in- Class companies leverage event triggers to automate email

communications with customers. Event triggers can be used to deliver targeted follow-up messages automatically based on

customer behavior. The challenge for the Best-in-Class is developing customized marketing content to use in various event based

triggers. However, considering that only 10% of the lowest

performing organizations actually leverage this technology, there is a good indication that event based triggers play an integral role in helping Best-in-Class companies create personalized relationships with customers and prospects.

Use web analytics to help identify commonalities in customer behavior for segmenting and targeting. Web activity can be a leading indicator for how customers might react to marketing messages across other channels. Prior Aberdeen research revealed that many large retail organizations use web activity to optimize cross-sell and up-sell opportunities in brick-and-mortar locations. Web analytics help Best-in-Class organizations further segment lists to continue increasing click-through rates by delivering increasingly relevant messages to customers.

Email is the most cost effective, profitable, channel for both B2C and B2B organizations. Best-practices in email personalization demand that

organizations stop trying to dictate the messages they deliver to customers and start trying to understand exactly which messages their customers actually want to hear. The goal is to improve the lifetime value of the customer through a personal relationship between the customer and the company.

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Aberdeen Insights — Summary

Email personalization techniques are relatively new to the market, and leveraging these techniques will require investments in training and technology. The research unequivocally demonstrates that email personalization (even at the most basic levels) plays a critical role in delivering superior email marketing campaign performance.

All organizations surveyed recognize the value of personalization. They also realize the essential role customer data plays in attaining Best-in- Class performance. As a result, all respondents have initiatives in place to both consolidate and cleanse customer data before implementing more advanced personalization techniques. The Best-in-Class are still early adopters of highly personalized techniques and technologies; however, their performance is a clear indication that we will continue to see rapid adoption of more advanced capabilities like dynamic message assembly within top performing organizations.

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© 2008 Aberdeen Group. Telephone: 617 854 5200

Appendix A:

Research Methodology

Between May and June 2008, Aberdeen examined the use, the experiences, and the intentions of 551 enterprises using email marketing in a diverse set of enterprises and industries.

Study Focus

Responding executives completed an online survey that included questions designed to determine the following:

√ The degree to which email personalization impacts email campaign performance

√ Best practices in email personalization

√ The benefits, if any, that have been derived from using email personalization The study aimed to identify emerging best practices for personalizing email campaigns and to provide a framework by which readers could assess their own management capabilities.

Aberdeen supplemented this online survey effort with interviews with select survey respondents, gathering additional information on email

personalization strategies, experiences, and results.

Responding enterprises included the following:

Job title / function: The research sample included respondents with the following job titles: marketing (49%); business development (27%); sales (10%); IT manager or staff (4%); other (10%); senior management (34%); director (17%); and manager (21%).

Industry: The research sample included respondents from: retail (17%); software / hardware (9%); IT consulting (8%); publishing and media (3%); finance (3%); other (17%); and small percentages across all other industries

Geography: The majority of respondents (75%) were from North America. Remaining respondents were from the Asia-Pacific region (7%) and Europe (18%).

Company size: Seventeen percent (17%) of respondents were from large enterprises (annual revenues above US $1 billion); 15% were from midsize enterprises (annual revenues between $50 million and

$1 billion); and 68% of respondents were from small businesses (annual revenues of $50 million or less).

Headcount: Eleven percent (11%) of respondents were from large enterprises (headcount greater than 1,000 employees); 24% were from midsize enterprises (headcount between 100 and 999 employees); and 65% of respondents were from small businesses (headcount between 1 and 99 employees).

Solution providers recognized as sponsors were solicited after the fact and had no substantive influence on the direction of this report. Their

sponsorship has made it possible for Aberdeen Group to make these findings available to readers at no charge.

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Table 10: The PACE Framework Key

Overview

Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows:

Pressures — external forces that impact an organization’s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competitive) Actions — the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product / service strategy, target markets, financial strategy, go-to-market, and sales strategy)

Capabilities — the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products / services, ecosystem partners, financing)

Enablers — the key functionality of technology solutions required to support the organization’s enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management)

Source: Aberdeen Group, June 2008

Table 11: The Competitive Framework Key

Overview The Aberdeen Competitive Framework defines enterprises as falling into one of the following three levels of practices and performance:

Best-in-Class (20%) — Practices that are the best currently being employed and are significantly superior to the Industry Average, and result in the top industry performance.

Industry Average (50%) — Practices that represent the average or norm, and result in average industry

performance.

Laggards (30%) — Practices that are significantly behind the average of the industry, and result in below average performance.

In the following categories:

Process — What is the scope of process standardization? What is the efficiency and effectiveness of this process?

Organization — How is your company currently organized to manage and optimize this particular process?

Knowledge — What visibility do you have into key data and intelligence required to manage this process?

Technology — What level of automation have you used to support this process? How is this automation integrated and aligned?

Performance — What do you measure? How frequently? What’s your actual performance?

Source: Aberdeen Group, June 2008

Table 12: The Relationship Between PACE and the Competitive Framework PACE and the Competitive Framework – How They Interact

Aberdeen research indicates that companies that identify the most influential pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute those decisions.

Source: Aberdeen Group, June 2008

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© 2008 Aberdeen Group. Telephone: 617 854 5200

Appendix B:

Related Aberdeen Research

Related Aberdeen research that forms a companion or reference to this report include:

• Tailor-Made CRM: Best Practices in Customization, Configuration, and Integration; May 2008

• Lead Scoring and Prioritization: The Path to Higher Conversion;

May 2008

• The CMO Strategic Agenda: Automating Closed Loop Marketing;

March 2008

• CMO Strategic Agenda: Demystifying ROI in Marketing; February 2008

• Green Marketing: Leveraging Customer Data to Reduce Direct Mail Waste; February 2008

• The Convergence of Sales and Marketing Technologies; December 2007

• Demand Generation: Kick-Start Your Business; September 2007

• Success Strategies in Marketing Automation; July 2007

Information on these and any other Aberdeen publications can be found at www.Aberdeen.com.

Author: Ian Michiels, Sr. Research Analyst, Customer Management Technology Group, ian.michiels@aberdeen.com

Since 1988, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter — the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.2 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500.

As a Harte-Hanks Company, Aberdeen plays a key role of putting content in context for the global direct and targeted marketing company. Aberdeen's analytical and independent view of the "customer optimization" process of Harte- Hanks (Information – Opportunity – Insight – Engagement – Interaction) extends the client value and accentuates the strategic role Harte-Hanks brings to the market. For additional information, visit Aberdeen http://www.aberdeen.com or call (617) 723-7890, or to learn more about Harte-Hanks, call (800) 456-9748 or go to http://www.harte-hanks.com This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by

Aberdeen Group, Inc. 043008a

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