Role Of A Channel: E-Mail

Your Channel Advisor creates a profile of each channel, determining the role each channel plays in your business. Let's look at an easy marketing channel like e-mail.

• Does The Channel Scale? The answer, undoubtedly, is no. For most businesses I work with, e-mail comprises somewhere between 2% and 10% of total annual sales ... usually closer to 2% than to 10%. You could really do a spectacular job of e-mail marketing, and you might increase sales a few percentage points. So this isn't going to be a channel that carries the freight. E-mail is a support channel, an important role, but a role of support.

• Does the channel do a good job of acquiring new customers? In most cases, the answer is no. The number of new customers from e-mail, on an annual basis, are generally under five percent of the total number of new customers ... and for many businesses, under two or three percent. This tells you that e-mail isn't a channel that you use to start new relationships (though it certainly could be if the right formula is discovered), and is probably not a channel you'd launch new businesses or product lines with. Your mileage may vary.
  

• Does the channel aid in profitable customer retention? Yes and no. E-mail doesn't dramatically move the annual customer retention metric --- without an e-mail marketing program, the retention rate might be 40%, with a program, maybe 44%. However, the channel has essentially no variable cost, so all the sales (if the channel isn't a discount/promo/free-shipping channel) flow through to profit at a high rate.

• Does the channel aid in customer service? Maybe a little bit, though certainly not in the way that folks use social media to solve consumer complaints. Because e-mail isn't a "human" channel, it fails many of the customer service tests that retail and call centers pass.
  

• Does the channel feed other channels? Yes, and other channels feed e-mail. Many businesses acquire e-mail addresses through their catalog channel and through their retail channel. So e-mail is utterly dependent upon those two channels for survival. However, e-mail feeds other channels. Retailers know that half of their e-mail generated sales happen in stores, so that's a big deal. And e-mail fuels paid search --- you send an e-mail marketing campaign to a customer, and the customer goes to Google to do some research. Google loves e-mail marketing! Finally, most catalogers know that up to half of their e-mail orders come from a customer who received a catalog in the past "x" days, so e-mail can feed the catalog channel. E-mail makes your online marketing executive look good! As a result, e-mail is an important link in the "channel chain".

• Does e-mail marketing generate profit? Oh yes! With essentially zero variable cost (don't give me that argument about the need to hire people to execute e-mail, all marketing channels have to hire people to get the work done), e-mail flows-through to profit at the best possible rate. I know of catalogers who break even on nearly all activities --- making all of their profit from e-mail marketing, even though e-mail marketing only represents ten percent of total annual sales.
  

• Does e-mail marketing educate customers? Yes again! In fact, if we're not using e-mail to educate customers, we're failing. E-mail marketing is maybe the most inexpensive way to teach customers about us. In many ways, we ruin e-mail marketing by trying to "sell" all of the time --- using our open rate and click through rate and conversion rate metrics to go to the lowest common denominator of free shipping and %-off promotions.

• What is the exit strategy for e-mail marketing? Oh, this is a delicious question. Under what circumstances would you shut down your e-mail marketing program? If I asked 100 of you this question, I doubt more than 5 would say that e-mail marketing should be shut down, ever But please, be realistic. If your e-mail list was declining by fifteen percent a year, would you consider shutting the channel down? If productivity fell to $0.05 per e-mail (as many of you tell me is happening), would you just stop wasting time and give up, allocating resources elsewhere?
  

• What is your R&D strategy for e-mail marketing? This isn't as simple a question as "we're testing subject lines". Do you have an R&D strategy that includes completely ending your current version of "creative", scrapping it for something so new and different that you'd frighten your e-mail marketing manager? How about the 80% of e-mail subscribers who don't click on anything ever --- why keep doing the same thing over and over and over and over 104 times a year, might this represent an R&D opportunity --- you're certainly not risking any sales here?! Anyhow, every Channel Advisor has an R&D strategy for e-mail marketing, whether the e-mail marketing manager wants to honor it or not.

• Does e-mail marketing lend itself to in-house expertise or vendor expertise? Oh boy. OH BOY! The answer is yes. Your in-house staff know how to work with merchants, they know how to work with that pesky inventory manager who wants to keep dumping overstocked goods in a third-weekly e-mail campaign. Your in-house staff knows that the CFO is demanding a 5% sales increase NOW and therefore you have no choice but to add the third weekly e-mail campaign that the inventory manager is waiting to pounce on. But wait! Your vendor knows the best targeting algorithms. Your vendor knows more about getting the e-mail in the inbox than anybody. Your vendor knows the right days of the week to send e-mails, and knows how many is "too many". Your vendor might hurt sales by asking you to reduce frequency or to trim your e-mail marketing list. So you're best off going with both in-house and vendor expertise, in my opinion.

So what is the role of e-mail marketing? It appears that e-mail marketing is a support channel, one that marginally improves customer retention, fails to attract scalable amounts of new customers, and contributes a minority of sales that are usually very, VERY profitable. This channel educates customers, it interacts with catalog marketing and paid search, and it generates sales in other channels without directly getting credit for the sales. E-mail easily lends itself to significant R&D efforts with minimal impact on top-line sales.

Now, given this profile, how would you, the newly appointed Channel Advisor of your company, propose using e-mail marketing? How would you educate each and every employee in your company about the important (but support-level) role that e-mail marketing plays?

The Role Of Channels

In basketball, we all look to superstar players for inspiration. We enjoy watching the player that can record a "triple-double", ten or more points, ten or more rebounds, ten or more assists, in one game.

The "triple-double" is like "multiple channels".

Here's the thing. A superstar player has a hard time achieving a triple-double without serious help from his/her teammates. You cannot score more than ten points unless somebody passes you the ball. You cannot achieve ten assists unless your teammates can make shots.

In other words, each player has a role.

Now, allow me to ask you a question. Who, when you are meeting in your strategy sessions, assigns the role of each channel, so that all employees know what role each channel plays in your business?

Don't feel bad if you haven't identified who plays that role in a business. And don't expect that person to be the CMO, either. We haven't trained chief marketing officers to think strategically about the roles that channels play.

I will say that the most talented multichannel employees tend to intuitively know what role each channel plays. This could be just about any employee in your business, couldn't it?

On a piece of paper, write down the following channels, and the role each channel plays in contributing to the success of your business.

• Catalog Marketing.
• E-Mail Marketing.
• Paid Search.
• Natural Search.
• Banner Ads.
• Affiliate Marketing.
• Shopping Comparison Sites.
• Orders Via Your Call Center.
• E-Commerce Orders.
• Sales Force.
  
• Live Chat.
• Google.
• Amazon.
• Video Commerce.
• Landing Pages.
  
• Retail Stores.
• Outlet Stores.
• Outlet Tabs On Your E-Commerce Website.
• Facebook.
• MySpace.
  
• Twitter.
• Your Blog.
• Radio.
• Television.
• Newspapers.
• Auction Sites.
• eBay.
• Drive-Through.
• ATM Machines.
• Local Branches.

How did you do? Ask yourself the following questions, for each channel:

• Does the channel scale? In other words, can it become one of the top two or three sales volume channels? If the answer is no, why do you participate in the channel?
• Does the channel do a good job of acquiring new customers? If the answer is yes, do the customers have an acceptable long-term value? If the answer is no, what is your strategy to deal with low-LTV customers?
  
• Does the channel aid in profitable customer retention? In other words, if you eliminated social media, would your annual retention rate change? If the answer is no, why are you participating in social media?
• Does the channel aid in customer service? In other words, does the channel solve customer problems? If the answer is yes (i.e. call center), ask yourself why you pay those folks $11 / hour while you take home $175,000 a year while not speaking directly with your customers?
  
• Does the channel feed other channels? If television advertising drives customers to your website, and your website drives customers to your stores, and customers generate profitable sales in your stores, then you established a successful micro-channel path. Hint --- the secret to successful multichannel marketing is to thoroughly understand and exploit profitable micro-channel paths. Quick ... name your five most profitable micro-channel combinations?
  
• Does the channel generate profit? Having an unprofitable $3,000,000 store doesn't do your brand any favors.
• Does your channel educate customers? Catalogs, websites, and e-mail are good at education. And education leads to demand generation. And demand generation is the secret to profitable success. Most of the Web 1.0 advertising channels are not capable of demand generation --- they focus on demand interception, an important but different role for those channels.
  
• What is the exit strategy for each channel? In other words, what is the future of, say, e-mail marketing? What are the conditions under which you would decide to discontinue e-mail marketing?
• What is your R&D strategy for emerging channels? It is one thing to be on Twitter, telling your customers that chinos are on sale for $29.99 and that your chief merchant ate a burrito for lunch. It is quite another thing to think strategically about how you will use the channel for research and development. How much time and money do you invest in an emerging channel, and when do you pull the plug?
  
• Does the channel lend itself to in-house expertise or vendor-expertise? There are advantages to both, aren't there?

If a channel fails to deliver across most of the questions listed above, ask yourself why you participate in that channel? What would happen if you dropped that channel, and re-invested your money elsewhere?

Your homework assignment for April is this:

• Assign one individual in your company the role of "Channel Advisor". This individual determines the role of each channel, and actively communicates the role each channel plays in the success of your business (using tools like Multichannel Forensics) to every employee in your company.