Monday, July 28, 2008

Marketing Case Study: Email and Segmentation

Last week we had a nice discussion about the new environmental guidelines for direct marketers, just introduced by the Green Marketing Coalition. One of my suggested additions to their guidelines was to incorporate marketing channels that do not require paper. Another suggested addition was to better target mailings, again to reduce the amount of paper used.

Well, this case study, coming to us from BtoB Magazine is an excellent example of doing both of these things--moving from DM to email marketing AND using segmentation to better target campaigns. Thought you'd be interested.

Background and Initial Results:
E-mail marketing has been a boon to Analog Devices, a manufacturer of semiconductors and supporting products for signal processing applications. Five years ago, the company started testing e-mail marketing against direct marketing and saw an instant winner, said David Kruh, direct and database marketing manager for Analog Devices.

“It cost us about $1 per piece to print and mail a brochure, but it only costs about one cent to send an e-mail,” he said. “Furthermore, e-mail is trackable. ... When we tested e-mail versus direct mail, we found we were getting hundreds-of-times-better response rates for e-mail marketing.”

Fine-tuning the Program:
But as successful as e-mail marketing had been for his company, Kruh knew he could do even better. Working with e-mail service provider Experian CheetahMail, Analog Devices revamped its program, focusing on list segmentation, extensive testing, personalization and the use of affinity analysis, a graphically based data analysis tool that uncovers common behaviors, relationships and characteristics of people who buy specific items.

For list segmentation, Kruh split his list into two distinct groups: one he termed “tire-kickers,” who fall into the hobbyist or student category, and the other more influential group that includes designers and consultants. He did so to help his salespeople gain better-quality leads, he said.

“We’d send out our ‘Solutions Bulletin’ and some months get 3,000 requests for samples, But the sales didn’t follow the requests,” he said.

After digging deeper, Kruh’s team saw that the people who purchased most often were also the ones who clicked through to fewer links. “The more activity we saw in terms of clicks, the less we saw in terms of revenue,” he said. “It makes sense. Who has time to go clicking around a Web site? Hobbyists, students, and people at smaller companies or research facilities.”

Kruh ceased sending direct mail to the unprofitable group; at the same time, he started sending specific, targeted e-mail messages to the profitable group. He also tested dayparting and personalization for both groups. Doing so revealed that Thursdays beat Tuesdays by 15% across the board. He also learned that sending a message at midnight beat midday by 10%, and that sending messages at midnight resulted in one-third fewer unsubscribes.

“The way we see it is engineers come to work, have coffee and read their e-mail to get their days started,” he said. “By noon, things are piling up for them and they don’t have time to read our messages.”

Personalizing messages—a strategy that Experian CheetahMail encouraged but Kruh initially resisted—has also helped significantly, translating into 10% to 60% higher click-through rates.

The final piece to the e-mail puzzle, Kruh said, has been affinity database analysis, which helps the company figure out, for example, what other parts someone who buys an amplifier is likely to buy.

“In 2007 we ran a campaign to introduce a new sensor amplifier. We got 25% better click-through rates with the affinity populations than with the folks who were previous amplifier purchasers,” he said. “Part of what we believe is people who are already buying our amplifiers know all about them, so the information we are sending is not of as much interest.”

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