The Rise of E-Lists

Economic realities are putting the pinch on direct mail budgets, but B-to-B publishers and the list market are turning to e-lists for relief.

By Jane Zarem
Monday, July 6, 2009

What’s happened to direct mail? Given rising costs and changing customer behaviors, compounded by the current economic meltdown, some b-to-b publishers are mailing less and, in a few cases, have given up direct mail altogether. In the meantime, publishers and the list market are pushing email to fill the void.

“Life has changed,” says Gloria Adams, VP audience development at PennWell. “Direct mail is just not cost-effective anymore.” Other than using it to promote shows and conferences—and its two paid-circulation magazines—PennWell curtailed all direct mail campaigns about five years ago. And PennWell is not alone. Publishers of controlled-circulation magazines, in particular, are increasingly replacing what had been their rather heavy reliance on direct mail with email marketing—or they’re using direct mail efforts to reach only a very small, targeted list of best prospects.

Without a doubt, slashed budgets have been a driving force in the transition from direct mail to email. “The level of prospect direct mail is down significantly,” says Jay Schwedelson, corporate VP at Worldata. “But publishers still need new business to keep their rate bases at certain levels, so they’re focusing on email to drive online subscriptions and are being pretty aggressive with their email offers. email has also become a much more stable environment for marketers than a year or so ago,” Schwedelson adds. “The lists are more reliable, the data quality is far better than it used to be, and the cost of executing email is comparatively minimal.”

But cost is only one reason why publishers are embracing email. Email allows rapid execution and an immediate response. With direct mail, they might wait 6-to-12 weeks for a real understanding of results. With email, they’ll have a decent reading literally within the first 48 hours. “Back in the days when we used direct mail, we were pretty much dead in the water for the last 30-40 days before the end of an audit cycle,” recalls Adams. “Now, I can do an email campaign the day before the cycle closes. Email is that flexible.”

Email files do have problems, though. Open rates are not as good as marketers would like, and deliverability is less reliable than direct mail. “But you know where you stand within a day,” says Adams. “And testing is so easy—I can just email a portion of the file, pick a winner, and then roll out the rest of the file right away.”

Most of PennWell’s email campaigns derive from house lists generated from the publisher’s nearly 40 magazines, its trade shows, and several newsletters. Not only are they the best sources for Adams’s purposes, they’re good sources for other mailers, as well. In fact, email names generate most of PennWell’s current revenue from list rental. The magazine and email files are totally integrated. And since email addresses are confirmed when subscribers qualify or requalify—and email promotions are sent through the fulfillment house, so any bounces show up immediately and are removed from the file—there’s no question about deliverability. “They’re completely clean,” she says. “And even though the quantity is lower, the rental cost of our email is higher than our direct mail list, so it brings in equivalent revenue.”

Of course, publishers of controlled-circulation magazines are always more interested in quality than quantity. PennWell’s integrated email house list is probably half the size of its direct mail list, but email outperforms direct mail by about 3:1, according to Adams, and can be as high as 5:1 in some markets. “And email has brought down our cost per acquisition from about $10-$12 to $1-$2,” she says. “That’s significant.”

Besides subscription promotions and requalifications, Adams uses email for trade show promotions, surveys, and other purposes, including list rental, during the course of a month. “I’m always afraid we’re going to kill the goose that laid the golden egg,” she admits, “but we’ll continue using email until the next great thing comes along.”

Filling the Gap With Telemarketing

Ziff Davis Enterprise has also stopped using direct mail in favor of email, according to Kelsey Voss, senior director, audience marketing. Voss is responsible for eWeek, Baseline, and CIO Insight, all controlled-circulation b-to-b publications. “Our last direct mail campaign was in 2006,” she says. “That was a 100,000-piece mailing, which was very expensive to put together, and the response rate was dismal—less than 1 percent. Our main subscription intake is through online qualification forms, so a printed mailing piece just makes people go through too many hoops to subscribe online.”

It makes infinitely more sense, then, for Ziff Davis Enterprise magazines to send out email offers and notifications with direct links to an online form; and once the subscriber hits “submit,” the completed form goes straight to the fulfillment house. It’s a streamlined process that eliminates errors that can happen with direct mail.
Email is also proving to be the smartest channel for renewals. “Once we receive the Web subscription form, we send an email confirmation,” says Voss, “which pretty much guarantees a correct email address. So our email list is pretty clean, and that makes it very easy to contact the subscriber for a renewal.”

With direct mail out of the equation, Voss employs telemarketing to cover subscribers who don’t want to be reached electronically or are difficult to reach via email. While more expensive than email—but a lot cheaper than direct mail—telemarketing has been a very effective option and produces an enormously high conversion rate, averaging a whopping 60 percent for renewals and 25-30 percent for new business.

Email list costs, quantities, and response rates have varied for new business efforts, depending on the type of list. List exchanges with similar publications, which are cost-free, often pull an attractive 5 percent response, according to Voss, and she might mail as many as 500,000 names. Renting names can be expensive, however, and her response rates for rented e-lists average only around 2 percent. “If we’re testing a rented e-list, we usually take the minimum 5,000 names,” she says. “And with a rented e-list, you must really target properly and be very careful with your selects. You need to make sure you don’t buy, say, 50,000 names and then get a 1 percent conversion rate. That would be the same as using direct mail.”

In fact, publishers are doing a significant amount of email testing, according to Worldata’s Schwedelson. “Their own house files are the best testing ground,” he says, “because if publishers can’t get their email creative or offers to work for their own customers, they won’t work for people who aren’t their customers. The problem is that publishers have invested in countless versions of direct mail packages and offers over the years, and they can’t simply take what works best offline and apply it to email with minor tweaks. It’s apples and oranges. So they’re testing different creative, different offers, and different timing to determine what works for them with email.”

Shifting from Volume to Profitability

While not relying completely on e-lists, Nielsen Business Media has also moved away from traditional direct mail in favor of email. “Our strategy has shifted from pure volume to one of profitability,” says Neil Eisenberg, group audience marketing director, entertainment. “We isolated the best-performing direct mail lists in terms of profitability (mostly house lists) and now mail a reduced quantity. Then we reallocated the money saved toward online marketing, and email is a very large part of that.” Eisenberg is responsible for three titles: Billboard, The Hollywood Reporter, and Backstage (including Backstage.com, which has a separate online subscription service). Backstage was the email marketing test case about two years ago, and its success became the model for the other titles.

The direct mail campaigns—generally four per year—used to include about 100,000 names, and the response rate was less than 1 percent. By reducing direct mail to 15,000 highly targeted names per mailing, the response rate increased, but only slightly, to just over 1 percent. “We found,” Eisenberg adds, “that we could generate an even greater response from our email house lists than from our direct-mail house lists by hitting the audience with email offers multiple times without burning the list and at a much lower cost.” The email response rate has been in the range of 5 percent.

Nielsen Entertainment’s email campaigns are targeted to expires, conference attendees, and site visitors who have a relationship with the brand but haven’t yet subscribed. “We’ve been able to test different terms and prices and get a quicker read on the results than we could with direct mail. When we determine the term and offer that works, we do a follow-up email. And within another month or so, we can do another campaign.”

“Direct mail is so much more involved than an email campaign, where you simply work with a good writer and send the copy off to a service provider,” says Eisenberg. “Email frees up a lot of staff time, so people can focus on the things that work best. There’s no question that email makes sense. But we do need to find innovative ways to identify and capture the email addresses of non-subscribers who have demonstrated an affinity for the brand—anyone with an interest in receiving our content, whether they’re site visitors, conference attendees, newsstand buyers, or e-newsletter subscribers. Then, we can aggressively market to them via email rather than depending on passive house ads or banner ads.”

Email Marketing—The New Normal

Email marketing is becoming “the new normal” in the b-to-b world, according to Donna Buckner, COO and CFO at Statlistics. “When email marketing was new, people were hesitant to use it. The rules and regulations were kind of gray; and if you didn’t abide by the rules, you were heavily fined. Over time, the rules and the terminology have been given a broader range, so publishers are finding opportunity in email.”

Publishers are also interested in allocating more of their promotional dollars online in order to drive Web traffic, adds Jen O’Brien, senior account executive. And once a prospect clicks on a URL within an email message, the site owner has the capability of knowing how much time the individual spends on the site, which part of the site he or she investigates, and so forth. “Through email marketing, they gather much more intelligence about what interests the individual than they possibly could with direct mail,” she points out.

O’Brien finds, though, that some clients expect email rental lists to cost less, because the cost of deployment—typically $100-$120 per thousand—is so much cheaper than for postal mail. “They’re often surprised to learn that, in some cases, the price can be double that of a postal list,” she says, “although all prices are negotiable at this point due to the economy.” She also suggests negotiating multi-channel pricing to interest clients in at least trying email.

In the past few months, though, Schwedelson reports that the differential for renting a b-to-b email list has dropped to a mere 10-15 percent premium over the cost of renting a comparable direct mail list. “On the consumer side, the cost of an email list can be even less than a comparable direct mail list,” he says. “I expect prices to come down even more in the next 12 months.”

Email rental lists are more expensive than postal lists primarily because they have fewer names, they’re harder to keep up to date, and the universe shrinks very quickly. A list with 10,000 postal names, for example, might include as few as 3,000 email addresses, which are further whittled down by bounces and undeliverables. Otherwise, list brokers handle email lists much like postal lists, in that the list owner must approve the order, gets to see a sample of the creative, and reserves the right to deny renting the names for the renter’s particular purpose. And like postal lists, the best, highest quality, top-performing email lists have good hygiene, the selects are controlled and targeted, and use is limited so people don’t receive too many offers too frequently.

The hardest part of email marketing—for everyone involved—continues to be avoiding junk filters and spam blocks. That’s much more difficult on the consumer side, where the ISPs have pretty hefty spam filters, than on the b-to-b side, which are mostly company addresses. “It’s hard to tell from one week to another when or where a mailing piece will have a deliverability problem,” says Buckner. “It can be a nightmare.”

Using a spam-scoring software or service helps by generating a spam score for the creative that catches possible problems— the subject line, fonts, words bolded more than once, the use of color, exclamation points within the message, attachments—elements that may render the email undeliverable.

All that said, publishers who have made email work view it as a completely separate medium from direct mail. Those who are finding difficulty are often trying to take their offline methodology and apply it online. That’s simply not going to work.

Meanwhile, Voss predicts that the use of direct mail will continue to drop significantly in favor of email for all publishers—at least for the short term. “Even consumer publications are using more email,” she says, “as they’re becoming more involved online. But I don’t see direct mail going away completely. In fact, we may see a slight uptick in direct mail in a couple of years—if only because so few people will be doing it. Then, sending out a targeted and appropriate mailing piece might just catch the prospect’s attention. So I wouldn’t be surprised to see direct mail come back in vogue!”