E-Mail marketing realities for financial marketersRay ParenteauE-Mail Marketing, Gramm-Leach-Bliley Act, CAN-SPAM Act, ClickRSVP "Is e-mail marketing a good thing?" If you gathered representatives from 10 different lenders in a room and asked them this question, eight of them would agree with the statement. But if you followed up with, "What is your company doing with e-mail?" I expect you'd be met with thundering silence. E-mail marketing makes many lenders uncomfortable. Though a large number believe they should be using e-mail as a marketing tool, only a few are actually doing it. We estimate that fewer than 10 percent of lenders and financial institutions are using e-mail marketing at all. In a recent report by Marketing Sherpa, 680 e-mail marketing campaigns were sampled, and only 22 (three percent) were financial institutions. I find this astounding because just about everyone has some sort of relationship with a financial institution. More significant is that these are important relationships involving all aspects of moneya product that has all kinds of uses and is especially time-sensitive. When you consider the immediacy and personal nature of e-mail, it's amazing that more financial institutions don't use it for marketing. In all fairness, it hasn't been easy for lenders. First came the Gramm-Leach-Bliley Act. Then the avalanche of spam began, much of it containing dubious offers for mortgages and credit. This was met with growing frustration that led to the CAN-SPAM Act of 2003, along with a host of industry initiatives to stem the tide of "junk" e-mail. Now, the rising concern over "phishing" and e-mail-related fraud has taken the spotlight. Nevertheless, things are changing. A new "Sender ID" standard is being widely adopted and will reduce e-mail forgery. The e-mail marketing industry is becoming more "professionalized," and consumers are smarter about using e-mail. In short, e-mail marketing is poised to become a serious tool for lenders and financial institutions. Here is a reality check on what's needed to make it work for you. It's Easier Than You Think As a legitimate marketer, you can effectively use e-mail and comply with CAN-SPAM as long as you have an active relationship with the recipient. Your customer or an active prospect could qualify as such. However, the basic rule is that you cannot contact anyone who has opted out of receiving your messages. Period. For non-customers (prospects), the rule is more stringent, and you must have an explicit "opt-in" from your prospect in advance. Therefore, if you have e-mail addresses for your customers, you can send them promotional e-mails provided that you follow these five basic rules: *The recipient has not opted out; *Your message contains a working opt-out mechanism that you must process within 10 days; *You include your physical address in the e-mail; *Your message is clearly promotional in nature; and *No part of your message (subject, sender, etc.) can be deceptive. The significance here is that you can e-mail your customers and enjoy the benefits of cross-selling and up-selling. It's called "relationship marketing," and it works. Yes, you will get a few opt-outs, which typically total less than 0.5 percent, but the upside is compelling. All you need to do is follow the aforementioned rules. It's Harder Than You Can Imagine Given today's e-mail climate, managing a professional e-mail marketing program requires expertise and systems that most lenders do not currently have. Marketing Sherpa estimates that it costs upwards of $150,000 per year to sustain a professional e-mail marketing program in-house. The reality here is that, unless you have the internal resources to commit, it's best to outsource to a professional service. Besides the technical issues involved in preparing and delivering professional e-mail, there are numerous obstacles to having your message received. While delivery rates have always been hampered by frequent address changes (upwards of 30 percent per year), today's e-mail marketer must run the gauntlet of being "white listed by Internet Service Providers (ISPs) like AOL and Yahoo, spam-proofing copy, managing bounce-backs and processing opt-outs. If you don't comply with these industry standards, chances are that 30 percent or more of your e-mail campaigns won't even reach your target. The good news is if you establish and maintain an e-mail relationship with your customers and prospects, your deliverability and effectiveness will significantly improve. Because we practice "relationship marketing," our financial clients experience bounce rates of less than 10 percent and opt-out rates of less than one-quarter percent. Keeping a Clean List is Job One It used to be that measuring click-through responses and messages viewed were the key measures of an e-mail campaign. Today, it's about "deliverability," how much of your e-mail gets through. The most critical component for improving deliverability is list hygiene. For instance, if your campaign includes AOL customers and your rate of bad AOL addresses exceeds 10 percent, the rest of your campaign may be dumped. Likewise, if too many AOL customers use the "Report Spam" option on your message, you'll become blacklisted. Consider that AOL accounts for approximately 40 percent of consumer e-mail addresses, and then you can see the problem. And AOL is not the only one. More major ISPs (Yahoo, Hotmail, Earthlink) are implementing spam-blocking procedures that are directly based on the quality of the list and reputation of the sender. Again, the solution boils down to maintaining that relationship with your e-mail list, which partly involves quality of content but mostly concerns the basics: removing "dead" addresses, honoring opt-out requests promptly, and maintaining a current, centralized "do not e-mail" file to purge against future campaigns. Response is Not Always the Objective E-mail marketing is not direct-mail marketing. While the goal of direct-mail marketing is always response rate, that's not the whole story for e-mail marketing. In the new reality of e-mail marketing, the main objective should be "address retention," keeping an address current and active. Your goal is frequent e-mails to your customers and prospects. If you don't e-mail often enoughat least four times a yearyour deliverability could deteriorate to the point of becoming blacklisted. E-mail campaigns that are designed simply to stay in touch, without being annoying, can be very effective. So, make it a point to send some e-mails that aren't asking for an order. You goal is to build a good working relationship, which means not always being in selling mode. For instance, we offer a service (HomeValueBot) that allows lenders to provide their contacts with a free home value update on a quarterly basis. There is no hard sale pitch involved, but there is a relevant value to the recipient that builds a relationship. For example, one of our large credit union clients used this tactic and achieved a 27 percent response rate, directly generating more than $2.5 million in new equity lines in just six weeks. Relationship Marketing Works Non-promotional e-mails achieve success on three levels: they keep you in touch, keep your e-mail list clean, and generate some direct business. Regular e-mail contacts should be part of an overall mix that converts and retains customers. One of our clients (a $10 billion regional bank) decided to stage a customer appreciation day. They used e-mail to invite some 80,000 customers. More than 1,100 customers responded on the Web site and helped make the celebration a success. The e-mail cost was about $5,000, which is a fraction of what direct-mail would have cost. The reward was priceless. Another community bank client sends out regular e-mail reminders about CD rates and branch openings, with no response required. Although this is not an "opt-in" list, the opt-out rate is less than one-tenth of one percent. That tells me that customers don't mind hearing from their bank once in a while. Which brings us to another benefit of regular customer e-mails: customers know what your e-mails look like. It helps battle the recent explosion of e-mail scams and "phishing" attacks that customers have received from scam artists posing as financial institutions. If a legitimate financial institution stays in regular touch with their customers by e-mail, their customers know what their e-mails look like. It helps them screen out the scam artists. The bottom line is this: Don't let the complexities of e-mail keep you from staying in touch with your customers. With the right resources and systems in place, it can be an effective way to cross-sell and solidify your relationships with your customer. So, what are you waiting for? Ray Parenteau is president of Hopedale, Mass.-based ClickRSVP, a provider of e-marketing services to financial institutions and lenders nationwide. He may be reached at (508) 478-0440 or e-mail [email protected].