Ever since e-commerce executives had their allowances yanked by the capital markets and venture capitalists, e-mail marketing has been hailed as a savior of sorts -- a low-cost way to reach consumers and bring them back for more.
The only problem, of course, is that the more time people spend on the Web, the wearier they grow of e-mail marketing. According to a March report from Forrester Research, about 40 percent of people with at least four years of Internet surfing experience generally ignore e-mail marketing. For those with a year or less of online experience, the tune-out number is about 20 percent.
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So even as the field of dotcom survivors narrows, it is not necessarily a safe bet that e-mail promotions will get the same notice from consumers as when there were hundreds of e-tailers fighting for attention.
As a result, a growing number of e-commerce companies are hedging their bets with the terrestrial equivalent of spam: paper junk mail. Internet executives and analysts say that direct-mail campaigns are gaining popularity among online companies, despite the fact that physical mailings cost far more than e-mail.
"With the growth of the Internet, you'd guess that people are moving away from paper communications and more toward electronic interactions," said Tom Shimko, a partner with Peppers & Rogers Group, a consulting firm. "But that's not necessarily the case."
Certainly consumers still have an affinity for paper advertisements. According to a recent study conducted by Shimko's firm and sponsored by Pitney Bowes, a marketer of mailing systems, 34 percent of respondents said direct mail was most effective in establishing a relationship with them, compared with print ads (30 percent), television (25 percent), radio (5 percent) and e-mail (4 percent). It might have been more surprising, of course, if a survey sponsored by Pitney Bowes had not found that paper mailings were highly effective.
"A lot of this is about control," Shimko said. Direct mail is "certainly less intrusive than e-mail," he said, "and there's no great way to store or retrieve e-mail, so it's not easy to take it with you on a plane or a train and look at it when you want to."
Peapod.com, the Internet grocer, puts much more emphasis on direct-mail marketing than on e-mail, said Michael Brennan, Peapod's senior vice president for marketing. "People just can't get to their e-mails now, it seems, so breaking through that clutter is becoming a greater challenge," he said. "With direct mail, you have maybe a couple more seconds to get someone's attention."
Shimko would not disclose the amount his company spent on direct-mail advertisements, but he said such efforts were a core component of Peapod's marketing.
"We're a little different from other Internet companies, in that we have to build sales in a local market," he said. "And direct mail helps us target certain ZIP codes so we can fill a truckful of orders."
In the movement toward direct-mail marketing, some pessimists remain. Joseph Kennedy, president of E-Loan, the online lender, said, "E-mail enables us to be relevant in ways direct mail never could."
Kennedy said he had recently conducted a co-marketing campaign with Charles Schwab, the financial-services firm, mailing "hundreds of thousands" of e-mail messages and direct-mail pieces to prospects in the US. Without being specific, he said the e-mail response was superior, in part because the message within the physical mailing "had to be more generic."
"We can do an e-mail based on the fact that Greenspan had this to say about the economy, and the bond markets reacted this way," Kennedy said. "And that has higher value than a much more generic thing we put together with a 10-day lag time."
Kennedy and other executives said another downside to physical mailing was the expense of designing, printing and putting postage on a piece of mail, the combined costs of which, executives said, often exceed 25 cents for a postcard-size advertisement. E-mail ads, by contrast, can cost less than a penny for each one sent.
But some companies, like CarsDirect.com, have found ways to reduce the costs of direct mail. Chuck Hoover, the company's vice president for marketing, said CarsDirect had recently tested direct-mail advertising by including inserts in American Express bills.
From April to June, American Express mailed 4.1 million inserts promoting an offer of 10,000 frequent-flier miles for customers who bought cars on CarsDirect. Hoover did not disclose how much the mailing cost, but he indicated that it was much less than conventional mailings, because American Express essentially paid the postage.
"We paid to produce the inserts, and we're paying Amex for the miles when someone buys a car," Hoover said. "It's not a big fee."
And because CarsDirect tracks the response rate with American Express, Hoover said, his company gathers useful demographic and geographic information about the types of customers who respond to such offers through the mail.
In the past, Hoover said, CarsDirect had experimented with other direct mailing efforts. "But the challenge is that there's a lot of production expense and the operational expense in terms of finding the right mailing list, and so forth," he said.
With the American Express mailing, Hoover said, that hurdle was cleared. "They helped target the mailing a little, but their customer base skews a little high in terms of income," he said. "And the number of Amex users was high on our site anyway, so their mailing list alone was, in some ways, targeting for us."
Hoover said the company was extending its agreement with American Express through the end of the year. (It had been scheduled to expire in September.) "We have targets for what it costs us to sell each car," he said. "We don't reveal that, but the results of mailing were right in line with that."
Others, like Bluefly, an online retailer of discount apparel, have also found ways to skirt some mailing costs and still get the benefits of direct-mail advertising. Jonathan Morris, Bluefly's executive vice president, said the company had put promotional material from FragranceNet.com and others inside Bluefly packages, in exchange for similar treatment from their e-tail partners.
"That way, we can piggyback on someone else's shipping costs," he said. "And it's been extremely effective in acquiring new customers."
The company has also gone the conventional route, paying about US$60,000 in postage and production costs to send Bluefly postcards to 200,000 households late last month, and US$200,000 more to send a 12-page mailer to about 400,000 customers this spring.
Whereas "a fraction of a percent, to a couple percent" of those who receive Bluefly e-mail solicitations turn into paying customers, 3 percent or 4 percent of those who are sent Bluefly postcards make purchases, Morris said.
Of course, that does not justify repeated mass mailings. "If I send postcards that cost 30 cents each, versus e-mails that cost a penny, is the postcard going to be 30 times more effective?" Morris said. "The answer is, it depends." The factors include the quality of the offer and the extent to which the mailing includes people who are predisposed to shop with Bluefly.
The company is still trying to determine whether those who respond to paper mailings tend to spend more on each purchase, or spend more over a longer period, than those reached online. "This is going to take us some time to figure out," he said. "That's why direct mail isn't perfectly suited for dotcoms that don't necessarily have the luxury of time."
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