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“We Know Who You Are” Is a Profitable Pitch

Despite privacy concerns, businesses can benefit from including personalized information about potential customers in their email advertising appeals.

Bottom Line: Despite privacy concerns, businesses can benefit from including personalized information about potential customers in their email advertising appeals.

Traditional advertising approaches — billboards, TV and radio commercials, and print ads — are, by the nature of their media, not very personal. Marketers don’t know who, in fact, is looking at an ad from one moment to the next. That is why department store pioneer John Wanamaker’s clever century-old quip is still relevant today: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

And despite the ability to track anyone’s movements on the Internet and analyze an individual’s interests and purchases — and ostensibly match display ads to people’s preferences — marketers are similarly in the dark about sales directly linked to their digital campaigns. As a result, whether online or offline, advertising content itself is geared toward reaching broad audiences with either an informative message (product features, benefits, and advantages) or an emotionally persuasive approach (using humor, for example, or a celebrity spokesperson’s likeness or endorsement that has nothing to do with the specifics of a product or service).

The one channel that offers at least the possibility of appealing to consumers in an immediate and intimate way is email. People can be targeted on the basis of their Web behavior, and their response — a clickthrough, a purchase, a move to trash the correspondence unread, or a request to unsubscribe — can serve as valuable marketing data for future email campaigns. Ironically, though, emails tend to be just as impersonal as other marketing efforts. Businesses are wary about crossing the line between marketing and stalking and have only gingerly customized email ads, caught between recommending products that recipients might be interested in and being intrusive. They fear a backlash from consumers who would be turned off by unsolicited messages popping up in their inbox that appear to know too much about their Web habits.

In its broadest application, that concern may be valid, but it also may be encouraging marketers to be too tentative, at their own peril. According to a new study, email messages generate far more sales leads and ad link clicks, and have lower unsubscribing rates, when they grab recipients’ attention with certain personal information — most importantly, their names.

Email messages generate far more sales leads and ad link clicks when they grab recipients’ attention with certain personal information.

The authors collaborated with three organizations in varied industries that use email marketing for different purposes, making this probably the first large-scale, real-world study to examine the relationship between personalized email advertising and its effects on consumer engagement. Collectively, across five separate empirical experiments, the authors analyzed the consumer response to more than 2.5 million emails.

The main company in the study sells US$1,000 CFA and CPA test preparation packages to working professionals around the world. Geared toward acquiring new global customers, the firm’s marketing campaign relies on email to sharpen an otherwise broad and unwieldy target demographic.

The authors randomized the recipients into two sets: those whose first names were in the subject line of the email, and a control group whose names were not. Otherwise, the body of the emails was the same, beginning with an introduction that used the recipient’s name before describing in detail the company’s software and coursework.

The recipients were nearly 20 percent more likely to open an email when it had their name in the subject line, the authors found, which resulted in a subsequent boost of almost 31 percent in sales leads and a 17 percent reduction in the number of consumers who unsubscribed. And those numbers are significant: The firm values each sales lead — wherein a recipient replies with an interest in buying the product — at $100, even if the email exchange doesn’t result in an immediate purchase. The findings were so dramatic that the company decided at once to include recipients’ names in the subject lines of all their marketing emails.

The authors extended their initial experiment to two more organizations operating in very different sectors. One was the largest online retailer in South America, whose customers were located in 13 different countries; its email campaign was intended to re-engage with previous customers, not to find new ones. The other was a prestigious university advertising its executive education program via email.

These studies generated positive results similar to those of the initial research. In the case of the retailer, the authors concluded that personalization clearly had value even when organizations were reaching out to consumers who had already dealt with them and had likely already formed an opinion of them.

The authors ran a separate experiment in which the CFA/CPA test software firm included the name of the recipient’s company in the body of the message. This further improved the number of sales leads and lowered cancellation rates, the authors found, showing that the positive effects of personalization aren’t limited to a consumer’s name or the subject line of an email.

The manifest impact of email customization came through in a final trial that tested the strength of combining a promotional message with a personalized element. In this experiment, the mention of a possible discount in the test prep company’s emails barely increased sales leads when the recipient’s name was not in the body of the email. But when recipients were addressed by name at the beginning of the message, the discount offer significantly boosted the number of sales leads generated.

As simple as it sounds — and as counterintuitive to privacy concerns as it may appear to be — psychologists have shown that people automatically react positively to their own name, and tend to appreciate ads that appeal to some aspect of their own identity. Given that Internet marketers have to cut through considerable inbox clutter to grab consumers’ attention these days (the rise of smartphones means people increasingly check their email while multitasking), personalizing emails could prove to be a simple way to seize and hold attention.

After all, across all of the tests, recipients didn’t just open personalized emails more often; they also were more likely to actively respond to informative ad content. That indicates that leading with personalized content could make consumers concentrate harder and retain more of the important, explanatory information firms truly seek to convey.

Source:Personalization in Email Marketing: The Role of Non-Informative Advertising Content,” by Navdeep S. Sahni (Stanford University), S. Christian Wheeler (Stanford University), and Pradeep Chintagunta (University of Chicago), Stanford University Graduate School of Business Research Paper No. 16-14, Jan. 2016

Matt Palmquist

Matt Palmquist is a freelance business journalist based in Oakland, Calif.

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