Survey: Retention-Based E-mail to Surge

Report predicts e-mail will draw from direct mail budgets

The number of e-mail marketing messages received by consumers will skyrocket from the 3 billion sent in 1999 to 268 billion in 2005 – or more than 1,600 messages per man, woman and child in the United States, according to a recent study of both businesses and consumers by Jupiter Communications.

Most of those messages will target existing customers. The survey indicates that e-mail is better geared toward retention marketing than prospecting: Only 14% of consumers surveyed want to receive e-mail from companies that have not had contact with them previously. And yet nearly half of the marketers are using it to prospect, while 61% said they used it to deepen their relationship with existing customers.

There were 2.8 billion retention messages sent in 1999, compared with 240 million prospecting e-mails. But Jupiter expects retention mail's percentage to drop from 98% last year to 86% in 2005, when 236 billion communications will be sent to existing customers. Jupiter projects that 32 billion prospecting messages will be sent that year.

The increase will be partly driven by cost factors. According to Jupiter, the cost per customer contact averages $6 for e-mail compared with $18 for direct mail. The difference is largely due to postage and per-piece creative savings. Up-front creative costs for e-mail average $1,000, as compared to $20,000 for direct mail.

It may cost less, but somebody's department still has to pay for it. Nearly four in 10 companies said that currently money for e-mail marketing came from online advertising funds. A third said that e-mail fell under their direct marketing budget, and 11% said they were funded from their traditional advertising expenditures.

According to the survey, by 2005 e-mail marketing will cannibalize 13% of the money that's now earmarked for direct mailings.

Spending increases on e-mail marketing will reflect these growth trends. Today, companies spend $80 million on electronic retention efforts and $50 million on prospecting. By 2005, retention e-mail expenditures will amount to $4.3 billion, compared with $1 billion for prospecting. But they'll be making it back: According to Jupiter, e-mail marketing revenue will grow from $164 million in 1999 to $7.3 billion in 2005.

Jupiter's report was drawn from a survey the company conducted in March among Web site marketing executives. The consumer research was taken from a questionnaire that was sent out to 5,000 online households. Twenty-six percent of the recipients completed the survey.