Using Uplift Modeling to Slash Email Marketing’s Hidden Cost
With constant pressure to reduce costs, marketers often rely on email as an easy and cost-efficient channel through which they can target their entire customer base with offers and promotions. Unlike advertisements, catalogs, and direct mailers, clicking “send” has a virtually negligible per-piece cost, often giving marketers the illusion that email is free. Thus, in an effort to reach as many customers as possible at minimal financial cost, many marketers overlook the pricey consequences that can result from sending mass, untargeted emails to their entire audience.
Email can serve as a platform through which companies can effectively communicate with their customer base, but multiple emails, irrelevant offers, and impersonalized messaging can be a quick way to drive some customers away, causing a drop in realizable customer value. How can marketers ensure that their email campaigns aren’t hurting business? Uplift modeling, an advanced analytic approach to marketing used by organizations such as U.S. Bank and T-Mobile, enables marketers to segment their customer audience to account specifically for such negative effects.
Uplift modeling predicts the difference that a marketing campaign will make on the behavior of customers. By incorporating customer data such as interaction history, current products/services used, and personal preferences, it enables marketers to identify and focus on contacting the right customers while weeding out the customers who will buy anyway, will never buy, or could react negatively to the message.
Uplift modeling divides an organization’s customer audience into four segments: Sure Things, Lost Causes, Sleeping Dogs, and Persuadables. Sure Things are those customers who will buy or renew regardless of whether companies contact them with an extra incentive to buy. In fact, emailing these customers discounts or promotions can work against revenues by presenting them with opportunities to spend less than they would have. Therefore it’s critical to identify the Sure Things in order to avoid contacting them with promotions.
Lost Causes are customers who will never buy or renew regardless of whether they are contacted. Investing time and resources to reach out to this group can be wasteful—but not nearly as detrimental as emailing the Sleeping Dogs, customers who do not want to be disturbed and are likely to be irritated by marketing outreach. Contacting this group can provoke customers to unsubscribe or take their business elsewhere.
Finally, Persuadables are those who react to emails by buying or renewing but who wouldn’t have done so had they not been contacted. These are the ideal customers to target. By using uplift modeling techniques, marketers can easily identify this segment. Uplift modeling has helped U.S. Bank better target its customers, and as a result, it has reduced its mailing volumes by up to 40% and has achieved a five-fold increase in campaign return on investment compared with existing programs.
When used as a channel to conduct mass, blanketed campaigns to an entire customer base, frequent emails, with untargeted and irrelevant messages, can annoy valuable customers who may decide to unsubscribe completely, eliminating the ability to contact them through email ever again.
Even if customers don’t take the time to manually opt out of a company’s emails by clicking on “unsubscribe,” they may have mentally opted out already by flagging these emails as spam, automatically deleting them, or simply ignoring them. Mental opt-out, when a consumer simply dismisses or deletes marketing emails instead of physically unsubscribing, can be difficult for companies to detect, often resulting in wasted time and resources spent on continued marketing.
Email is without a doubt a major marketing channel that can be an efficient way to communicate with customers. For email to be a cost-effective element of any marketing campaign, however, marketers must integrate a highly targeted strategy to ensure that the messages they send customers are relevant, personal, and warranted. While there is little fiscal cost associated with pressing “send,” mass marketers must weigh up the potential costs of lost opportunities that can result from an untargeted approach. In contrast, a calculated, highly targeted email strategy will ensure that organizations build strong, fruitful relationships with customers.
Mark Smith is executive vice president of sales and marketing at Portrait Software, a provider of customer interaction optimization software.
