Email benchmarking report UK 2010

COPYRIGHT: THE DIRECT MARKETING ASSOCIATION (UK) LTD 2011

EMAIL BENCHMARKING REPORT HALF 2 2010

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Email BenchmarkingReportHalf 2 2010

Sponsored by



Introduction 3

Sponsor perspective 4

1. Mailing volumes and state of the industry 5

2. Strategy and segmentation 11

3. Metrics 15

4. Deliverability 18

Contents



IntroductionThe overall aim of the DMA Email Marketing council continues to be to develop and promote email marketing as an effective and efficient channel. To achieve this vision the Council defines and disseminates best practice. Further the DMA provides its members with leadership, direction and support in their professional activities, and represents DMA members’ collective interests to the business community, legislative bodies and public at large.

The continued purpose of this report is to provide DMA members involved in or considering email marketing as a channel, with a reliable series of benchmarks that aid their planning and help them make informed marketing decisions.

This, Half 2 2010 National Email Marketing Benchmarking Report contains data collected during spring 2011, specifically relates to July, August, September, October, November, December data

The survey is completed by leading UK Email Service Providers (ESPs) who deliver the majority of outsourced email messages to business and consumer accounts in the UK.

ESPs surveyed include member and non-member companies. Results are self-reported using their own calculations. Data is collected via the DMA with the help of Business Bound. All data is provided on a confidential basis and aggregated and analysed by the DMA’s research team.

This report is made possible through the generous time given by certain key individuals. Firstly and most importantly thanks to all ESPs who continue to contribute and to Alchemy Worx for sponsoring this study.

Thank you to every member of the Benchmarking Hub; Dela Quist (Alchemy Worx Ltd.), Richard Gibson (Return Path), Steven Ledgerwood (Emailvision), Matthew Simons (Acxiom Digital), Rob Manning (Jacob Bailey), Joe Hunter (ExactTarget), Fiona Robson (Rocketseed). Also to Mark Brownlow, our report editor, and of course Lynn Hewitt of Business Bound who liaises with all ESPs to ensure that data is collected accurately and in a timely fashion. Ross Caddy also deserves special acknowledgment for his tireless work in project managing this study.

James BuntingChairman, Benchmarking Hub, DMA Email Marketing Council



Sponsor perspectiveWelcome to the DMA’s 2H 2010 report, which provides a detailed insight into email marketing trends in the UK. This report demonstrates significant growth in the email channel – both in terms of volume and sophistication – and these findings certainly mirror our experiences here at Alchemy Worx. What about you?

While email volumes were up 60% year on year, traffic to websites increased by 70% and we believe this reflects a growing understanding of the power of the email channel. Today, our clients are sending more emails than ever before as they begin to embrace the ‘more is more’ maxim. With increases in volume and frequency, of course, comes the corresponding challenge of producing ever more innovative emails, and the demand this places on internal resources. So it comes as no surprise that time and resource are the primary barriers to delivering on this.

This report also addresses what for us is the key question in email marketing today: how do we sustain this success story? In our view, it also supplies the answer – and a good deal to be positive about, too. When it comes to sustaining success, the email sector in the UK is clearly on the right track.

Dela QuistCEO, Alchemy Worx

http://www.alchemyworx.com/

http://www.alchemyworx.com/



1. Mailing volumes and state of the industryFor a long time, experts have pleaded with businesses to view email as much more than a simple, low-cost broadcast messaging system.

Ironically, it was just these qualities that attracted interest from marketers looking for a dependable source of leads and sales in the challenging financial environments of the last couple of years.

As such, email found itself in a solid position midway through 2010: media and marketers alike had come to accept the value of a basic email programme to business success.

Two questions for H2 concerned the sustainability of this success story, and whether email would continue its newly-respected “workhorse” role or expand to see more advanced tactics and strategies grow in favour. After all, marketers had access to a wealth of new tools and tactics through ESP innovation and the promise of integration with social media and other channels.

Chart 1: How many individual emails did you send in...?

Across the second half of 2010, email volume grew by 35% to reach a new high in December, when ESPs each sent out an average of just under 102 million emails.

Growth in email volume across the year was around 60% and the December number some 15% higher than in the same month in 2009.

Email volume seems to have settled into a pattern of steady increases, characterized by a slow start to the year, a seasonal peak in early summer and strong growth during the lead up to Christmas.

The year-end holiday email impact is confirmed by the ESPs, who cited seasonality more often than any other factor as the primary driver of volume changes across the last two quarters. This compares with Q1 and Q2, where budget availability played a far more prominent role.

The last quarter of 2010 also saw a record number of campaigns go out the door at an average 8845 per ESP.

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Chart 2: What do you see as the primary driver of the change in the volume of emails sent from the previous quarter?

Chart 3: How many campaigns per month do your clients manage using your tools and how many campaigns per month do you manage on behalf of clients?

These buoyant numbers and year-on-year growth partly mirror changes in email budgets. When comparing Q4 2010 with Q4 2009, only 6.3% of senders spent less, while almost a third spent between 21% and 40% more. Most senders (50%) either kept Q4 2010 budgets the same as in 2009, or spent up to 20% more.

Chart 4: Taking Christmas 2009 as a comparison period, what was the increase / decrease in email spend?

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Nevertheless, budgets throughout 2010 were still likely constrained by the scars of recession. A December 2009 survey by Silverpop, for example, showed nearly half of marketers intended to keep their email budgets the same over the following 12 months1.

Chart 5 confirms this uncertainty, with ESPs revealing their own clients more likely to maintain or reduce budget levels, rather than invest more in email in H2 2010.

Chart 5: How did market conditions affect your clients?

Going into 2011, the budget picture worldwide is more optimistic. For example:

In January 2011, BtoB Magazine found 63% of survey respondents intending to increase email spend, with 29% •keeping their budget constant2

According to the 2011 Digital Marketing Outlook Survey, 70% of brand marketers planned to invest in email •marketing in 2011…the joint highest result3

Predicted growth in ESP business already begins to give some clues as to where this email marketing investment will focus.

All ESPs were either “very confident” that their volume of business will increase in 2011 or at least expected some degree of volume growth.

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1http://www.silverpop.com/news/press/2009/email-marketing-budgets-survey.html2http://www.emarketer.com/Article.aspx?R=10081963http://www.slideshare.net/sodaspeaks/society-of-digital-agencies-soda-2011-digital-marketing-outlook

http://www.silverpop.com/news/press/2009/email-marketing-budgets-survey.html

http://www.emarketer.com/Article.aspx?R=1008196

http://www.slideshare.net/sodaspeaks/society-of-digital-agencies-soda-2011-digital-marketing-outlook



Chart 6: How confident are you that your business will increase in the following during 2011?

There was also confidence in the business growth of add-on services such as analytics, strategic advice or creative services, but not as much as for basic volume growth. So at least some budget increases are simply going into sending more email.

This reflects the maxim that more emails equals more response and more profits, especially given the relatively low marginal costs of each additional email.

The long-term success of the “more is more” approach does, however, require complementary improvements in the value of the offer/content delivered to subscribers and application of other tactics designed to improve targeting and/or the email experience. The impact of simply increasing frequency can otherwise wear off quickly4.

The push to send more email is also driven by the closer focus on ROI, also revealed in Chart 5.

High ROI comes from low costs as much as high revenues. When the focus is on ROI as a prime metric, the danger is that a sender looks solely to keep costs down. More investment in email tactics and tools can actually lower ROI (as costs rise faster than revenues), but can also increase overall profits significantly.

Regardless of expectations of future business growth, Chart 7 shows there has been little change in the availability of add-on services at ESPs.

Chart 7: Which of the following services do you provide to your clients?

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One area where there is less confidence about business growth is in content development. This is a little surprising since the “Content is King” mantra has experienced a renaissance of late. Potential benefits for email senders include:

Reader engagement and loyalty: product how-tos, for example, help customers get more out of their purchases •and content can keep readers engaged when they are not currently interested in promotional offersConversions: independent product reviews, for example, help purchase decisions •Competitiveness: useful content helps senders stand out from the competition•Sharing: valuable content provides good material for people to share with their online networks. It also supports •sharing by those subscribers disinclined to pass on purely promotional offers. In a recent survey5, “interesting content” was the top answer when Europeans were asked why they shared an email newsletter on social networks

One problem with a more content-focused approach is that the impacts are often long-term and not easily measurable or attributable. However, some success stories continue to emerge. For example:

Wasp Barcode Technologies built a content-dominated series of 9 welcome messages for new customers, and •found CTR on promotional offers sent towards the end of that series was 25% higher than in “normal” emails6

One pet supplies company switched focus from promotional to informational content and lifted email sales by 15% • 7

The biggest challenge is, of course, content production, which can be expensive. However, organizations can exploit user-generated content (like product reviews) or repackage existing content from elsewhere in the business (such as blog posts, service documentation etc.).

The growing volume of emails and campaigns has, perhaps surprisingly, not led to significant frequency increases, at least not in Q4 2010 (see Chart 15).

How can volume increase, without frequency increasing?

For the first time in recent memory, the number of addresses held by the average ESP exceeded 100 million, with a 7% increase in database size from Q2 to Q3 and another 3% increase from Q3 to Q4.

Chart 8: How many addresses do you currently have under management?

This list growth is certainly a contributory factor to volume increases: senders simply have bigger lists.

With contact frequencies actually quite low (less than half the contact frequencies in H1 2008, for example), senders recognize that they can send occasional emails to a wider range of people without risking an overtly negative reaction if the targeting isn’t spot on.

Relaxing targeting criteria captures some additional responses from people the sender may not have otherwise sent email to.

98,513,316101,274,880

90,230,661 92,053,502

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Q1 2010 Q2 2010 Q3 2010 Q4 2010

5http://www.socialemailmarketing.eu/2011/05/swyn-why-people-do-and-dont-share-email-marketing-content-on-social-networks/6http://www.internetretailer.com/2011/06/02/e-retailers-welcome-e-mails-get-attention-customers7http://www.marketingsherpa.com/article.php?ident=30909

http://www.socialemailmarketing.eu/2011/05/swyn-why-people-do-and-dont-share-email-marketing-content-on-social-networks/

http://www.internetretailer.com/2011/06/02/e-retailers-welcome-e-mails-get-attention-customers

http://www.marketingsherpa.com/article.php?ident=30909



Volume growth might also come through multiple-version campaigns, where different email versions are produced, each tuned to a particular segment (see section 2). This allows a “single” campaign to reach more segments. This approach drives more response than the one-version-fits all approach, but also costs more to create and manage.

The willingness to expand the audience is also reflected in the growth of acquisition emails. This growth is not in terms of % of total mailing volume, which was below Q1 levels in both Q3 and Q4, but at least in the willingness to mix approaches.

Chart 9: What percentage of your mailing volume is...?

Chart 10: What is the main type of email activity undertaken?

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2. Strategy and segmentationSection 1 illustrated the continuing trend to simply send more email. This sits alongside an awareness of the value of targeting and segmentation, but an awareness that is not reflected in terms of widespread implementation.

Given the associated response boosts, vendors have typically sought to encourage clients to move from “bulk” email to more closely targeted messaging. The transition is, however, still proving difficult in practice.

The H2 2010 survey does identify some change in this context. Chart 11 shows that the number of campaigns going to 4 or more segments has grown from 16% in Q1 to 37% in Q4, though most of this growth is in relatively simple segmentation.

Chart 11: How many cells or segments are typically in each campaign?

There is less headway in implementation of even more sophisticated approaches, such as dynamic content, complex segmentation and trigger messages.

Chart 12: What percentage of your volume / campaigns sent from your toolset are…?

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Nevertheless, the impact of even small amounts of, for example, trigger emails should not be underestimated. A US retailer found behaviour-based email campaigns accounting for 1% of total email volume, but 23% of email revenue8.

The slow spread of advanced tactics is certainly not due to a lack of available tools.

Chart 13 shows ESPs have a growing ability to, for example, individualize all content. However, the number of organizations taking advantage of these tools is not much different than in H1 2010.

Fewer senders actually individualized their content in Q4 2010 than in Q3 2010. This likely reflects a lot of generic “holiday” messaging during the Christmas season.

Chart 13: To what extent do you have the capability to individualise? What proportion of your clients individualise their emails?

Perhaps, then, the industry is moving to a three-tiered structure:

those sending basic, broadcast email•those using basic segmentation•those using advanced customized and triggered emails•

There are two potential misconceptions here for senders.

The first is to see progress up through these tiers as dependent on vast resources.

Chart 14 confirms that advanced email marketing is not constrained by an inability to grasp the benefits of such tactics, but rather the perceived time, data, budget and resources required to implement them.

The second is to see a move away from basic email marketing as an all or nothing event, such that programme growth is delayed until everything is in place (which it rarely ever is) for converting entirely to an all-singing, all-dancing one-to-one email machine.

It’s no surprise, then, to find a reluctance to implement these tools and tactics when Section 1 also shows how budgets are not growing fast and the ROI focus is even stronger.

However, there is much potential for introducing advanced tactics to select parts of a broader email programme without committing significant funds and time, or requiring detailed customer data.

There is, for example, much interest in trigger and lifecycle emails which go out as a direct response to an action taken by the recipient, or to a specific piece of data associated with that recipient.

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8http://www.internetretailer.com/2011/06/02/birkenstock-central-gets-revenue-kick-e-mail

http://www.internetretailer.com/2011/06/02/birkenstock-central-gets-revenue-kick-e-mail



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Sophisticated applications of the concept tend to get most media coverage, for example where individualized up- and cross-sells are embedded in shipping confirmations. There are, however, simpler alternatives.

Senders might, for example, insert a generic offer or promotional message into the footers/sidebars of order confirmation templates.

For a more detailed look at how an email marketing programme can evolve, see Dr. Dave Chaffey’s five-stage chart9.

Chart 14: Tactics such as dynamic content and complex segmentation can help with more targeted mailings rather than simply just mailing more. What are the main barriers for you / your clients in using such tactics?

A big question for 2011 is whether and how this tiered scenario will change.

One concern has always been that growing competition for attention (in the inbox and from other channels like social media) raises the quality bar for senders, forcing them to move to more advanced approaches.

While this concern remains valid, there is also acceptance that there is still room for fairly basic email marketing, assuming that the emails have at least some value to the recipients.

In other words, it is OK to send more email as a tactic to drive response, provided you do it intelligently and combine it with improvements in other areas so that value to the subscriber (eventually) increases in tandem.

The potential longevity of this more simplistic approach to email marketing is supported by data on frequency rates.

These rates dropped even further in H2 2010, with individual recipients seeing almost a third less email per month in the 2010 holiday shopping season than in the same period in 2009. Figures from the USA show that major retailers typically lifted frequency by 21% in Q4 2010 compared to the previous year . UK senders are clearly not over-mailing.

Chart 15: How many times on average is each address under management contacted per month?

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9http://www.smartinsights.com/blog/email-marketing/how-advanced-is-your-email-marketing/10 Data drawn from http://www.retailemailblog.com/

http://www.smartinsights.com/blog/email-marketing/how-advanced-is-your-email-marketing/

http://www.retailemailblog.com/



Irrespective of the broader debate on frequency, one accepted justification for increasing it is as a response to changing demand. During the Q4 shopping season, increased interest in offers and commercial email means senders can legitimately lift frequency in response. Yet this did not seem to happen in Q4 2010.

Senders may not have had the resources to lift frequency significantly, or may still have been reluctant to target the same recipients with repeated messages, preferring instead to target bigger lists, as discussed earlier.



3. MetricsSo how did the changes to volume, frequency and segmentation impact campaign metrics?

Retention email open rates peaked for the year at 26% in Q3, before falling to 22% in Q4. Unique clickthrough rates followed the same pattern, peaking at 9% in Q3 and dropping to 8% in Q4. The Q3 to Q4 drop is not unexpected, presumably reflecting the increased competition for attention from the seasonal rise in promotional messaging across all channels.

Open and click rates for acquisition email stayed broadly constant throughout the year.

Chart 16: Average Unique Open Rates (in %)

Chart 17: Average Unique Click Through Rates (in %)

Both open and click rates were higher than for the same period in 2009. The following table factors in volume to give total clicks delivered across the industry. Each ESP delivered an average of over 16 million clicks to client websites in H2 2010, over a third more than in H2 2009.

Year Total unique clicks per ESP (average)

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2009 6.0 million 6.0 million

2010 8.1 million 8.0 million

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In summary, the industry has expanded its reach (more emails are being sent), improved segmentation tactics, and maintained or lifted core performance metrics to produce its most “successful” half year to date.

With frequencies at a long-term low and the rich promise of advanced tactics, there is clear potential to improve even further through both more email and more targeted email.

Nevertheless, the dynamic nature of the online business environment means there is no cause for complacency. For example, opt-out rates remain at long-term highs, particularly for acquisition email.

Chart 18: What is the average opt-out rate for your clients?

In particular, challenges through 2011 are:Growth of mobile email: senders need to ensure emails display adequately on a myriad of mobile devices and 1. operating systems

Senders also need to account for mobile-induced changes in email and browsing behaviour, which we are only just beginning to research or observe. For example, statistics on email opens on mobile devices show peak mobile email activity to be early mornings, the end of the working day and in the late evening11.

Intelligent inboxes: webmail services and software manufacturers are giving users more (automated) tools to 2. sort incoming messages by priority, and merging other channels (like chat and social networks) within the email interface

This raises the quality bar for getting prime position on inbox screens.

Channel fragmentation and switching: more and more channels compete for the user’s attention, though 3. evidence points to email remaining a preferred channel for communicating with commercial organizations12

Competition and desensitization: email volume has no upper limit, but the online UK population does. Inbox 4. competition may increase and as commercial messaging per se grows, there is a risk of what Seth Godin13 calls “desensitization to all the information, not just the last bit”Increased subscriber expectations thanks to the growth of choice and control5.

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11http://www.knotice.com/news/KNOTICE-Press-Release-011311-2.htm12http://www.mediapost.com/publications/?art_aid=135762&fa=Articles.showArticle13 http://sethgodin.typepad.com/seths_blog/2010/12/the-inevitable-decline-from-clutter.html

http://www.knotice.com/news/KNOTICE-Press-Release-011311-2.htm

http://www.mediapost.com/publications/?art_aid=135762&fa=Articles.showArticle

http://sethgodin.typepad.com/seths_blog/2010/12/the-inevitable-decline-from-clutter.html



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Chart 19: Average Total Click Through Rates (in %)

Chart 20: What is the average click-to-open ratio?

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4. DeliverabilityDeliverability metrics introduce another dimension to the H2 2010 success story. Delivery rates and inbox delivery rates reached a long-term high for acquisition email and an all-time high for retention email, with a 97% delivery rate and 94% of delivered retention email hitting the inbox.

Typical benchmark figures for inbox deliverability of opt-in email would be around 85%, so UK ESPs are doing a better-than-average job of getting emails in front of subscribers.

With most performance metrics calculated based on the number of emails sent, improved delivery is therefore also contributing significantly to more opens and clicks.

Chart 21: What is your average delivery rate (in %)

Chart 22: What is your average inbox delivery in (%)

ESPs do not feel deliverability is getting significantly easier, although barely any describe the challenge as being in any way “difficult”.

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Chart 23: Given the technological changes in email, how easy do you find it to deliver email messages at the moment?

The key element in deliverability success is, of course, sender reputation. This is partly determined by the ESP’s actions (e.g. standards-conform sending infrastructure, IP management), and partly by the sender’s actions (e.g. list hygiene, number of spam reports).

H2 2010 metrics suggest these sender-related criteria have improved, with positive impacts for reputation and thus delivery performance: improved click rates, greater segmentation and a relatively low contact frequency imply spam reports probably dropped in H2. List hygiene also improved, as evidenced by decreases in bounce rates.

Chart 24: Average Hard Bounce Rates (in %)

This decrease is due, at last in part, to aggressive bounce management by ESPs. Default settings for removing soft bounces dropped 25% across the year to 2.6 in Q4.

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8%

4%

2.5% 2.7%

2%

3%

2%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010

Acquisition

Retention



Chart 25: What are your default settings (standard threshold) for removing hard and soft bounces?

Chart 26: What is your average failure rate (in %)

There was, however, a continuing slide in terms of deliverability tracking by ESPs, with almost a quarter, for example, not separating out hard and soft bounces.

This laxity is difficult to reconcile with improved deliverability rates, so it will be interesting to see if deliverability performance is maintained in 2011.

Complacency is a danger, particularly since the perceived importance of deliverability has faded as other issues grab media attention, such as social networks, email security and mobile marketing.

1.6 1.7 1.711.9

3.5

3.03.21

2.6

Q1 2010 Q2 2010 Q3 2010 Q4 2010

Hard bounces Soft bounces

9%

2% 2% 2%

13.1%

12%

10%

7%

1.3%

2.7%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

15%

Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010

Acquisition

Retention



21

Chart 27: To what level do you track deliverability?

41%

35%

59%

93%

88%

57%

53%

53%

47%

64%

60%

53%

71%

67%

93%

82%

93%

87%

82%

76%

0 0.2 0.4 0.6 0.8 1

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Individual error codes

Error codes rolled up acrosscampaign (transmission)

Error codes rolled up acrossdomain

Inbox placement

Hard and soft bounces

Leve

l of d

eliv

erab

ility

Date post:	05-Dec-2014
Category:	Business
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