The Transactional Messaging
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1 Vendor Research The Transactional Messaging Imperative JupiterResearch Vendor Research Strongmail > > > > > > > > > > The Transactional Messaging Imperative Capitalizing on the Marketing Opportunity of Transactional This is a vendor-sponsored JupiterResearch report specifically commissioned by StrongMail. JupiterResearch stands by the integrity of its findings and the validity of the methodology employed in this research study. However, this vendor-sponsored report should not be confused with independent research produced by JupiterResearch s syndicated product line. This report is intended for use by the sponsoring vendor and may not be publicly disclosed, disseminated, used or relied on by others without JupiterResearch s consent.
2 Vendor Research October 10, 2008 The Transactional Messaging imperative Capitalizing on the Marketing Opportunity of Transactional Transactional messages, including order confirmations and service-related messages, have historically been plain text-based messages that are generated from the system that facilitated the transaction. These systems lack the capability to format messages in HTML and include product offers and advertisements, both increasing revenue and brand awareness. Moreover, these legacy transactional systems simply lack the ability to report on critical measures such as delivery and response behavior. In fact, deliverability issues with messages such as order confirmations and bank statements will drive customers to contact customer support, consume additional Web site resources, and frustrate the end customer. SUBJECT TO DISCLAIMER ON COVER
3 New York 233 Broadway Suite 1005 New York, NY fax San Francisco 1000 Brannan Street Suite 400 San Francisco, CA fax United Kingdom Forrester Research Ltd. Charlotte House 9-14 Windmill Street London, W1T 2JG UK +44 (0) (0) fax France Research Center France Forrester Research SAS Rue Victor Hugo Levallois-Perret France +33 (0) (0) fax SUBJECT TO DISCLAIMER ON COVER For more information on JupiterResearch s services, including syndicated research and custom research tailored to the specific needs of your business, visit researchsales@jupiterresearch.com or call (North America), +44 (0) (Europe) or (rest of world). Reproduction by any method or unauthorized circulation is strictly prohibited. JupiterResearch s analyst reports are intended for the sole use of clients. All opinions and projections are based on JupiterResearch s judgment at the time of publication and are subject to change. Published October 10, JupiterResearch, LLC
4 CONTENTS Table of Contents 1 Executive Summary 2 Overview of Executive Survey Results 15 Report Methodology Table of Figures 3 Benefits of Including Marketing Content in Transactional Messages 4 Ownership of Transactional Marketing, by Marketing Deployment Type 4 Transactional Messaging Challenges Based on Ownership of the Transactional Messaging Stream 6 Top Challenges of Transactional 7 Disposition of Transactional Messaging Reporting Infrastructure 8 Transactional Revenue Contribution, by Type of Deployment 10 Transactional Budgets, by Industry 11 Transactional Tactics, Deployed and Planned 13 Best Practice Operational Schema for Implementing Transactional SUBJECT TO DISCLAIMER ON COVER
5 EXECUTIVE SUMMARY Executive Summary Transactional messages, including order confirmations and service-related messages, have historically been plain text-based messages that are generated from the system that facilitated the transaction. These systems lack the capability to format messages in HTML and include product offers and advertisements, both increasing revenue and brand awareness. Moreover, these legacy transactional systems simply lack the ability to report on critical measures such as delivery and response behavior. In fact, deliverability issues with messages such as order confirmations and bank statements will drive customers to contact customer support, consume additional Web site resources, and frustrate the end customer. Transactional messages are a vital part of the consumer dialog online and JupiterResearch interviews with senders using commercial applications reveal that transactional messages have the highest open rates of any type of message. As the online economy grows, an increasing number of transactional messages are being sent, creating new marketing opportunities for marketers. The JupiterResearch Marketing Forecast indicates that in 2012, the average online consumer in the United States will receive 146 transactional messages, nearly double the amount of transactional messages received on an individual basis in Marketers must consider bolstering their transactional sending infrastructure, include revenue-generating mechanisms such as ads and offers in these messages, and centralize the ownership of the enterprises transactional messaging efforts. Such tactics are essential to driving ancillary revenues and providing additional insight into understanding and optimizing customer engagement.
6 OVERVIEW OF EXECUTIVE SURVEY RESULTS Overview of Executive Survey Results Average Revenue Gains from Transaction Indicate Substantial Revenue Contribution Marketers are overlooking the potential revenue contribution that transactional messages can provide. The Direct Marketing Association and Shop.org detail that average order value for retailers is approximately $98 dollars. Applying this average order value to an average transactional message volume (e.g., order confirmations), and applying an average three percent revenue contribution from these transactional messages, results conservatively in approximately $2.9 million dollars annually in additional revenue. A previous JupiterResearch model found that at a minimum, retailers could add $250,000 in additional revenue even if they converted their transactional orders at a lower rate of one percent.
7 3 Integrating Marketing Programs into Transactional Messages Serves Multiple Business Benefits Fig. 1 Benefits of Including Marketing Content in Transactional Messages Increased revenue 60% Increased brand recognition 54% Increased customer satisfaction 50% Lower call center volumes 23% Question: What benefits have you seen from implementing a marketing program for transactional ? (Please select all that apply.) Source: JupiterResearch/E-Rewards StrongMail Marketing Executive Survey (9/08), n = 200 ( marketers, US) 2008 JupiterResearch, LLC Decreased burden on support 21% None, we haven t seen any benefits 2% 0% 20% 40% 60% 80% 100% Percentage of Marketers A survey of senders that have implemented marketing offers and/or advertisements in their transactional messages indicates multiple business benefits, including the following: Increased revenue. Sixty percent of marketers overall stated that they drove new revenue by including either product offers or advertisements. With marketers continually challenged by declining response rates and cluttered inboxes, increased marketing offers and advertising inventory via transactional messages is a proven approach to generating additional marketing revenues. In fact, marketers using a dedicated commercial onpremise system that is separate from the one that sends their marketing newsletters reported increased revenue (68 percent) that exceeded revenue from marketers using other deployment options. Promotional marketers have the most to gain as those marketers including product offers reported the highest instance of this response, with 67 percent of business-toconsumer promotional senders and 73 percent of business-to-business promotional senders citing increased revenue. Increased brand awareness. Fifty-four percent of marketers overall stated including marketing offers within their transactional messages actually helped to improve brand awareness. The ability to turn plain text oriented messages into full HTML messages that reinforce brand value elements will through its very inclusion of corporate logos and colors improve brand awareness. Increased revenue Increased satisfaction and decreased use of system resources. While the inclusion of Increased brand recognition relevant offers and information for clients to receive all-in-one messages can drive satisfaction, JupiterResearch cautions senders from overstating the role that combining transactional Increased customer satisfaction statements with marketing offers has on customer satisfaction. Instead, marketers should focus on more tangible measures (e.g., decreasing call center volume and the burden on Lower call center volumes Decreased burden on support None, we haven t seen any benefits
8 4 support). Both of these benefits are likely to be driven by the improved delivery of the transactional messages that commercial enterprise-grade systems often provide. Higher inbox delivery of transactional messages will reduce complaint calls and consume fewer system resources, particularly as they relate to routine transactional messages such as password reset messages. Transactional Not Universally Managed by Marketing, Driving Operational Inefficiencies Fig. 2 Ownership of Transactional Marketing, by Marketing Deployment Type Question: What department within your organization owns transactional ? (Please select one.) Source: JupiterResearch/E-Rewards StrongMail Marketing Executive Survey (9/08), n = 200 ( marketers, US) 2008 JupiterResearch, LLC Fig. 3 Transactional Messaging challenges Based on ownership of the Transactional Messaging Stream Source: JupiterResearch/E-Rewards StrongMail Marketing Executive Survey (9/08), n = 93 ( marketers whose marketing department owns transactional , US), n = 42 ( marketers whose IT department owns transactional , US) 2008 JupiterResearch, LLC Percentage of each Transactional messages Transactional messages segment citing owned by marketing owned by IT delivery 24% 31% Ability to 10% 19% use HTML Ability to 4% 17% use images Overall, just 47 percent of marketers indicated that their transactional efforts were owned by marketing. A deeper review, based on how companies deploy their marketing technology (an implementation that is typically owned by marketing), further reveals that in most instances, just roughly one-half of marketers have oversight for their transactional messages.
9 5 The lack of central ownership by marketing impedes implementing promotional offers or ads in transactional , as such corporate silos typically stymie innovation. Moreover, in an era where inbox placement is being increasingly moderated by the sender s overall reputation, it is necessary to manage the sending and oversight of messages regardless of type. For example, survey respondents that indicated that IT owns their transactional efforts cited the highest instance of deliverability issues (31 percent). In fact, IT owners cited challenges with the implementation of simple messaging elements such as HTML formatting and the use of images at nearly twice the rate as those senders where transactional is owned by marketing. Centralizing ownership of all transactional and marketing-oriented messages under the leadership of marketing provides fewer tactical and organizational burdens, which is necessary to begin to optimize the transactional messaging capabilities and infrastructure. These challenges amplify the lack of a centralized production process, as evident in the number of IT transactional owners that cite difficulty in using images. That challenge is likely further augmented by the high degree of non-enterprise-grade homegrown applications that impede the use of advanced tactics such as including marketing offers in transactional messages.
10 6 Reporting and Delivery of Transactional Messages Challenge Marketers, Burdens Optimization Fig. 4 Top Challenges of Transactional Question: What are your top two greatest challenges related to your current transactional deployment? (Please select up to two.) Source: JupiterResearch/E-Rewards StrongMail Marketing Executive Survey (9/08), n = 179 (B-to-C marketers, US); n = 106 (B-to-B marketers, US) 2008 JupiterResearch, LLC Reporting on the performance of transactional and the actual delivery of these transactional messages are universally the top challenges that business-to-consumer (B-to-C) and business-to-business (B-to-B) marketers face with transactional . The inability to measure and report on transactional performance greatly limits the opportunity for tactics that may optimize transactional . Tactics such as testing and refreshing creative elements could not possibly be attainted without some level of measurement and analysis. In fact, the mystery of delivery is further augmented by such a great lack of reporting. It is impossible to improve delivery without an understanding of the domains that are problematic or at least the very basic understanding of what the inbox delivery rate is on the marketer s transactional . B-to-B marketers are particularly more challenged with all of these concepts than their consumer-focused peers are; however, the life of the B-to-C marketer is not without its transactional messaging challenges. For example, in addition to the reporting and delivery challenges, 20 percent of B-to-C marketers cite challenges with both implementing dynamic content and triggering followon marketing messages.
11 7 Nonintegrated Transactional and Marketing Infrastructure Challenge Program Measurement Fig. 5 Disposition of Transactional Messaging Reporting infrastructure Question: What kind of access do you have to response data and reporting metrics about your organization s transactional ? (Please select one.) Source: JupiterResearch/E-Rewards StrongMail Marketing Executive Survey (9/08), n = 200 ( marketers, US) 2008 JupiterResearch, LLC While centralized oversight of all marketing messaging initiatives is vital to manage issues such as deliverability and optimizing centralized creative production processes, it also has tremendous bearing on the infrastructure that is used and the data that is available for analysis. When asked about what kind of access that senders had to transactional response data, only 40 percent of marketers indicated that they had complete access to the data stored in the same reporting repository as their marketing response data. An overwhelming majority of the respondents (60 percent) indicated some form of an inefficient process that limited or completely obscured their access to response data on transactional s. Integration of transactional and conventional marketing data is essential, as behaviors found with transactional can provide insight to enrich the overall set of engagement data of all subscribers. However, this begs the question: Does the sending infrastructure that facilitates the sending of transactional messages need to be the same exact sending infrastructure as the system that is used to blast the much higher number of outbound promotional messages and newsletters? JupiterResearch interviews reveal there are stark differences in the capabilities between solutions designed to push a massive amount of at one time versus stand-alone systems optimized to deliver messages on a one-off basis. Stand-alone systems optimized specifically to deliver transactional typically provide a host of integration options
12 8 in order to trigger and format the transactional message, as well as features that make it easy to proof and report on transactional performance. While integration of all subscriber reporting data is necessary, behaviors that stem from Web analytic applications or ecommerce platforms more often inform or trigger the transactional than the data from marketing offers. However, the post mailing performance data is something that must be integrated into a single subscriber data store for improved segmentation and targeting purposes. Marketers Implementing Dedicated Packaged Applications for Transactional Drive More Online Revenue from Transactional Fig. 6 Transactional Revenue contribution, by Type of deployment Question: What percentage of your online revenue do you attribute to sales generated from offers in your transactional messages? (Please select one.) Source: JupiterResearch/E-Rewards StrongMail Marketing Executive Survey (9/08), n = 98 ( marketers who use same system for transactional and promotional/newsletter , US), n = 63 ( marketers who use homegrown solution different from marketing application, US), n = 38 ( marketers who use dedicated commercial application different from the marketing application, US) 2008 JupiterResearch, LLC Executives using a dedicated packaged (e.g., commercial) application that is different than the application that is used for sending their bulk marketing messages report the highest percentage of revenue from their offers in transactional . For example, 37 percent of marketers using homegrown solutions report transactional revenue contribution of greater than 5.1 percent, as compared with those using a dedicated transactional application, of which 54 percent report revenues greater than 5.1 percent. Of the executives using the same solution for both tasks, 45 percent report transactional revenue contribution that is greater than 5.1 percent.
13 9 While more executives that use a dedicated commercial-grade transactional application show the highest revenue contribution out all of their peers, they also have the lowest number of survey respondents that indicated that they do not track revenue from these efforts. This suggests that the ability to measure revenue is less of a challenge for executives that have deployed their transactional solution in this manner. The ability of marketers to succeed in driving ancillary revenue from transactional messages is based on the ability to craft relevant offers to subscribers, report on transactional performance, and scale to deliver these mission-critical messages. This data is empirical evidence that marketers using an application dedicated to transactional have demonstrated more success than those using other deployment options.
14 10 Without Shared Measurement and Management of Transactional , Allocated Budget Dollars Risk Waste Fig. 7 Transactional Budgets, by Industry Question: What is your dedicated buget for transactional messages in 2008? (Please select one.) Source: JupiterResearch/E-Rewards StrongMail Marketing Executive Survey (9/08), n = 32 ( marketers operating in telecommunications, US); n = 94 ( marketers operating in financial services, US); n = 57 ( marketers operating in retail, US), n = 200 ( marketers, US) 2008 JupiterResearch, LLC Nearly one-half of marketers (47 percent) are budgeting $500,000 or more for their transactional in Marketers in the technology and financial services industries are budgeting more than those in retail, due to higher transactional volume (e.g., bank statements, password reminders). Marketers must begin to combine the management and measurement oversight of their transactional and marketing messages, as well as invest in commercial-grade systems dedicated to transactional messages, or these allocated budget dollars could be wasted. It is critical that marketers implement strategies that centralize the transactional messaging process within the marketing organization in order to leverage subscriber segmentation schemes, centralize post campaign reporting, and harness marketing content for use in transactional messages. Properly budgeting and selecting a solution that provides detailed reporting and measurement rigor will ease the burden in building a return on investment statement, by making the measurement and accounting of the revenue and delivery of messages easier to access.
15 11 Marketers Must Implement Table-Stakes Tactics to Optimize Transactional Messages Fig. 8 Transactional Tactics, Deployed and planned Note: Selected responses shown. Question: From the following list, please indicate which transactional tactics you use currently and which you plan to deploy in the next 12 months. (Please select one for each.) Source: JupiterResearch/E-Rewards StrongMail Marketing Executive Survey (9/08), n = 200 ( marketers, US) 2008 JupiterResearch, LLC Marketers implementing transactional messages are not utilizing all of the tablestakes tactics that are required to optimize these messages fully. While the use of HTML formatting is finding favor among marketers, many other tactics are falling far shorter. In order to improve the effectiveness of transactional , marketers must embrace the following tactics: Message authentication. Just 31 percent of the respondents said that they are using authentication schemes (e.g., SPF, DKIM) on their transactional messages, and another 38 percent plan to implement them within the next 12 months. It is imperative that marketers rapidly implement message authentication, particularly on transactional messages, as ISPs and enterprise mail gateways are increasingly putting messages without authentication through many more spam filters, ultimately hindering message delivery. It is also vital for those sending statements and financial services institutions, where spoofing and message phishing has historically been higher. A/B split-path testing. Testing messaging creative, offers, and targeting is the cornerstone of direct marketing, and applying this tactic to transactional should be no exception. Just over one-third (36 percent) of survey respondents indicate that they embrace this concept on
16 12 a regular basis. Such low adoption of this important tactic further puts marketing programs at risk. Testing is a tactic that all marketers must prioritize for transactional, promotional, and newsletter-oriented messages. The somewhat higher use of dynamic content and utilization of cross-sell and up-sell messages in transactional messages cannot be optimized unless marketers are embracing testing tactics in concert with the deployment of dynamic content and offeroriented content blocks. Abandon cart programs. Utilizing cart abandon data should be considered low-hanging fruit for marketers. Implementing abandon programs have proven to drive ancillary revenue and provide the means to drive additional transactional messages such as order confirmations. Marketers should seek to target those site visitors that abandon purchasing, registration, and downloading processes. Dedicated IP address. Only one-half of executives surveyed state that they currently send their transactional from a dedicated IP address. Implementing such a tactic and utilizing solutions that easily facilitate the segmentation of classes (e.g., transactional, promotional) is important, as spam complaints or delivery issues with promotional messages may taint the delivery and reputation of the transactional mail stream unless that transactional is sent from its own dedicated IP address. While adoption of this tactic is higher than the use of authentication schemes, it is necessary to utilize both tactics to address the overwhelming challenge of message delivery that marketers continue to cite.
17 13 Marketers Must Centralize Management, Measurement of Transactional Fig. 9 Best Practice Operational schema for Implementing Transactional Source: JupiterResearch (10/08) 2008 JupiterResearch, LLC Based on the aforementioned challenges and successes of marketers implementing transactional , the following best practices emerge. JupiterResearch suggests that organizations use this approach for implementing and optimizing the revenue opportunities associated with transactional . Centralized ownership. Friction between IT and marketing challenges transactional optimization and creates unnecessary redundancy as it relates to the measurement and oversight of marketing and transactional programs. Companies with centralized marketing oversight and the use of a commercial-grade application for transactional have demonstrated that they are more successful in a variety of ways, including higher revenue contribution from transactional and fewer challenges related to reporting on mailing performance. JupiterResearch believes the marketing organization is the optimal business unit to oversee transactional , as it creates obvious and transparent synergies with conventional marketing programs. Such a structure more easily allows the ability to leverage customer segmentation data and apply lessons related to which offers and marketing tests are resonating with subscribers. Moreover, it provides more coherent strategic guidance to the organization s marketing program, as well as tactical benefits (e.g., the ability to leverage content designed for promotional messages in transactional offers). For publishers, it provides unique opportunities to create additional advertising inventory by creating advertising blocks within the transactional messaging environment.
18 14 Bifurcation of the sending infrastructure. Companies with dedicated commercial-grade packaged applications for transactional clearly generate more ancillary revenue from their transactional messages than marketers using one application that may not be optimized to meet the disparate operational nuances of transactional and promotional . While it is critical that these applications be integrated, the requirements for transactional messaging systems to essentially remain bulletproof with a high up-time is often more rigorous than the service level requirements for the sending of promotional and newsletter messages. Accordingly, marketers should seek to implement a dedicated transactional system that can easily integrate into the marketing infrastructure and a variety of systems (e.g., e-commerce platforms, Web analytics) that will trigger and drive the transactional messages. Moreover, marketers must seek out transactional solutions that offer a full complement of detailed reports, delivery optimization features and the ability to implement proven tactics such as the inclusion of cross-sell and up-sell messages in which testing, segmentation and dynamic content are required features. Reliability and scalability should also be a primary consideration for marketers in market for a dedicated transactional application. Centralized reporting. The necessity for marketers to report on domain-level delivery rates as well as segment-level subscriber performance, including click-through and conversion performance on marketing offers in the transactional message, is a key element to manage the combined marketing and transactional messaging infrastructure. Marketers should seek out solutions with intuitive reports that are easily customized, as well as those that can be shared widely within the broader marketing organization. Marketers must investigate providers that can provide the same types of reports that are used for promotional and newsletter marketing, particularly those that can combine transactional and promotional analysis into one reporting environment. Centralized reporting is essential to ensuring that marketers have the most complete picture of subscriber behavior.
19 REPORT METHODOLOGY Report Methodology JupiterResearch/E-Rewards StrongMail Marketing Executive Survey In September 2008, JupiterResearch conducted a formal survey of marketing executives. A total of 200 qualified individuals from companies of all sizes completed the survey, according to predefined quotas. Respondents received an invitation to participate in the survey, with an attached URL linked to the Web-based survey form. As an incentive, respondents were awarded with frequent flyer points. In this survey effort, JupiterResearch worked with its research partner E-Rewards, Inc. on the technical tasks of sample building, survey fielding, and data processing. E-Rewards maintains one of the largest executive research panels, with more than 200,000 marketing/ advertising decision makers or influencers. Panel-based market research with E-Rewards enables JupiterResearch to field successful, highly targeted surveys to hard-to-reach executives such as marketers.
20 > > > > > > > > > > JupiterResearch provides analyst research and advisory services to help companies develop, extend and integrate business strategies across online and emerging channels. Backed by proprietary data, JupiterResearch s industry-specific analysis, competitive insight and strategic advice give businesses the tools they need to exploit new technologies and business processes. JupiterResearch is headquartered in New York City with offices throughout the United States and around the world. For more information on JupiterResearch s services, including syndicated research and custom research tailored to the specific needs of your business, visit researchsales@jupiterresearch.com or call (North America), +44 (0) (Europe) or (rest of world). SUBJECT TO DISCLAIMER ON COVER
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