whitepaper Marketing Response By Morgan Stewart Key Findings at a Glance
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1 whitepaper Marketing Response Rate Study By Morgan Stewart ExactTarget s 2004 groundbreaking study of which day of the week was the best day for marketers to send s caused many to re-evaluate their common practices and employ testing to determine which day worked best for their customers. Now ExactTarget is back with another study that looks at data collected during the 2005 calendar year. In fact, this is the largest, most comprehensive study to date, including data from more than 4,000 organizations, 230,000 sends and 2.7 billion messages. About the Author As Director of Strategic Services at ExactTarget, Morgan Stewart is responsible for database and marketing strategy, testing and segmentation and benchmarking analysis. The study summarizes overall open, click-through and unsubscribe rates and provides additional analyses based on day of week for sending while examining list size and target audience. Key Findings at a Glance 1. Open rates are declining, while click-through rates remain stable. This has been the case for the past two years. Open rates are affected directly by image blocking used by many clients and ISPs. This in turn negatively affects click-through rates. Two groups, however, have helped stabilize click-through rates: late adopters and companies leveraging re-engagement strategies for consistent non-responders. 2. Friday was the best day for opens. Click-through rates were also strong for Friday. 3. Sunday was the best day for click-throughs. However, month-to-month performance was erratic, indicating seasonal differences. 4. Smaller lists generate a higher response. B2B marketers get the greatest benefit from this phenomenon since their lists are typically smaller. B2C organizations also can benefit from this trend by segmenting their audience into smaller groups.
2 Overall Response Rates Key Findings ( Figure 1) Open rates have dropped steadily over the past two years. In 2005, average open rates dropped an average of 1.8 percent per quarter. Comparing the average open rates for the 4th quarter of 2005 with the same period in 2004, open rates declined 16.5 percent from 42.5 percent to 35.5 percent. Click-through rates have remained relatively stable over the past two years with a slight upturn in the second half of Clickthrough rates for the 4th quarter in 2005 increased 10 percent to 6.6 percent from 6 percent in the 4th quarter of Average unsubscribe rates decreased in The unsubscribe rate appears to be stabilizing at approximately 0.25 percent. There is a correlation between declining open rates and declining click-through rates. The average ratio of opens-to-clicks (open rate divided by click-through rate) for companies sending on a consistent basis for more than a year is stable. Thus, click-through rates are declining for established senders in proportion to declining open rates. The overall ratio of opens-to-clicks has declined from 6.6 in Q to 5.4 in Q On average, there are more unique clicks for each tracked open. Figure 1: Open, Click and Unsubscribe Rates ( Quarterly Averages) 2
3 Overall Response Rates ExactTarget Analysis Image blocking technology is responsible for declining open rates. opens are recorded with a tracking image within HTML s. clients, such as Outlook 2003, allow users to disable the display of images in the user s . When this occurs, the tracking image does not render and the ability to track the open is lost. When images are not displayed in HTML , the subsequent click activity also is negatively impacted. There also is evidence of list fatigue for companies that have been sending consistently for more than a year. Both organizations that routinely trim their lists and late adopters of are buoying industry average click-through rates. They also have lower than average open-to-click ratios, meaning more people click once they open an . These activities help explain the slight increase in click-through rates at the end of last year. Many organizations combat list fatigue by developing re-engagement and list cleansing strategies. These programs identify consistently non-responsive subscribers and attempt to get those users to re-engage by developing alternative contact strategies. After a set period, marketers place non-responsive subscribers in a separate list that either stops receiving or receives much less frequently. Late adopters have the advantage of established best practices in design. While these companies have open rates consistent with the industry at large, their open-to-click ratios (often tracked as click-through as percent of opens) are much higher than established senders. This phenomenon speaks to both the design of the s themselves (they are better at getting subscribers to click-through) and the freshness of the offers contained within the messages. Established senders may want to take note and consider giving their programs a facelift. Re-engage Lackluster Subscribers Many organizations combat list fatigue by developing re-engagement and list cleansing strategies. Identify consistently non-responsive subscribers and attempt to get those users to re-engage by developing alternative contact strategies. 3
4 Response by Day of Week Key Findings (Figures 2-5) Figure 2: Average Click-Through Rates (January-December 2005) Figure 3: Average Open Rates (January-December 2005) Figure 4: s Sent by Day (January-December 2005) Figure 5:Campaigns Sent by Day (January-December 2005) 4
5 Response by Day of Week Key Findings (Figures 6-7) Figure 6: Click-Through Rates: Best Days by Month (January-December 2005) Figure 7: Open Rates: Best Day by Month (January-December 2005) 5
6 Response by Day of Week Key Findings Friday had the highest open rates for 14 months straight from October 2004 through November In December, Friday was the second highest performer with an average open rate of 34.7 percent, just 0.3 percent behind Thursday. Strong open activity correlates with strong click activity and this was clearly the case for organizations sending on Friday. Friday yielded consistently strong click results throughout the year ( percent monthly) and was second behind Sunday in average click-through rates for the year. Sunday had the highest average click-through rate for the year, but was a consistently low performer for open rates. In fact, in every month in 2005, Saturday and Sunday had the lowest average open rates, with Sunday generally outperforming Saturday. Month-to-month click-through rates for Sunday varied widely with the average ranging from 4.9 percent in June to 8.3 percent in October. This variation did follow seasonal trends with low performance in summer months and strong response in winter months. send activity is still focused mid-week: approximately 96 percent of campaigns and 92 percent of volume was sent Monday through Friday. The higher relative volume of on the weekend is due to the business-to-consumer focus of these campaigns. B2B organizations sending on the weekends may have been rewarded for their unconventional choice of day to send as their average click-through rates were 25 percent higher on the weekend. However, we cannot draw any conclusions due to the small sample size. Response by Day of Week ExactTarget Analysis In last year s study, ExactTarget asserted there is no such thing as a universal best day to send . We still hold this view, but the results of our 2005 study provide additional information with these assertions. Individual organizations still must conduct their own testing to determine which day of the week works best for them, but any test should consider Friday and Sunday as viable challengers. Organizations must consider their competition in the inbox. Whereas a large organization may have clearly defined competitors in the general marketplace, competitors in the inbox can be drastically different. In the inbox, organizations are competing for the attention of their subscribers. Given that the number of s sent on Friday is relatively low compared to other weekdays, the odds of getting the attention of subscribers is higher. The strong results for Friday support this notion. The number of s sent over the weekend also is low, so this increases the odds that subscribers will spend time interacting with their . However, there is a different dynamic on the weekends that must be considered. During the summer months, those in a target audience are most likely to spend the weekend outdoors away from their computers. In the winter, subscribers may spend more time indoors catching up on and/or preparing for the week ahead. 6
7 Response by Audience Size & List Size Key Findings (Figures 8-11) Figure 8: Open and Click Rates by List Size (January-December 2005) Figure 9: Click-Through as % of Opens by List Size (January-December 2005) Figure10: Open Rates by Audience Type and List Size (January-December 2005) Figure 11:Open and Click-Through Rates by Audience Type (January-December 2005) 7
8 Response by Audience Size & List Size ExactTarget Analysis List size is one of the strongest predictors of response rates, including both open and click-through responses. Organizations must factor in list size when benchmarking program performance. This phenomenon is one of the strongest cases for audience segmentation. The smaller the targeted audience, the more organizations can specify their message directly to this audience in their communications. This is a sure way to increase response to your communications. The larger the list, the more important it is to have compelling creative and offers in order to generate click-through rates in your campaign. Unfortunately, with larger lists it is much more difficult to drive significantly higher open rates than normal. This is attributed to both list fatigue inherent in larger lists and the reality that it is difficult to convey compelling and relevant messages to a large audience through the subject line. Selectivity seems to be based on the subject line for larger messages since nearly 20 percent of subscribers click-through at least one time once they open the . Evolving Industry Poses New Challenges The ExactTarget 2005 Response Rate Study is based on data collected through ExactTarget for s delivered during the 2005 calendar year. The study analyzed twelve months of historical data from more than 4,000 organizations, 230,000 campaigns, and 2.7 billion messages. Open rates are calculated by dividing the number of unique opens by the total number of messages delivered. Opens are recorded only when the tracking image has been rendered. Opens are not recorded when a click action is recorded with no corresponding open action. Click-through rates are calculated by dividing the number of unique opens by the total number of messages delivered. Unsubscribe rates are calculated by dividing the number of unsubscribes by the total number of messages delivered. The open-to-click ratio is the number of unique opens recorded for each unique click. Click-through as percent of opens is the inverse of this ratio, or unique click-throughs divided by unique opens. B2B, B2C and Mixed Audience classifications are self-reported by ExactTarget clients. Organizations not providing this information to ExactTarget were not included in this portion of the analysis. 8
9 A Thought for B2B Mailers Organizations with a B2B focus can expect to see higher open and click rates than their B2C counterparts. Figure 11: Click-Through Rates by Audience Type and List Size (January-December 2005) Response by Audience Size & List Size Key Findings (Figure 12) Open and click-through rates both decrease steadily as list size increases. The downward trend in open rates by list size stabilizes between percent with average open rate of 400, ,000 subscribers. At this point, the audience appears to be of significant size that adding incremental names to the list will not have an increased negative affect on the open rate. The downward trend in click-through rates is less predictable than open rates. While this trend still exists, there is more variability in average click-through rates at higher volumes. Estimation models based solely on volume are not particularly accurate, indicating that creative and content play a crucial role. Organizations with a B2B focus can expect to see higher open and click rates than their B2C counterparts. This is explained partially by the average size of lists to which these organizations send . Fifty-two percent of B2B campaigns are sent to lists of less than 1,000 subscribers, and only 5.6 percent of B2B campaigns are sent to lists of more than 10,000 subscribers. Compare that with 41 percent of B2C campaigns sent to lists of more than 10,000 subscribers. 9
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