HOW TOP RETAILERS USE TRANSACTIONAL EMAIL:

From First Click to Lifetime Customer HOW TOP RETAILERS USE TRANSACTIONAL EMAIL: Silverpop Study Reveals Revenue-Boosting Tactics

HOW TOP RETAILERS USE TRANSACTIONAL EMAIL: Silverpop study reveals revenue-boosting tactics Email marketing can be a double-edged sword. While it allows marketers to connect deeply with customers through uniquely relevant offers and measure the results instantaneously, the growing use of spam filters and crowded inboxes is making it increasingly difficult to fully engage with even your most valued customers. However, there is a largely untapped communications channel that enables marketers to reach out to customers with new and relevant offers precisely when a company and its products are top-of-mind. This channel is already likely your most highly read and actedupon messaging vehicle. But if you re like most, you aren t taking advantage of it. So what is this untapped channel that already has a tremendous share of your customers attention? It s the great, forgotten channel that s likely buried within your IT department or hanging off the end of some ancillary system, forlorn and forgotten. It s transactional email. And the fact is, your transactional emails can deliver promotional messages to the right person at the right time with tremendous results. Transactional emails are those which companies send to customers to confirm a purchase, notify of shipping dates, deliver warranty information, etc. While commercial emails are increasingly ignored or considered spam, recipients say transactional messages are the type most worth reading. 1 And six out of 10 consumers state they don t mind receiving marketing messages included within transactional emails. 1 Yet far too many marketers fail to exercise control over this powerful channel, ignoring the revenue-generating potential of improved branding, cross-sell and up-sell opportunities afforded by this communications channel. There is, however, a growing number of marketers who want to take back control of all customer touch points and utilize transactional emails in a more promotional manner, and many seek the services of marketing technology providers to help them achieve their goals. JupiterResearch reports that 58 percent of email marketers want to outsource their transactional emails to marketing technology providers. Of companies that already outsource promotional email, the number jumps to 65 percent. 2 Marketers seek assistance from these providers with their transactional emails in order to receive improved deliverability, trackability, scalability and the opportunity to include cross-promotional offers. Additionally, JupiterResearch projects a healthy return on investment when companies include marketing-oriented messages in transactional emails. Properly targeted with relevant offers, Jupiter estimates that transactional emails can generate as much as $500,000 annually in additional revenue when cross-sell and up-sell messages are included. 2 To identify how companies are currently using transactional emails and identify best practices, Silverpop undertook a study of the messages sent to recipients immediately following an online purchase. Findings show how some companies capitalize on using this targeted marketing channel to cross-sell and up-sell relevant products to customers, while others fail to harness the full power of transactional email marketing. Key findings With careful planning and by following the best practices identified in Silverpop s study of top online retailers transactional messages, marketers will find that transactional emails can be among their best marketing tools. Among the significant elements identified in the evaluation of the transactional emails, Silverpop found the following: Most companies sent transactional emails within 10 minutes of order placement. About the Study To identify how top retailers utilize transactional emails, Silverpop purchased items from 84 of the top online retailers as identified by Internet Retailer. 3 Each transactional email was evaluated for the following: 1. Timespan between placement of order and receipt of email 2. Subject line branding 3. Personalization 4. Layout elements 5. Up-selling and cross-selling 6. Smoothing the way to the inbox 7. Administrative elements For a list of companies analyzed in Silverpop s How Top Retailers Use Transactional Email study, see Appendix A. www.silverpop.com 1-866-SILVPOP (745-8767) 2009 Copyright Silverpop. All rights reserved. The Silverpop logo is a registered trademark of Silverpop Systems Inc. 2

Six percent of the transactional emails received landed in recipients junk folders. Nearly six out of 10 emails (58 percent) were sent in HTML format. Just one out of five emails included promotional offerings. Only 14 percent of transactional emails encouraged recipients to register to receive future promotional messages. Harnessing the revenue-producing power of transactional email Following closely on the heels of a customer action, transactional emails are both expected and opened with great regularity. Because these messages reach customers at a time when they are most likely thinking about the company in a positive light, savvy marketers are eager to utilize transactional emails to enhance customer relationships, solidify branding and cross-sell and up-sell additional products. When adding promotional content to transactional messages, keep in mind that there are certain legal complexities to take into account, especially if you typically don t offer an opt-out in your transactional messages. While in most cases there is nothing prohibiting transactional messages from containing some promotional content, there are certain guidelines you must adhere to, especially in the United States, with respect to the placement of the commercial content and the content of the subject line. Silverpop recommends you consult with your legal counsel with respect to complete regulatory interpretations and compliance requirements. Clearly, most retailers feel the need to confirm purchases shortly after they are made. To do otherwise is somewhat akin to leaving a department store customer standing at the cash register. 2. Subject line branding For retailers, the company name seems to be a key component in the effort to get recipients to open transactional messages. In conducting this review of transactional emails, Silverpop found that nearly nine out of 10 (86 percent) of the transactional emails received from top online retailers included the brand name in the subject line. Forty-six percent of companies that branded the subject line also included the order number. Establishing a strong brand identity is an important role for marketing. Utilizing transactional emails to enhance brand awareness by including the company name in the subject line is an important best practice. Silverpop found in its Email Creative That Works study 4 that emails with the company or brand name in the subject line had open rates on average 7 percent higher than those that did not. Because online shoppers are likely to make purchases from several different retailers, as well as get inundated with emails from other companies competing for their business, it s helpful for them to be able to quickly spot your company s receipt. It is also worth noting that there are U.S. regulations regarding the presence of promotional content in the subject line of transactional emails that do not contain an opt-out. You should check with your legal counsel before including such content. FIGURE 2: Personalization The following elements evaluated in Silverpop s study reveal how some top online retailers use transactional emails to enhance customer relationships and drive revenue. They also show the large number of top retailers that fail to fully harness the tremendous power of this unique communications channel. 1. Timespan In Silverpop s study, a majority of retailers sent transactional emails within 10 minutes of an online purchase. Many appeared within seconds. A few, however, took considerably longer, with one transactional message not arriving until nearly six hours after the purchase was made. (See Figure 1: How Long It Took to Receive Transactional Messages.) FIGURE 1: How Long It Took to Recieve Transactional Messages 3. Personalization Transactional emails provide marketers a rich opportunity to develop strong customer relationships. As with any type of interaction, it s better to call a person by name. In Silverpop s review of transactional emails, only 56 percent of the companies studied did so. Thirty-seven percent used both first and last names, while the remainder used just the first name. (See Figure 2: Personalization.) Personalization of email messages is a basic precept of any successful commercial email campaign. JupiterResearch found that as many as nine out of 10 promotional emails contain personalization. 5 If it makes sense to use a person s name when trying to sell him or her a product, it certainly is appropriate to do so when a purchase has been made. Best practices in promotional messaging should be followed with transactional emails as well. JupiterResearch found that marketers who employ www.silverpop.com 1-866-SILVPOP (745-8767) 2009 Copyright Silverpop. All rights reserved. The Silverpop logo is a registered trademark of Silverpop Systems Inc. 3

personalization are 40 percent more likely to have average unique conversion rates of more than 3 percent compared to those that do not. The analyst firm also found that personalized content can generate conversion rates that are three times more than those of non-personalized email. 4. Layout elements HTML vs. Text: The creativity afforded by HTML emails helps marketers boost returns. In a previous study of creative elements, Silverpop found 98 percent of promotional emails were HTML-based. 4 However, only 58 percent of transactional emails from the top online retailers evaluated for this study were sent in HTML format. (See Figure 3: HTML vs. Text.) FIGURE 3: HTML vs. Text FIGURE 4: Sidebars with Promotional Content Lacking strong branding, text messages generally simply confirm the purchase order. Utilizing HTML formatting that includes essential branding elements is a powerful way to enhance customer loyalty and even increase revenue. Not only do HTML emails look better, they are measurable. The marketing department that carefully evaluates metrics of its promotional emails should be equally concerned about the responses generated by transactional messages. By leveraging the sophisticated reporting capabilities utilized for the majority of commercial emails to also measure response to transactional messages, marketers can gain a better understanding of all the ways the company communicates with its customers. Links to the Web site: A transactional email is often a receipt, and customers will frequently keep such items tucked safely away rather than delete them. Savvy retailers, therefore, include a link to the company Web site in transactional messages, making it easy for the customer to quickly return for more purchases. Nearly eight out of 10 retailers Silverpop evaluated for this study included a link to the company s Web site in transactional emails. (See Figure 6: Links to Web Site.) Navigation bars: Fully half of the HTML transactional emails in the study included navigation bars. The look of these emails coordinated well with the original Web site on which customers made purchases, thereby further enhancing the branding experience. Most emails featured navigation bars along the top of the message, consistent with the formatting of promotional messages that Silverpop found in its Email Creative That Works study. 4 (See Figure 7: Transactional Emails with Navigation Bars.) Additionally, HTML emails afford greater layout flexibility regarding positioning and prominence of the promotional portion of the transactional email. In the United States, the Federal Trade Commission has indicated that a transactional email must include all or a majority of the transactional content at the beginning of the message body for it to retain its transactional status. In text messages, that puts any promotional offerings at the bottom of the message and generally below the fold. However, with HTML emails, retailers can place relevant product offerings in sidebars for better visibility. (See Figure 4: Sidebars with Promotional Content.) Logo: Establishing brand loyalty is the goal of every marketer, and showcasing the company logo is a key element of branding. Yet retailers who send transactional emails in a text format are unable to artfully and emotionally connect the customer s purchase to the brand. While some retailers sent HTML messages that looked like text and didn t include any formatting or images, 94 percent included images and logos. (See Figure 5: Transactional Emails With Logos.) FIGURE 5: Transactional Emails With Logos www.silverpop.com 1-866-SILVPOP (745-8767) 2009 Copyright Silverpop. All rights reserved. The Silverpop logo is a registered trademark of Silverpop Systems Inc. 4

By including cross-sell and up-sell opportunities within transactional emails, marketers are taking advantage of one of the most important attributes of this type of messaging. Because these emails are triggered by the customer, he or she is expecting the message and will readily open it. The email arrives promptly following a purchase and therefore reaches customers who have a recent affinity toward the company. The timeliness of promotional offers that transactional messages afford can generate significant additional revenue at little additional cost. Photos can help up-sell and cross-sell: While some text emails included promotional offers, HTML with photography more closely matches the promotional messages consumers are used to receiving. And the presence of photography is likely to enhance marketers ability to generate additional customer sales. Silverpop found in its Email Creative That Works study that B2C marketers experienced higher click-rates when they included images in their emails. While all-text B2C messages generated a 4.7 percent click rate on average, those that were mostly image-oriented doubled that rate, achieving a 7.1 percent average click rate. 4 Photography strengthens the ability to up-sell or cross-sell customers. FIGURE 6: Links to Web Site 5. Up-selling and cross-selling in transactional emails The revenue potential of transactional emails that include cross-sell and up-sell offers can be huge. JupiterResearch estimates companies can add as much as $500,000 annually in revenue by including promotional elements in transactional emails. 2 Yet, of the text and HTML transactional messages that Silverpop reviewed during the course of this study, only one out of five offered additional products or services in the email. (See Figure 8: Percentage of Transactional Emails with Promotional Content, and Figure 9: Examples of Promotional Content in Transactional Emails.) FIGURE 7: Transactional Emails with Navigation Bars Nearly four out of 10 retailers (39 percent) who sent HTML emails included photos of other products the customer might also want to consider. (See Figure 10: Images to Cross-sell and Up-sell.) FIGURE 8: Percentage of Transactional Emails with Promotional Content 6. Smoothing the way to the inbox White list requests: Including a request to be added to recipients personal white lists or email address books is a practice that is rapidly becoming important in promotional messages, and should be included in transactional messages as well. Doing so can significantly aid message deliverability and renderability in many popular email clients. Research has found that more than half (56 percent) of email users say they always add legitimate, trusted companies to their address books. 6 While requests such as, Please add mycompany.com to your personal address book can dramatically improve deliverability and renderability, only 2 percent of the transactional emails reviewed by Silverpop made such a request. Perhaps more retailers would take the time to ask recipients to white list their addresses if they realized how many of their messages including critical transactional emails were landing in recipients junk folders. While the percentage was small in Silverpop s study (just 6 percent), the impact is large for the companies who failed to make a sound impression on customers by having their communication regarding a purchase bunched in with discounts on Viagra and pleas from Nigeria to help conceal small fortunes. www.silverpop.com 1-866-SILVPOP (745-8767) 2009 Copyright Silverpop. All rights reserved. The Silverpop logo is a registered trademark of Silverpop Systems Inc. 5

FIGURE 9: Examples of Promotional Content in Transactional Emails Companies should carefully monitor the deliverability of their transactional messages, since mishandling can drive up call-center costs. Deliverability monitoring is offered by companies such as Pivotal Veracity and Return Path, or is integrated into the offerings of many marketing technology provider applications. Requests for opt-ins: A larger percentage of retailers used the transactional message to promote their commercial email programs than to cross-sell or up-sell customers. Sixty-eight percent of companies that offer emails as part of their marketing programs included a link in the transactional email to opt in to receive promotional messages. (See Figure 11: Opt-in Requests.) Since customers that buy from you are your most highly engaged audience, an opt-in opportunity in a transactional message should be your single best source for highly qualified additions to your list. But don t just ask them to drop their name into your database. Spend the time to clearly delineate the value proposition of your email program. You may also want to link to a sample message and to your privacy policy. 7. Administrative elements Order summary: While not all companies went to the lengths some did by including a photo of the item purchased, a vast majority (92 percent) included a summary of the order placed. Allowing the customer to review the order can avert sending the wrong item and help cut down on calls to customer service. Inclusion of phone number or email address for customer questions: When customers offer up credit card numbers in exchange for a product or service, you can expect they ll want at least some level of comfort that their questions and concerns can be answered. It s especially important if they notice a mistake in the order after reviewing the transactional message. Still, one-fourth of companies evaluated in the study failed to give customers a phone number or email address to use for questions or FIGURE 10: Images to Cross-sell and Up-sell concerns. (See Figure 12: Inclusion of Phone Number or Email Address, and Figure 13: Example of Message with Both.) Thanks, but please don t respond: While all but one transactional email Silverpop received included a thank you for ordering message in the body copy, many also included a warning not to respond. Given that the recipients are customers who have very recently made a purchase, replies from them should be handled. Either replies from customers should be sorted and read, or companies should consider reply-handling software. Many marketing technology provider applications incorporate reply-handling software in the solution. www.silverpop.com 1-866-SILVPOP (745-8767) 2009 Copyright Silverpop. All rights reserved. The Silverpop logo is a registered trademark of Silverpop Systems Inc. 6

FIGURE 11: Opt in Requests FIGURE 12: Inclusion of Phone Number or Email Address Conclusions Transactional emails can be a powerful tool for marketers. By taking advantage of the high open rates of transactional emails and establishing brand loyalty at the time customers are most likely thinking about the company, top online retailers strengthen relationships with customers and drive revenue growth. In reviewing how top online retailers utilize this powerful communications channel, Silverpop found the following best practices: Send transactional messages within seconds of the purchase. Include the company name in the subject line. Send HTML messages to enhance branding and showcase other items the customer might consider. Personalize messages. Photos help sell products and can work well in transactional emails. Include a link to your Web site. Use transactional messages to cross-sell and up-sell products and services. Silverpop Engage Transact converts transactional emails into powerful marketing communications Silverpop Engage Transact turns static, transactional email into a powerful tool for marketers. By bringing this important messaging channel out of the IT department and into your marketing organization, you are able to exert more control over corporate branding and content while ensuring a higher level of customer satisfaction. Silverpop Engage Transact enables marketers to: Easily generate rich HTML messages for receipts, notifications and alerts Ensure that each message includes appropriate branding elements Include important and relevant cross- and up-sell messaging Track opens, clicks and other recipient actions Increase deliverability rates Ensure CAN-SPAM compliance Seamless integration of customer data Silverpop Engage Transact allows for easy, seamless integration with existing IT systems using our XML API set. Messages can be sent immediately or batched for bulk processing at a scheduled time. Whether you re sending a few messages at a time or millions, Silverpop can handle the load of high-volume sends. Messages are created in real time and personalized based on your company s unique business rules. Silverpop helps ensure messages reach your customers inboxes and provides detailed tracking reports to monitor opens and clicks. continued on page 8 FIGURE 13: Example of Message with Both Phone Number and Email Address www.silverpop.com 1-866-SILVPOP (745-8767) 2009 Copyright Silverpop. All rights reserved. The Silverpop logo is a registered trademark of Silverpop Systems Inc. 7

FOOTNOTES: 1. E-Mail Marketing: How to Improve ROI, emarketer, May 2005 2. Optimizing Transactional E-mail Messages, JupiterResearch, May 2005 3. Top 500 Guide, Internet Retailer, 2006 4. Email Creative That Works, Silverpop, October 2006 5. Effective E-mail Marketing, Jupiter- Research, Volume 3, 2004 6. E-Mail Marketing: How to Improve ROI, e-marketer, Bigfoot Interactive, NOP World, Roper ASW, 2005 FIGURES: 1. How Long It Took to Receive Transactional Messages 2. Personalization 3. HTML vs. Text 4. Side Bars with Promotional Content 5. Transactional Email with Logos 6. Links to Web Site 7. Transactional Emails with Navigation Bars 8. Percentage of Transactional Emails with Promotional Content 9. Examples of Transactional Emails with Promotional Content 10. Images to Cross-sell and Up-sell 11. Opt-in Requests 1 2. Inclusion of Phone Number or Email Address 1 3. Examples of Messages with Both Phone Number and Email Address APPENDIX A: Companies included in the study 1-800-Flowers.com Inc. Abercrombie & Fitch Co. Amazon.com Inc. Apple Computer Inc. Art.com Inc. Avon Products Inc. BarnesandNoble.com Inc. Bass Pro Outdoor Online LLC Best Buy Co. Blair Corp. Blue Nile Inc. Buy.com Inc. Cabela s Inc. CaféPress.com CDW Corp. Circuit City Stores Inc. Coldwater Creek Inc. CompUSA Inc. Costco Wholesale Corp. Crate & Barrel Crutchfield Corp. CVS Corp. delia*s Inc. Dell Inc. Disney Direct Marketing Drs. Foster & Smith Inc. Drugstore.com Inc. ebags.com ecost.com Inc. Eddie Bauer Etronics Inc. Federated Department Stores Inc. (Macy s) Follett Higher Education Group (Emory University Bookstore) Foot Locker Inc. Gap Inc. Gateway Inc. Harry and David Holdings Inc. HP Home and Home Office Store (Hewlett-Packard Co.) IAC/InterActiveCorp. (HSN) IBuyDigital.com Inc. J. Crew Group Inc. J.C. Penney Co. Inc. J.C. Whitney & Co. L.L. Bean Inc. Lillian Vernon Corp. Limited Brands Inc. (Victoria s Secret) Lowe s Cos. Inc. Musician s Friend Inc. (Guitar Center Inc.) Netflix Inc. Newegg.com Nordstrom Inc. Northern Tool + Equipment Catalog Co. Office Depot Inc. OfficeMax Inc. continued from page 7 Two Ways to Generate Transactional Messages Only Silverpop Engage Transact allows marketers to take into consideration the various business requirements of the company s transactional emails and select the method best suited to generate messages. Both methods are equally simple yet effective. Use templates with dynamic content fields. Creating a template within the Transact system requires the marketer only to deliver the personalized elements for each dynamic field within the message. Simply submit a recipient data file and the content for each personalized field within the template, and your message is assembled and delivered. > This type of message construction is best suited for receipts and other materials with consistent layouts and structures. Send Silverpop the entire, preassembled message body. Marketers with complex business rules or existing in-house systems may choose to deliver the entire, preassembled HTML body for each message. This type of message construction offers the marketer complete flexibility. Using this approach, marketers can use internal rules engines to assemble each message with as much personalization as necessary. > Preassembled message body transactional emails would be most appropriate for itineraries or other materials that require completely personalized content for each message sent. Leverage relevancy and deliverability to boost ROI Marketers who want to gain control over opportunities to reach out to customers with the right product at the right time will want to learn more about Silverpop Engage Transact. Don t delay in reaping the benefits of maximizing transactional emails with improved deliverability, enhanced branding and the inclusion of relevant marketing messages. Omaha Steaks Overstock.com Inc. Palm Inc. PC Connection Inc. PC Mall Inc. Quixtar Inc. QVC Inc. Recreational Equipment Inc. (REI) Redcats USA (Chadwick s) Saks Fifth Avenue Scholastic Corp. Sears Holdings Corp. ShopNBC.com SmartBargains.com SonyStyle.com Spiegel Brands Inc. Staples Inc. Systemax Inc Target Corp. The Home Depot Inc. The Neiman Marcus Group Inc. The Sharper Image The Sportsman s Guide Inc. The Talbots Inc. Toys R Us Inc. VistaPrint Walgreen Co. Wal-Mart Stores Inc. Williams-Sonoma Inc. Zappos.com Inc. www.silverpop.com 1-866-SILVPOP (745-8767) 2009 Copyright Silverpop. All rights reserved. The Silverpop logo is a registered trademark of Silverpop Systems Inc. 8