Email is still -- and will continue to be -- a favorite channel for marketers, according to a new report.
Posted Jan 7, 2008
New York-based market research firm JupiterResearch announced today that it predicts domestic spending on email marketing will have a compound annual growth rate (CAGR) of 11 percent during the next five years, increasing from $1.2 billion in 2007 to $2.1 billion in 2012. Email continues to be a favorite channel among marketers and will continue to play an important role in the industry, according to the report.
This five-year roadmap of email's growth is based on JupiterResearch's own email forecasting model and the insights of company analysts. Judging by the projected rise in spending, email will likely remain a strong channel of communication between companies and consumers. The increase in email budgets, however, does not seem to be taking away from any other marketing channels. In fact, while a few marketers are moving some of their print campaigns online, "all of the online marketing and advertising spend that we track and forecast -- display, search, online classified -- are all increasing," says David Daniels, vice president and research director at JupiterResearch and author of the report.
Naturally, as more channels become available and customers continue to be bombarded with an ever-increasing number of messages, marketers need to ensure that their emails are not only highly relevant, but that their databases are clean and accurate. "Clearly there will be more clutter," Daniels says. According to a Jupiter study conducted in November 2007, 17 percent of the U.S. population creates a new email account every six months, which requires marketers to employ better "reactivation tactics." However, the study reports that 73 percent of B2C marketers fail to capture and effectively utilize email clickthrough behaviors, and rarely investigate the situation after consumers have been "unresponsive."
The report indicates that end users will see a significant increase in retention emails, from 2,715 per active user in 2007 to 3,788 in 2012 (a CAGR of 7 percent), while acquisition emails will see a more modest growth (a CAGR of 5 percent). Daniels explains that the faster growth in retention emails indicates that marketers are trying harder to retain existing customers, a strategic move partially attributed to the fact that holding onto an existing customer is cheaper than acquiring a new one, he says. Moreover, Daniels notes that because there doesn't seem to be a huge increase in the number of consumers who are opting into permission-based emails, the primary driver of customer retention is on the marketer side.
Moreover, spam is predicted to hold steady on the individual level, but the report indicates that Internet service providers (ISPs) won't be as lucky. "ISPs will continue to battle nefarious senders and use progressive tactics to block billons of messages daily," the report states. And the fight to block spam will continue to cause collateral damage: Even though Jupiter predicts that by 2012 the cost of erroneously blocked emails as a percentage of overall email marketing spend will drop, the report still projects the price tag will reach $143 million, which "represents a significant cost of doing business that marketers must try to further reduce."
As marketers are committing more resources to ensure better list hygiene, Jupiter anticipates that marketing will see average delivery rates improving to 90 percent. To increase revenue and minimize costs, Daniels says, what it comes down to is marketers understanding "the value of what an email address is worth to the organization." That assessment, he adds, "will guide tactics that embody relevancy."
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