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Email is an inexpensive, efficient way to communicate with customers, members, and donors. So capturing valid, deliverable email addresses is critical for a business. Studies, however, indicate that about one-third of the email addresses to which a company sends marketing communications will bounce back as undeliverable over the course of a year. This is a huge problem for companies trying to stay in touch and increase revenue through email marketing.

How much is a customer's email address worth? Rick Buck, Director of e-Media at e-Dialog, a full-service email marketing provider, says, "Many of our clients can equate a dollar value to every email they send out. For every email that doesn't get delivered, they will lose revenue in that campaign. So it's mission critical to their success that we deliver their email messages."

The Business Costs of Undeliverable Email

In addition to the fact that people change their email addresses frequently, the email marketing problem is exacerbated by the fact that few companies validate the accuracy of the emails originally registered on their sites. Yet, in most cases, a company has spent at least $5 or $10 in advertising just to acquire an email address in the first place, remarks Bill Kaplan, CEO of FreshAddress, Inc., a Newton, Massachusetts-based email database services provider.

A DoubleClick 2005 Consumer Email Survey revealed that 65 percent of respondents open emails that offer product discounts, 51 percent open emails advertising free products, and 32 percent have purchased a product or service during the same online session in which they opened the promotional email. The negative impacts for not validating registered email addresses or keeping an updated database are significant.

In addition to lost revenue, invalid emails result in wasted marketing investment and poor customer experience. Furthermore, too many bouncing emails from a single source can cause the sending company to be blacklisted by ISPs. Additionally, it is easy for a malicious user to register an email address like abuse@[ISPname].com, sending a company's email marketing communications to a spam reporting address from which it is difficult to undo the damage.

In December 2005 and January 2006, FreshAddress conducted a study to test the top 50 retail Web sites (selected from Internet Retailer's list of the top sites based on gross sales) to determine which companies employ best practices in validating customer email addresses registered on their sites. The study tested nine common email errors (such as typing a "2" instead of the @ sign, misspelling a domain name, or typing a comma instead of a period before "com") as a small subset of the millions of invalid email registrations that occur daily.

None of the 50 sites correctly identified and rejected all nine of the invalid email addresses tested, thus allowing undeliverable email addresses into their databases. Based on numbers provided by Internet Retailer, it estimates that each retailer loses over $500,000 per month due to faulty email address validation.

Outsourcing to Reconnect

Through its patented Email Change of Address process and Email List Hygiene and Correction Process, FreshAddress locates current email addresses for those on a bounced list, helping its clients reconnect with customers, members, or donors. Services are priced on a pay-per-performance basis, and the cost equates to just a little more than the cost of a postage stamp--approximately 50 cents per deliverable address.

FreshAddress developed technology that provides a missing link between someone's old address and their current preferred email address. When it finds a current address for someone on a client's bounced list, FreshAddress sends a permission message to the customer on behalf of the FreshAddress client. The message reminds the customer that the company has special offers and discounts and would like permission to stay in touch through email. If the customer does not opt out, that software sends the current deliverable address back to the client.

To address email problems at the source, FreshAddress also offers its services as a real-time solution. In this scenario, when someone registers an email address on a client's Web registration page, the email address is sent to the FreshAddress server. If it identifies a problem, it sends a message back in a second to the user so he/she can correct the address at the time of registration.

These days, companies in retail, B2B, travel and a number of other verticals depend on marketing their products and services via email; Buck at e-Dialog says the company's clients are increasingly dealing with a volume of bounced emails and ask for updates on those addresses. E-Dialog uses the FreshAddress solution to facilitate this process.

"When we can't deliver addresses successfully to our clients' customers," explains Buck, "then we want to get hygiene on those addresses to see if we can salvage them, so we can continue sending our clients' information to them."

"We've always outsourced list hygiene and correction and incorporated it into our service offering," states Buck at e-Dialog. "Since our clients outsource their email needs to us, we are fully aware of the benefits of outsourcing additional services that are not our core competency or in areas where we don't want to build a core competency."

It is not cost-effective for individual companies to build a division with the technology, people, and processes for a centralized clearinghouse of email address changes, monitoring closed domains, and monitoring and deleting suspect and malicious addresses. By outsourcing, companies reap the benefit of the provider's investments in technology and infrastructure, along with lower costs because of the economies of scale.

Buck says the service can, on a one-time shot, save five-ten percent of a company's addresses. On an ongoing basis over the course of a year, however, it can save e-Dialog's clients 15-30 percent of the names they were unable to deliver to. "Our clients look at this list hygiene service as part of the total value proposition we provide for their marketing program."

Lessons from Outsourcing Journal:

• About one-third of the email addresses to which a company sends marketing communications will bounce back as undeliverable over the course of a year. For every email that doesn't get delivered, they will lose revenue in that campaign.
• It is not cost-effective for individual companies to build an in-house solution with the technology, people, and processes for re-connecting with customers, members, and donors by finding current email addresses. By outsourcing, companies reap the benefit of the provider's investments in technology and infrastructure, along with lower costs because of the economies of scale.
• A real-time solution that validates email addresses when they first register employs best practices in keeping errors out of the database in the first place.

Publish Date: March 2006

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Copyright © 2006 - Everest Partners, L.P.

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