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How Does Email Marketing Work?

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Email marketing is a form of direct marketing, which uses electronic messages to communicate commercial messages to an audience. In its broadest sense every email sent to a customer or potential customer could be considered to fall under the umbrella of email marketing.

The term email marketing was seriously damaged following the explosion of spam during the formative years of the internet. However, recently email marketing has received growing acceptance as a marketing channel that can be used to attract new customers, not just develop relationships with existing ones. Therefore there are two main purposes of email marketing:

  • To enhance to relationship of a company with its current customers and to develop increased loyalty and future repeat sales.
  • To attract and acquire new customers.

In the UK the size of the market for email marketing platforms and services reached £178 million by the end of 2006, a 20% rise from the previous year.

The permission based email marketing industry as a whole is now valued at in excess of $8 billion in the US. This looks set to grow considerably more with almost two-thirds of B2B marketers and one-half of B2C marketers planning to increase their use of email newsletter sponsorship.

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Emailing your Current Customer Base

The invention of the email has resulted in an extremely cheap way for companies to contact and keep in touch with their existing customers. However, few companies make the most of the email marketing opportunity. By providing your customers with special offers and interesting and useful email newsletters you can significantly enhance loyalty, keep your company in your customers’ minds, and ultimately create an increase in sales.

Before embarking on an email marketing strategy with your existing customer base it is advisable to purchase or license software that allows you to track and monitor the success of your email marketing campaigns. The golden rule of marketing is to measure and track everything you do. Email marketing should be no different.

Email marketing software will also often allow you to create email templates, segment your customers based on click-through rates and conversions, and adjust content to meet your customer’s needs. Having an interesting and informative email newsletter also allows you to offer a sign-up facility on your website, capturing people’s email addresses for future marketing purposes.

Attracting and Acquiring New Customers

The industry for cold email marketing is very misunderstood. It is often likened to sending out spam, and naturally many companies are very skeptical about its benefits and potential. In reality, when done properly, email marketing is one of the most cost-effective ways of building awareness and generating sales.

Research shows that more than 88 percent of online consumers have made a purchase as a result of receiving permission based email.

There are 3 main ways in which email marketing can be used to attract new customers:

  • Using a List Broker
  • Cost per Acquisition
  • Newsletter Sponsorship

Using a List Broker

There are many websites who have built up a significant membership base and are looking for ways in which they can monitorise their customer base. At the same time, there are many companies who can offer goods and services that those customers would be interested in.

List Brokers are dedicated companies or individuals who bring these two parties together. They then agree a price, usually per thousand emails, and take a cut of the price paid. Tracking and click-through statistics are usually provided by the list broker.

Cost per Acquisition

Cost per Acquisition (CPA) refers to results-based email marketing, in that payment is only made for each specific action, whether that’s a click-through, new registration, or sale. CPA can be likened to affiliate marketing, and is certainly an ideal way of carrying out email marketing because of its risk-free nature.

CPA is provided by list brokers, although many only provide the simpler cost per thousand email marketing model

Newsletter Sponsorship

Many websites send out a monthly newsletter to their customer base and consequently some offer newsletter sponsorship or a featured company section in the newsletter. Generally newsletter sponsorship is obtained by approaching the relevant website directly.

Newsletter sponsorship is considerably cheaper than straightforward email marketing. The reason for this is that with straightforward email marketing the message will only be about your company, with the email having been designed by yourself or a design agency. Contrasting this, newsletters will contain other information, with information on your company being an added extra. This naturally has a lower impact and fewer people will click through to your website.

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