Customers who opt out can cost companies significant money in lost sales and profits, Jeff Nicholson, vice president of global marketing for Pitney Bowes, told the audience at the Loyalty 360 Engagement & Experience Expo.
Some of the issues with opt-outs start just in the perceptions marketers have about consumers, according to Nicholson. “Look at the language we use… customer targeting. Nobody wants to be ‘targeted.’ No one wants to be ‘sold’ and no one wants to be targeted. We wonder why we are viewed as the adversaries.”
According to Nicholson, the majority of marketers view themselves as advocates for the customers, however, less than half of all consumers view them this way.
Opting out may seem like a small issue if the percentage of customers doing so is seemingly small, under 1 percent, yet even such a small percentage can mean a significant loss in revenues and profits when considered over a customer’s lifetime, Nicholson said. Additionally, there are customers who “silently” opt out by designating a company’s e-mail messages to automatically go into the “junk” file.
“For the longest time, marketers have mistakenly regarded email marketing as ‘free,” Nicholson said. “Strategic marketers are finally waking up to the consequences of getting it wrong.”
Another issue is that an increasing amount of consumes are using Facebook or LinkedIn to bypass e-mail, as a result they aren’t seeing many marketer messages.
Nicholson cited a Direct Marketer Association report that by the second quarter of 2010, delivery rates for both retention and acquisition e-mail were below 90 percent for the first time ever. Those ESPs measuring inbox delivery found as little as 70 percent of delivered acquisition email reaching the inbox and just over 90 percent of delivered retention e-mail doing so. Taken together, these numbers mean almost 40 percent of acquisition e-mail (and almost 20 percent of retention e-mail) is not going where marketers would like it to go.
Customer opt-outs are even more costly to the company when one considers that the large majority of those opting out are the highest income – and, therefore, usually the most valuable – customers.
Nicholson said there are three major reasons that customers opt out:
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Frequency – customers are contacted more often than they want to be
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Perception of permission – Customers don’t believe that they have opted in.
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Relevancy – The customers receive messages that are not relative to them.
Opt out is not just a moment in time, Nicholson added. “The effect is cumulative. It compounds with every campaign.” In each one, more tend to opt out, meaning a higher percentage of customers who no longer receive marketing messages.
So when the compounding effect of opt-outs is taken into account, an e-mail campaign thought to be effective might actually turn out to produce degraded lifetime customer value due to additional opt-outs, according to Nicholson.
Nicholson urged marketers to “not just manage the opt-out process; address the opt-out problem.”
To do that, marketers need to first understand why people opt-out and measure opt-out exposure, including understanding a campaigns true success rate (response vs. opt-out) and calculating the cost of that opt-out risk.
By pre-filtering messages to ensure that they are relevant and by considering frequency (limiting the number of e-mails, even those considered to be relevant), marketers help ensure the relevancy and profitability of campaigns and help prevent future opt-outs, according to Nicholson.
Nicholson also stressed that marketers need to ensure that opt-outs meet regulatory requirements, though that can be done in part by offering customers alternatives to full opt-outs.