creating email mkt effectiveness on premise solutions

7/28/2019 Creating Email Mkt Effectiveness on Premise Solutions

1/15

Research Sponsored by

CREATING EMAIL

MARKETING

EFFECTIVENESS WITH

ON-PREMISE

SOLUTIONS

Written by David Daniels, The Relevancy Group, LLC

Strategies to

Deliver

Relevance

and Results

June, 2012


2/15

Page | 1 Research Sponsored by

Copyright 2012 The Relevancy Group, LLC. All Rights Reserved.

Creating Email Marketing

Effectiveness with On-PremiseSolutionsStrategies to Improve Relevance and ResultsWritten by David Daniels, The Relevancy Group, LLC

Research Sponsored by WhatCounts

Introduction:

Increasing Email Marketing Complexity Warrants a Closer Look at On-Premise Solutions

Over the last decade, the Email Marketing Industry has been largely dominated by

outsourced or cloud-based Email Marketing Service Providers (ESPs). While these hosted

ESP solutions offer robust features for some marketers, the ability to maintain greater

control over marketing production and data integration has driven an increasing number of

marketers to embrace on-premise solutions. Today, the growing complexity of email

marketing requires marketers to leverage multiple data sources and tactics. The need to

integrate a growing array of systems has driven The Relevancy Group to explore the

potential value that on-premise solutions provide.

This document is based on a Relevancy Group executive survey that was conducted in April

and May of 2012. The survey includes responses from 368 marketing and IT executives.

The survey screened out executives who were unfamiliar with their organizations email

marketing efforts as well as organizations with fewer than 10,000 customer records. The

data features a balance of business-to-consumer and business-to-business senders. While

the survey includes responses from a variety of industries, the industry focus mainly

consisted of financial services, retail, travel/hospitality and media/publishing. The full

methodology and audience composition can be found in this reports Afterword section.

For more information on The Relevancy Groups services, visitwww.therelevancygroup.com, call (877) 972-6886, email

[email protected] or on twitter @emaildaniels https://twitter.com/#!/EmailDanielsor @relevancygroup

Reproduction by any method or unauthorized circulation is strictly prohibited. The Relevancy Groups reports are intended for the sole use of clients. For press

citations, please adhere to The Relevancy Group citation policy at http://relevancygroup.com/press.htm.All opinions and projects are based on The Relevancy

Groups judgment at the time of the publication and are subject to change. Copyright 2012 The Relevancy Group, LLC. All Rights Reserved.
http://www.therelevancygroup.com/http://www.therelevancygroup.com/mailto:[email protected]://twitter.com/#!/EmailDanielshttp://relevancygroup.com/press.htmhttp://relevancygroup.com/press.htmhttps://twitter.com/#!/EmailDanielsmailto:[email protected]://www.therelevancygroup.com/


3/15



Key Questions:This document answers the following questions related to email marketing deployment options:

Which type of deployment options do marketers currently use?

What is the outlook for utilizing on-premise email marketing technology?

What are the elements that marketers most desire when selecting email marketing solutions?

What benefits do those utilizing on-premise technology claim?

Are marketers utilizing on-premise solutions that are more sophisticated than their hosted peers?

What challenges most greatly plague on-premise email marketers?

What is the ROI of on-premise solutions as compared to hosted solutions and what is the overall impact of these

different senders on corporate revenue?

Executive Summary:Many marketers rely on a combination of hosted and on-premise email marketing solutions and improved control

over production, integration and costs drive on-premise deployments. Marketers using on-premise solutions

benefit from improved efficiency and effectiveness as well as the ability to integrate more data sources than

marketers using ESP outsourced solutions. Those using on-premise solutions cite fewer email marketing challenges

and use more sophisticated tactics such as testing and lifecycle messaging. Marketers utilizing on-premise

technology contribute more revenue from email marketing efforts and, according to corporate revenue, on-premise

marketers are generating a 15X return on their email marketing investment, compared to hosted marketers that

are generating a 9X return on their email marketing return. On-premise deployments offer savings beginning at six

million emails a month.

List of Report Figures

Figure 1 Email Marketing Technology Deployments, 2012

Figure 2 Outlook on Using On-Premise Solutions

Figure 3 Top 10 Most Important Considerations When Selecting Email Marketing Technology Solutions

Figure 4 Drivers to Deploying On-Premise Email Marketing Solutions

Figure 5 Benefits of Using an On-Premise Email Marketing Solution

Figure 6 Data Sources Currently Integrated to Email Marketing On-Premise versus Hosted

Figure 7 Top Five Challenges Sorted by Greatest Differences of Hosted Users to On-Premise Users

Figure 8 Comparing Revenue Contribution and Budgets of Deployment Types

Figure 9 On Premise Deployments Offer Savings Beginning at Six Million Emails a MonthFigures 10-13 Afterword: About the Survey Audience


4/15



PART I The State of Email Marketing Deployments

Many Rely on a Combination of Hosted and On-Premise Email Marketing Solutions

Marketers continue to prefer hosted technical solutions to on-premises solutions. This preference primarily results from

the historical complexities of email deliverability and an increasingly accelerating service, feature, price and usability

arms race among email service providers (ESPs). Overall, twenty-one percent of executives surveyed work with hosted

ESPs and another thirty-eight percent use a combination of hosted and on-premise ESP solutions. While just twelve

percent of executives currently use an on-premise vendor solution, an overwhelming seventy percent of executives

stated they would consider using a vendors on-premise solution.

On-premises deployments are nearly equally distributed across market segments, with organizations that market to

both businesses and consumers accounting for the largest share of deployments at fifty-six percent. While monthly

email volume is similar between on-premise and those using hosted ESP offerings, curiously, our survey reveals that

marketers operating on-premise send fewer messages a month than those working with hosted solutions. With

customer database size nearly the same, this would indicate that marketers working with hosted ESPs are mailing

slightly more frequently each month than those utilizing on-premise solutions.

Median Monthly Mailing Size

Senders Utilizing On-Premise Technology 6.1 million emails

Senders Utilizing Hosted ESP Solutions 7.8 million emails

Figure 1 Email Marketing Technology Deployments, 2012

Question Asked: What technology do you currently use to manage your email marketing? (select one)

Source: The Relevancy Group Executive Survey, n=368 5/12, United States Only


5/15



Figure 2 Outlook on Using On-Premise Solutions

Question Asked: Would you consider utilizing a vendors on-premise email marketing solution? (select one)


Cost, Reporting and Delivery Features Top Marketer Vendor Selection Considerations

When asked about the most important considerations when selecting email marketing solutions, executives cite cost

(49%), reporting (42%) and email delivery features and services (40%) see figure 3. Given macro-economic conditionsand the competitive nature of the email marketing vendor community, executives are correctly focused on these top

three attributes as they are the largest levers that impact revenue and profitability growth. This selection criteria and

feature set can be resolved by both hosted and on-premise ESP offerings.

Cost While marketing organizations are often seduced by the increasingly low CPM of hosted solutions,consideration must be given to the reoccuring nature of that pricing as well as the additional services and labor

costs that it often requires to integrate the solution to adjacent marketing systems. Given the importance of

cost, this study puts particular emphasis on budgets and revenue contribution, comparing on-premise marketers

and their peers who deploy email marketing through hosted solutions.

Reporting The reporting and analytical tools necessary for discovery and optimization is always a top

consideration for email marketers. Marketers often require custom reporting solutions, organizations largelycite the need for custom reporting and analytical services (see figure 3). Not unlike deliverability services, the

disposition of the deployment type has little to do with the vendors capabilities to deliver reporting tools and

services. Anecdotal evidence from Relevancy Group interviews reveals that many marketers export their email

marketing reporting data to a separate business intelligence application for analysis. The importance of


6/15



reporting should not be dismissed in the vendor selection process, but marketers must map this need to their

exisiting analytical tools and capabilities.

Deliverability The desire to improve email deliverability and optimize message inbox placement hashistorically driven marketers to outsourced ESP solutions. However, the reality today is that a variety of ESPs

that offer on-premise solutions also offer hosted solutions as well as deliverability services and tools.

Additionally, the importance of deliverability has created a robust ecosystem of vendors focused solely on thistopic, amounting to a plentiful array of solutions regardless of how the email sending platform is deployed.

Given this market maturation, it is inaccurate to portray a delivery feature benefit of solutions based upon their

deployment category (e.g. on-premise or hosted). Lastly, marketers should not overly focus on deliverability

benefits. Email marketing vendor-driven infrastructure improvements are table-stakes initiatives for improving

deliverability. These are often are erroronously overshadowed by delivery improvements that proper list

hygiene, coupled with the understanding of subscribers behavior, can provide. Technology alone, regardless of

its deployment disposition, can not improve inbox placement.

Figure 3 Top 10 Most Important Considerations When Selecting Email Marketing Technology Solutions

Question Asked: What are your most important considerations when selecting an

email marketing application/technology solution? (select all)



7/15



PART II Understanding the Benefits to On-Premise Technology

Improved Control Over Production, Integration and Costs Drive On-Premise Usage

When asked why their organization operates some or all of their email marketing with a vendors on-premise

technology, executives largely cited greater control over production, integration and costs (see Figure 4). When seeking

out the potential benefits of on-premise solutions, executives are correctly focused on lower costs, specifically citing the

lack of need to pay an ESP based on volume. Executives should also expect that on-premise technology will provide

greater in-house control when integrating other disparate data sources and applications. However to realize these

benefits, organizations must have the proper commitment to staffing resources. While there is some evidence to

support that on-premise solutions have provided greater control and efficiency in the marketing production process,

deploying on-premise technology should not be a considered a panacea to remedying internal production issues.

Previous studies and interviews conducted by The Relevancy Group have determined production and control issues are

typically mired in organizational dysfunction and conflict, and cannot be remedied by technology alone. That said,

having the proper tools to guide internal existing processes can assist in empowering greater control and efficiency over

the marketing production process.

Figure 4 Drivers to Deploying On-Premise Email Marketing Solutions

Question Asked: Please indicate why your organization operates all or some of its

email marketing with a vendors on-premise solution? (select all)

Source: The Relevancy Group Executive Survey, n=368,On-Premise n=183 5/12, United States Only


8/15



Marketers Using On-Premise Solutions Benefit from Improved Efficiency and Effectiveness

Executives deploying some or all of the email marketing messages with on-premise technology cite several benefits

including the following:

Improved Efficiency of Campaign Production and Deployment Overall, fifty-six percent of respondents

leveraging on-premise email marketing technology state that they can deploy campaigns more rapidly andthirty-seven percent cite a reduction in marketing production and execution costs (see Figure 5). Organizations

that operate their marketing programs in-house benefit from not having to collaborate with the production

services of outsourced ESPs. This internal corporate control not only improves the velocity of campaign

deployment but also reduces costs as marketers do not have to pay production fees for ESP services.

Greater Ability to Target Campaigns and Improve Relevance via Integration to Other Systems Forty-nine

percent of on-premise marketers report that they have improved the targeting and relevance of their

campaigns. This advantage is partly due to the improved ability to ingrate to other systems, as cited by twenty-

eight percent of these executives. Clearly organizations leveraging on-premise email marketing technology can

cite clear, tangible benefits and the ability to leverage additional data and systems via integration must not be

dismissed.

Improved Customer Value The ability to improve targeting and relevance through greater production control

and data integration drives nearly a quarter of these on-premise users to realize a greater understanding of their

customers value, improved revenue per customer and reductions in IT costs. Given the increasing competitive

nature of email marketing and the importance of securing the customers attention and engagement in the box,

the ability to improve not only customer value but also reduce costs should drive marketers to explore on-

premise email marketing technology benefits.

Figure 5 Benefits of Using an On-Premise Email Marketing Solution

Question Asked: What are the benefits that you and your organization have experienced from using a vendors on-premise email marketing solution? (select all)

Source: The Relevancy Group Executive Survey, n=368, On-Premise n=183 5/12, United States Only


9/15



Marketers Using On-Premise Solutions Integrate More Data Sources than Marketers Using ESP Solutions

When exploring the improvements that on-premise solutions can provide, marketers must focus on the ability to more

widely integrate their email marketing solution to external and existing data sources. While the ability to integrate to

external systems is not an exclusive benefit to on-premise solutions, the survey data indicates that more marketers

utilizing on-premise technology are integrating more disparate data sources (see Figure 6). The aforementionedimprovement in targeting and customer value requires a better understanding of the customer. Integration to customer

data sources is a key component to improving relevance and ultimately customer value and marketers leveraging on-

premise solutions are at an advantage over their peers using hosted outsourced solutions.

Figure 6 Data Sources Currently Integrated to Email Marketing On-Premise versus Hosted

Question Asked: Currently Integrated: For each of the following systems and data sources, please indicate your plans for integrating to them into a

centralized database for use in marketing efforts? (select all)


On-Premise Marketers Demonstrate Higher Sophistication than Their Hosted Outsourced Peers

Marketer sophistication as defined by the tactics and strategies utilized when conducting email marketing is not driven

by technology alone. Certainly, the solution feature-set and application ease of use to implementation tactics such as

dynamic content insertion or testing is necessary; however, the marketer and organization must be committed to

embracing such relevance-empowering strategies. The survey data suggests that, for example, more on-premisemarketers exceed their hosted outsourced peers in the use of the following tactics:

Greater use of offers in transactional messages, one third of on-premise marketers embrace this tactic ascompared to twenty-six of hosted outsource marketers.


10/15



Higher use of multi-wave lifecycle marketing messages, just over a quarter (26%) of on-premise marketersembrace the benefits of automated lifecycle messaging as compared to twenty percent of their hosted peers.

Greater use of testing: Nineteen percent of on-premise multi-variant testing as compared to twelve percent of

those working with hosted outsourced solutions.

While on-premise solutions should not be considered a silver bullet to advance marketing campaign sophistication, the

survey data also indicates that on-premise marketers encounter fewer marketing challenges (see Figure 7).

Marketers Using On-Premise Solutions Largely Cite Fewer Email Marketing Challenges

Regardless of deployment type, there are many universal challenges that all marketers share such as knowing how to

begin optimizing campaigns and managing frequency and list turn over. There are other challenges that do not impact

on-premise marketers as much as those working with ESPs. On-premise marketers cite fewer of these challenges.

Coordination across marketing departments and brands As evident in the previous statement that there is

greater control and velocity in the production of campaigns, just fourteen percent of on-premise marketers cited

coordination across departments and brands as a challenge as compared to a third of marketers utilizing hosted

outsourced solutions.

Integration benefits from on-premise technology appear clear

As the aforementioned data illustrated, on-premise marketers are less challenged with integration as compared to those leveraging hosted technology.

Just twelve percent of on-premise marketers cite integration as a challenge as compared to a quarter of

companies leveraging hosted outsourced technology.

Figure 7 Top Five Challenges Sorted by Greatest Differences of Hosted Users to On-Premise Users

Question Asked: What are your greatest challenges when developing email marketing campaigns? (select all)

selected responses, greatest deviations of challenges by deployment type



11/15



PART III Demonstrating The ROI of On-Premise Solutions

Marketers Utilizing On-premise Technology Contribute More Revenue from Email Marketing

Given that monthly mailing sizes are relatively the same between organizations using hosted solutions and on-premise

technology, on-premise marketers are able to deliver more revenue from their email marketing efforts. While thereare many variables to driving revenue from email marketing, Part II illustrates that on-premise marketers are leveraging

more data and possess a higher level of sophistication as compared to marketers outsourcing to hosted technology.

When utilizing the mean averages of these two different groups of marketers, the following data stands out.

Table 1 Mean Monthly Sending Volume and Mean Annual Revenue Contribution from Email Marketing

by Email Marketing Technology Deployment Type

Deployment Type/

Mean Email Volume,

Mean Email Revenue %

Mean Monthly Email

Marketing Sending Volume

Mean Percentage of Annual

Revenue Contribution From Email

Marketing

On-Premise Marketers 6.1 million messages 12.4 Percent

Hosted Outsourced

Marketers

7.8 million messages 7.9 Percent

Given the smaller sending volume of on-premise marketers the data suggest that they are getting more value out of

these marketing messages than their peers working with hosted solutions. This is in part driven by the greater use of

relevance empowering tactics (e.g. testing) and data integration.

On-Premise Marketers Deliver Highest Revenue Contribution Based on Spending

Marketers utilizing both hosted and on-premise solutions spend more annually on email marketing than other

deployment categories; however, this group reports that while their overall corporate revenue is higher, that just twelvepercent of that number comes from their email marketing campaigns (see Figure 8). Comparatively, on-premise

marketers seem to have found the sweet spot of spending and email program revenue contribution. While on-premise

marketers also report a twelve percent revenue contribution from their email marketing program, they spend slightly

less than those using a combination but more than those using a hosted solution. While this one year comparison of

spending is lowest for hosted senders, it does not take into account the amortization benefits that on-premise solutions

offer. That is, on-premise marketers, while spending more, also deliver a higher corporate revenue contribution from

their email program than those using hosted solutions. The variable nature of spending that utilizing hosted solutions

requires marketers to spend more over a three year period, which is the typical amount of time at which capital

expenses such as on-premise investments are amortized.


12/15



Figure 8 Comparing Revenue Contribution and Budgets of Deployment Types

Question Asked: How much does your organization spend annually for Deployment of Email marketing (all in including technology and sending

fees), Which best describes your annual company revenue? What percentage of your overall revenue is attributed to your email marketing

initiatives?


Overall ROI of Utilizing On-Premise Solutions is Nearly Double of Hosted Solutions

In comparing revenue contribution, overall corporate revenue and email marketing spending, marketers utilizing on-premise solutions report nearly double the revenue from their email marketing programs than their hosted peers. This

difference is significant considering that the sending volume of on-premise marketers is smaller than their hosted peers,

underscoring the higher sophistication. Consider the following data from the two distinct segments of marketers

reporting their results in this Relevancy Group survey. This is a comparison of the average mean results from each

segment.

On-Premise marketers report overall average annual revenue of $583 million dollars.

Hosted marketers report overall average annual revenue of $508 million dollars.

On-Premise marketers report an annual email revenue of $70 million dollars (12% of annual revenue)

Hosted markers report an annual email revenue of $40.7 million dollars (8% of annual revenue)

On-Premise marketers report an annual email marketing budget of $467,000 dollars Hosted marketers report an annual email marketing budget of $435,000 dollars

The data indicates that regardless of deployment type, email marketing is wildly profitable. However, consider the

differences.


13/15



On-Premise marketers are obtaining nearly double the amount of revenue on an annual spend that is just$30,000 more annually. This is also significant because they are obtaining this through slightly fewer messages.

Based on the revenue, On-Premise marketers are generating a 15X return on their email marketing return ascompared to hosted marketers that are generating a 9X return on their email marketing return.

Table 2

Mean Annual Overall Revenue, Email Revenue, Email Marketing Budget, Return

Dollars/Deployment Type Both On Premise Outsource ESP

Overall Revenue (Mean) $ 598,571,000 $ 583,721,000 $ 508,961,000

Email Revenue % Mean 12% 12% 8%

Email Revenue (Mean) $ 71,828,520 $ 70,046,520 $ 40,716,880

Email Marketing Budget (Mean) $ 612,000 $ 467,000 $ 435,000

Return on Email Spend 12x 15x 9x

One-Time Amortized Spend Delivers Greater Long Term Value than Annual Variable Spending

Given the assumed expenses depicted in the model in figure 9, marketers that send 6 million pieces of email per month

can attain greater value by deploying on-premise. This assumes a decreasing CPM cost for the outsourced deployments

as the email volume increases. Additional assumptions include a three year amortization of the on premise capitalexpense. Labor salaries were kept consistent for the on premise and outsourced scenarios. These labor costs were

built on typical median salaries and the labor force grows from two full time equivalents to four as the volume increases.

Given these assumptions the break-even point where on premise solutions become more affordable is 6 million

messages a month.

Figure 9 On Premise Deployments Offer Savings Beginning at Six Million Emails a Month

Assumes three year amortization of on-premise capital expense. CPM decreases for

Outsource spend as volume increases. Additionally assumes labor costs the same for both deployment models, with staffing costs growing with volume.

Source: The Relevancy Group, LLC 6/12


14/15



AFTERWORD & METHODOLOGY

Figures 10-13 - About the Survey Audience

Survey Methodology:

The survey was conducted in April and May 2012 by The Relevancy Group using an online panel of marketing and IT

executives. Survey respondents where qualified based on their knowledge of and participation in their organizations

email marketing efforts. The survey included randomization and skip ordering to ensure that the results and answers

were normalized. The survey also focused on respondents in the retail, travel, financial services and the

media/publishing industries and quotas were used to ensure at least 50 respondents in each of these industries. The

balance of the respondents included random collection of other industries. This survey and panel complies with

ESOMAR codes and guidelines. Panels are recruited by email and online marketing with over 300 diverse online affiliate

partners and targeted website advertising. The Relevancy Group employs e-Rewards "by-invitation-only" recruitment

methodology to invite pre-validated individuals to participate in these panels.

Research document and survey: Copyright 2012 The Relevancy Group, LLC. All Rights Reserved.


15/15


C i ht 2012 Th R l G LLC All Ri ht R d

About WhatCounts

WhatCounts is an email marketing service provider dedicated to helping you find and grow your email marketing ROI.

We accomplish this by providing our clients with flexible deployment options (SaaS or appliance), a dedicated account

model where you work with the same team all of the time instead of a random call center employee, campaign

production services for full service email marketing when you need it, and enhanced email with the latest video andsocial options. We are dedicated to helping you send relevant, timely, targeted, awe-inspiring email that grows your

business and helps you achieve your email marketing ROI goals. We are proudest of the fact that some of our customers

are seeing email marketing ROI as high as $200 returned for every $1 invested. Were headquartered in Atlanta,

Georgia, with offices in Seattle, Sydney, Baltimore, and other regional locations. Learn more atwww.whatcounts.com.

About The Relevancy Group

The Relevancy Group is dedicated to educating the market on the imperative tactics needed to foster trust with

consumers and improve an organizations relevance within the broader online economy. Working with the leading

vendors and associations serving the household names that comprise our economy, The Relevancy Group acts as an

educator and trusted advisor in the aim of optimizing cross-channel connected marketing strategy and tactics. For more

information, please visit:www.relevancygroup.comand follow The Relevancy Group on Twitter @RelevancyGroup

About The Author

David Daniels CEO and Co-Founder, The Relevancy Group

For 24 years, David has been a marketing industry proponent. Currently as CEO of The Relevancy Group, David directs

market research and consulting essential to digital marketing. Direct Magazine said David is one of the most influential

experts in email marketing, if not the most influential.Co-author of the book Email Marketing An Hour A Day, David

has held senior level positions at Forrester and JupiterResearch, Apple, Anthropologie, MacWarehouse, Proteam and the

earliest online retailers on CompuServe. David advises many industry associations including the OTA, writes a

syndicated column for ClickZ and has been a contributor to the Weekend Today Show on NBC. Follow David on Twitter

@emaildanielshttps://twitter.com/#!/EmailDaniels Learn more atwww.relevancygroup.com
http://www.whatcounts.com/http://www.whatcounts.com/http://www.whatcounts.com/http://www.relevancygroup.com/http://www.relevancygroup.com/http://www.relevancygroup.com/https://twitter.com/#!/EmailDanielshttps://twitter.com/#!/EmailDanielshttps://twitter.com/#!/EmailDanielshttp://www.relevancygroup.com/http://www.relevancygroup.com/http://www.relevancygroup.com/http://www.relevancygroup.com/https://twitter.com/#!/EmailDanielshttp://www.relevancygroup.com/http://www.whatcounts.com/

creating email mkt effectiveness on premise solutions

Documents