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CREATING EMAIL
MARKETING
EFFECTIVENESS WITH
ON-PREMISE
SOLUTIONS
Written by David Daniels, The Relevancy Group, LLC
Strategies to
Deliver
Relevance
and Results
June, 2012
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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/ -
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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
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Copyright 2012 The Relevancy Group, LLC. All Rights Reserved.
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
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Figure 2 Outlook on Using On-Premise Solutions
Question Asked: Would you consider utilizing a vendors on-premise email marketing solution? (select one)
Source: The Relevancy Group Executive Survey, n=368 5/12, United States Only
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
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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)
Source: The Relevancy Group Executive Survey, n=368 5/12, United States Only
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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
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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
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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)
Source: The Relevancy Group Executive Survey, n=368 5/12, United States Only
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.
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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
Source: The Relevancy Group Executive Survey, n=368 5/12, United States Only
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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.
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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?
Source: The Relevancy Group Executive Survey, n=368 5/12, United States Only
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.
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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
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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.
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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
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