From the March 2004 issue of Entrepreneur

For several years, e-mail marketing has taken the place of traditional direct mail; e-tailers who use it have seen quicker responses and noticeable increases in overall response rates. And since it eliminates printing, postage and other costs, e-mail marketing is one of the most affordable ways to reach targeted groups of customers.

However, unsolicited e-mail-better known as spam-has effectively turned many customers away from e-mail marketing. Today's consumers generally don't want to receive advertising that doesn't interest them, and they especially don't like having their e-mail inboxes cluttered with spam.

A report released in October 2003 by the Pew Internet & American Life Project, a nonprofit initiative of The Pew Research Center, found that 25 percent of U.S. e-mail users say they use e-mail less because of spam. The problem is so prevalent that President Bush last year signed the Can-Spam Act of 2003, which went into effect on January 1.

In addition, a growing number of consumers, businesses and ISPs are using spam-filtering software to eliminate spam. Microsoft is beefing up its anti-spam software offerings. During the first half of 2004, its SmartScreen technology, already used in the company's MSN network, Hotmail service and Outlook e-mail, will be included in Exchange Server 2003. The technology uses algorithms to determine whether incoming messages qualify as junk e-mail and filters them out before they get to the end-user's e-mail inbox. A variety of other filtering programs also are available. E-tailers are particularly concerned about spam-filtering software because, in many cases, it inadvertently blocks legitimate, permission-based e-mail.

Consider Bill Broadbent, CEO and co-founder of T-ShirtKing.com, a Mountainair, New Mexico, licensed T-shirt e-tailer with sales of more than $1 million. According to Broadbent, last year his company sent a weekly e-mail newsletter to an e-mail list of more than 300,000 names. The list is populated by opt-in customers and visitors who chose to receive the e-newsletter, by signing up either on Broadbent's site or on affiliate sites. And everyone-even people coming to the site from affiliate sites-is sent an e-mail from T-ShirtKing.com asking if they have opted in to receive the e-newsletter.

But because of the new spam utilities, that list of 300,000 has dropped by 30 percent, and the response rate has dropped by more than 50 percent. "If people don't open their e-mail newsletters, after six e-mailings we take them off our list," says Broadbent, 43, whose e-newsletter was responsible for 25 to 30 percent of sales last year but less than 5 percent this year. "What's happening is that the newsletters are going into their spam boxes and never coming out."

The problem is affecting not only broadcast e-mail messages, but also customer order receipts and daily customer communication. In fact, e-mail is no longer a reliable means of communication for Broadbent's company because of spam filters, and soon it may become altogether impractical. Says Broadbent, "There are e-mails that are just for customer service-every single e-mail is handwritten and sent to each customer individually-and at least half of them end up in their spam boxes or spam folders."

Spam blockers are becoming a major concern for many entrepreneurs, affirms David Daniels, research director at Jupitermedia in New York City. "Legitimate marketers are seeing a decrease in performance in their e-mail marketing campaigns based on messages getting blocked," he says. In fact, in a report released by Jupitermedia in August 2003, "The State of E-mail Marketing: Perfecting the Appropriate Mix of Art and Science," 78 percent of executives surveyed said that ISPs' spam filters have been a problem and have affected their marketing programs. According to Daniels, "There was a wide range of responses, from decreased click-through rates to decreased open rates."

There are various techniques e-tailers use to ensure their e-mails are not being intercepted by anti-spam software. Broadbent, for example, is considering sending out an e-mail that says, "The T-Shirt King e-newsletter is available at this URL," and then alerting people that they can go to a Web site to read it. "By reducing the amount of text in the e-message, we are assuming the message won't get tagged as spam," says Broadbent. Indeed, words such as "free," "special" or "click here" are often tagged as spam and end up being intercepted by spam-filtering software.

Broadbent is planning to sign on with Listrak (www.listrak.com), a company that offers a hosted e-mail marketing solution and has relationships with the major ISPs, so e-mail from its clients is not labeled spam. Broadbent says this service will cost him an extra $1,000 per month, but it can cost businesses with fewer people on their lists as little as $100 per month. "If we can regain the lost sales we used to receive after we sent our e-newsletter, the $12,000 won't be missed," says Broadbent. Another company offering a similar service is Roving Software. Its Constant Contact software (www.constantcontact.com) targets companies with lists of up to 100,000 e-mail addresses.

Small-business marketing consultant Sharron Senter, who sends her 1,500-count subscriber list a marketing tip each week by e-mail, suggests that before you send your e-newsletter, you run it through SpamAssassin (www.spamassassin.org), a filter that identifies spam. It will immediately e-mail you back a spam score with a rating and suggest areas of improvement. Depending on the score, you may have to tweak your e-newsletter or e-message before sending it out. Senter recommends doing this once a month or once each quarter, since spam-filtering software changes often to keep up with spammers.

Daniels recommends doing an e-mail campaign in smaller bursts to "throttle the amount of messages being sent, because some of the ISPs will block based on volume," he says. "If they see an IP address that is blasting a bunch of mail, they will block it or slow it down to investigate."

Managing e-mail marketing campaigns is clearly becoming more complicated, time-consuming and difficult because of spam. Unfortunately, because of a few "bad apples," you'll have to weigh the pros and cons of an e-mail marketing program prior to launch-and probably even spend more to accomplish it.

For more tips on improving delivery success, look for the May 2004 "Net Sales."


Melissa Campanelli is a marketing and technology writer in Brooklyn, New York.