DirectBuy’s E-mail Program Helps Build Customer Relationships

Publication: Direct
February 9, 2009

It’s amazing what a simple series of “welcome” e-mails to new registrants can accomplish. What’s even more amazing, though, is the number of marketers who don’t use them.

Marketers who wait to communicate with new subscribers risk being labeled spammers when they finally do send that first message because recipients just might forget they agreed to receive them. If enough people report the marketer as a spammer, their ISPs will begin diverting the marketers’ mail into recipients’ spam folders or blocking them altogether.

Welcome e-mails are the best place to set new customers’ expectations. They also can be great customer-retention tools. Just ask the folks over at DirectBuy, a company that offers home furnishings, appliances, flooring and related goods at manufacturers’ prices.

The firm makes no money on the sale of merchandise at its showrooms. DirectBuy’s revenue comes from the membership fees customers pay to have access to its low-priced goods. As a result, the fees customers agree to pay are a significant aspect of the business.

How significant? They apparently vary so much that Melinda Hyde, the firm’s senior marketing coordinator, declined to give even a range.

“Each of our 166 locations is independently owned and operated. The costs of membership vary vastly from state to state and from showroom to showroom because of the local services they provide in addition to [our] national services,” she says. “So it wouldn’t be fair to give a figure because it wouldn’t be accurate.”

In any case, just after a customer signs a contract with DirectBuy, there’s a sensitive period during which the individual may get cold feet and back out of the deal. Moreover, many state laws give them a short window to do so.

“When you join DirectBuy, you sign a contract. And as with any contract, there are rules and regulations attached to it, including the opportunity to cancel,” Hyde says. “Obviously, to us one of the most important things is member retention. And when we began to think about it, we decided member retention starts the day they sign up.”

So last July, with the help of e-mail service provider SubscriberMail, DirectBuy began sending new members messages just after sign-up.

As Hyde describes the process, “During the first week we want to make sure [e-mail recipients] understand the value of the membership and that we’re with them every step of the way, starting the very day they join. Within an hour of their information being entered into our system, they’re sent an e-mail.”

The message contains a welcome letter from DirectBuy’s president and links to Web pages created specifically for new members. “They can go in and learn basically anything they want to know,” Hyde says.

The open rate on these messages is nearly 71%. To put this figure in perspective, an e-mail “open” is recorded when the receiving machine calls for images from the sender. With most inbox providers blocking graphics by default these days, a marketer is lucky to see open rates of 20%.

DirectBuy’s open rates for its welcome e-mails mean most new members are asking their inbox providers to turn on the message’s graphics.

And among those who open the message, Hyde says more than 40% click on a link.

The second day after joining, customers get another e-mail describing the services available to them.

They also get a third message and occasionally a fourth during the first week. The unsubscribe rate from these communications is 0.15%.

“The final e-mail is sent on the seventh day because we don’t want to send members too much,” Hyde says. “It lets them know the retention program’s other benefits.” For example, it offers the opportunity to sign up for product announcements and specials.

“The great thing about selling at price,” Hyde continues, “is that sometimes vendors have just done inventory and they have all this merchandise that’s either overstocked or last year’s model. And they’re willing to offer it to their stores at an incredible price. This e-mail program allows me to get that message out to our members and give them better than [usual] DirectBuy pricing.”

The program’s payoff? A 1.5% increase in member retention during the first week.

And according to Hyde, “the most exciting part is that we’re not done. As with any program, we intend to improve it. So in my eyes, there’s even more potential.”

Jordan Ayan, SubscriberMail’s founder and CEO, believes DirectBuy’s e-mail welcome program is a prime example of using the channel to establish relationships.

He puts it this way: “E-mail marketing is an exceptional tool for building customer relationships. DirectBuy’s event-triggered e-mails let [recipients] know exactly what to expect from their new membership. This steady flow of relevant e-mail information at critical points in the customer life cycle improves the depth of the relationship DirectBuy forms with its customers, and as a consequence has boosted its customer retention rates.”

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