Retention vs. Email Marketing: What’s the Difference?

Email marketing
February 8, 2023
13 min
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In 2022, the number of email users numbered 4.25 billion. With the growing tendency, the criterion is to reach almost 4.6 billion by the end of 2025.

That is why the importance of marketing via email as well as retention marketing tactics is growing at a stable rate.

number of email users
Number of e-mail users worldwide from 2017 to 2025(in millions). Source: Statista

At Promodo, we’ve already discussed automation in retention email marketing in detail. After the release of the article, we started receiving questions concerning retention in marketing, for example, “How to combine my email strategy with retention automation?”, “What is more effective for my business: email marketing or retention marketing?”.

In this article, together with Head of the Retention Marketing Department Svitlana Fursa we reveal the essence of email marketing, its relation to retention marketing, and determine the role of the loyalty program for both of them.

Email Marketing Evolution

Just Imagine… An ordinary day on May 1, 1978. A guy named Gary Thuerk works as a marketing manager at Digital Equipment Company. The morning seemed tense because Harry had an important task—to make the world’s first email newsletter to 397 people.

Gary logs onto ARPAnet*. At 12:33 EDT, he sent the first-ever email from the US East Coast to the West Coast. The text contained an invitation to a presentation of new products by Digital Equipment Corporation, where the company intended to sell computers with new software.

*ARPAnet is a computer network created in 1969 in the USA by the Advanced Research Projects Agency of the US Department of Defense, which became the prototype of the Internet.

As for the effectiveness of the first email newsletter, you may find what Gary Thuerk says about it.

What was the return on investment (ROI)?

“This led to an increase in sales of approximately $12 million”.

Open rate?

“It is impossible to determine the open rate. I assume that about 200 recipients read the email”.

CTR?

“About 40 people came to the presentation. 40 out of 200 or 40 out of 400 is still a very good result”.

Unsubscribes?

“No one could unsubscribe. However, I got a lot of complaints. The recipients forwarded the emails to other technical ARPAnet users”.

So, the general reaction to the mass email spam turned out to be negative. Although among the recipients, there were those who got more interested in it than small mass mailings with announcements about the birth of children.

A lot has changed in the field of email marketing since that first email.

In 2020, the global email marketing market was estimated at $7.5 billion. And this is just the beginning. According to forecasts, it will increase to $17.9 billion by 2027.

mail marketing revenue

In 2023, the number of users of the global network is not limited to 397 people, and modern email marketing specialists need to consider many factors. For example, data privacy. People are increasingly seeking to protect their personal information. They are ready to share it only with companies they trust.

In addition to privacy breaches, one of the most significant reasons companies lose customers is a lack of contact and relationship-building with clients.

According to Salesforce Research, 73% of consumers believe brands “should anticipate their unique expectations.” 56% of respondents expect more personalized offers from their favorite companies. At the same time, 88% of people believe that the experience provided by a brand is as important as its products and services.

customer expectations from brands
factors affecting the purchase desicion

In addition, you should also consider the factors that may affect the customer’s purchase decision.

factors affecting the purchase desicion

Receiving personalized offers, anticipating unique expectations, and feeling valued by your favorite brands — in 2023, email marketing can cover all these needs. At this point in the customer journey, the newsletter stops being just an email and becomes a tool for retention marketing.

Of course, email marketing is not the only way to retain customers. Depending on the level of requests, you can use contextual advertising, push, SMS, chatbots, or pop-ups. All these tools are better to be automated.

You may find extensive information on automation in retention marketing in our article, which we also prepared together with Svitlana Fursa.

Key points about the relationship between retention marketing and email marketing:

  • Retention marketing is a comprehensive strategy that includes different tools, tactics, and channels;
  • An email newsletter is one of the retention channels, and the email strategy is part of the retention strategy;
  • The task of retention marketing is to evaluate the overall retention of the project and not a separate channel.

What about the differences?

RETENTION? EMAIL? THE THING IS IN METRICS!

Email is one of the most effective and affordable retention marketing tools. However, it is not enough to retain customers.

You may evaluate the effectiveness of an email newsletter with two metrics: open rate and click rate. Further, you need to assess the amount of profit from each newsletter.

METRICS FOR ASSESSING RETENTION

  • CRR (Customer Retention Rate);
  • Cohort analysis (the research of the customers’ behavior based on the actions performed in a certain period);
  • Churn rate;
  • LTV (Lifetime Value);
  • ARPU (Average Revenue per User).

The core difference between email marketing and retention marketing is performance measurement indicators and different approaches to analysis.

“It is a mistake to consider the lack of direct profit from email newsletters as a sign of their ineffectiveness. In fact, there’s a profit. Probably, retention metrics are not used during the analysis. Even though you send a newsletter at some stage of the customers’ journey, a chain of events precedes the purchase/targeted action of clients. For example, the email may simply be unread or read, but it takes a long time to make a decision. Another scenario is that the customers found out about promotions and new products from promotional newsletters and went to the site through a search engine. Therefore, it is important to consider all retention channels”. Svitlana Fursa, Head of the Retention Marketing Department at Promodo

First, you need to analyze the Customer retention rate in general for the entire site/project. Then, you may detail your analysis with additional filters. For example:

  • order source (using UTM);
  • category of goods;
  • method of order/payment/delivery (self-delivery, courier, etc.);
  • total number of orders;
  • interval between orders.

In fact, the list goes on. You may choose the filters yourself, depending on your tasks and goals.

Examples of Retention Marketing

Case Study #1: Returning Users to the Required Category for Repeat Transaction

The main task is returning customers to a certain category. The purchase itself is a great plus, the category of purchase plays a critical role. If the customer bought in category A, it is critical to make them buyers of both, category A and category B.

We worked with the Bloomreach platform, which allowed us to calculate various metrics and build custom reports, and dashboards without the help of analysts. Therefore, the action plan was as follows:

  1. Setting up cohort analysis dashboards (reports).
  2. Building and testing hypotheses regarding possible scenarios of customer behavior and ways to motivate them to buy in a new (for them) category.
  3. Summing up the results. Besides the repeat purchases, the Churn Rate was a significant indicator for us. We targeted not only to increase the rate of repeat purchases but also to retain the maximum number of customers due to a change in communication strategy.

Case Study #2: Dependence of Repeat Sales on the Day of the Week

During the analysis of the effectiveness of email marketing, we found that the number of orders was increasing. However, the amount wasn’t sufficient because the traffic growth pace was significantly higher.

We decided to set up a cohort report for a detailed situation analysis. However, we involved the analysts from the client’s team. After examining the dashboard in PowerBI, we discovered a strange (but only at first glance) regularity:

The share of customers who placed their first order on a Saturday or Sunday and made a repeat order within the next three months is lower than if the order was placed on a weekday.

Together with the client’s team, we found a hypothesis that the cause of this failure was the work of the call center, namely, the incorrect determination of delivery terms. For example, the customer placed on Saturday. The call center representative states that the order will be delivered on Tuesday or Wednesday. In fact, the customer receives the parcel the very next day, on Sunday. On one hand, the client needs to be happy about the fast delivery. However, on the other hand, the buyer has gotten upset because of the long delivery times and formed a non-loyal attitude to the brand.

What’s next? The specialists worked on setting up the processes of ordering, assembling, and sending orders. The main result is that the day of the week and the frequency of repeated orders had no dependence anymore.

In case study #2, we detected the problem quickly enough. However, most often, it is difficult to draw correct conclusions based only on one report.

In order to provide quality service, it is important to collect and process customer feedback. Having such analytics, you can significantly reduce costs for the call center, and solve other problems. For example, you may free the call center workers from:

  • determining the problem’s stage;
  • sending the client to the manager immediately with the formed request, while collecting NPS.

You may also decrease the retargeting cost by outlining this segment in your base. It’s cheaper to get the contact and targeted action with the retention marketing tools compared to standard advertising tools, such as Google and Facebook.

Loyalty Program is the Basis of Retention Marketing

If you are wondering how to improve customer retention, we’ll surprise you. Loyalty programs retained customers even long before the Internet. Modern companies keep using basic loyalty tools such as following:

  • discounts;
  • discount cards;
  • bonuses;
  • rewards;
  • coupons;
  • free goods.

“Looking forward to you again! Here’s your ticket”

In 1872, The Grand Union Tea Company started giving their clients tickets. They were to collect 4 tickets to then exchange them for a pound of tea.

These tickets are the ancestors of modern gift cards, coupons, and other forms of bonuses offered to customers nowadays.

Loyalty Program Evolution

Any loyalty program motivates the clients to interact with the brand again, namely buy goods again as a result of previous positive experiences, satisfaction with the brand, and high value received from the purchase.

The loyalty program is able to orient your entire business to the most profitable segment of your target audience.

What does this mean?

In the future, businesses will start to focus more on clients that make repeated purchases or have a high average receipt.  

Further—more.

Due to the data obtained from loyalty programs, you may find ways to make the least profitable generate more revenue through increasing LTV and therefore the profit of the company.

Loyalty, Retention Marketing, and Email Marketing form a marketing combo, where an email is a loyalty tool. At the same time, the loyalty program itself is a retention marketing base.

For example, the email newsletter with discount information is an example of email marketing. However, if you add reactivation or a “perks” for subscription, it becomes an example of retention through a loyalty program.

“You need to plan the loyalty program in the smallest detail. First, it is necessary to evaluate its prospects. The main taboo is a discount for the sake of a discount. Secondly, answer the following questions: “What type of discount does it need to be?”, “What size should this discount be?”, “Why and who do you give it to?”. The right approach to the loyalty program is to integrate it into all communication channels with customers, including, for example, the usual form of subscription in the website footer. Yes, it requires additional technical implementation and integration, but it isn’t detached from the context”. Svitlana Fursa, Head of the Retention Marketing Department at Promodo

Examples of Retention through a Loyalty Program

For example, when Uber sends you a push message with a coupon on some discount, it uses retention through a loyalty program. When a local coffee shop invites via SMS or  Messenger to return to get a free second pie, it also applies retention marketing with loyalty.

Svitlana Fursa also highlights where you can also use the loyalty program:

  • motivation for the first purchase (give a discount on one order, or offer bonus points at the start);
  • personal birthday offer (selection of goods, promo codes);
  • reminder about the balance of bonuses and their expiry date, adding the selection of personal recommendations of goods.

In addition to maintaining customers, loyalty programs have a number of other advantages.

Conclusion

​​The loyalty program is the basis of retention marketing. At the same time, email is the top tool of the loyalty program. Marketers use different metrics for email marketing and retention marketing analysis. However, all of them are parts of a comprehensive marketing strategy.

We hope that we’ve helped you to figure out the differences, peculiarities, and benefits of both retention marketing and email marketing.

If you still have questions, feel free to contact us!


February 8, 2023
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