Surviving in spam's shadow

For Janine Popick, spam is a four-letter word.

The CEO of San Francisco-based VerticalResponse constantly preaches to corporate clients about how to send e-mail to consumers without descending into the unsavory company of pornographers and con artists. She believes the online marketing industry needs to spend more time teaching companies how to use direct e-mail--a potentially cost-effective and targeted marketing strategy--and differentiating from its scorned cousin, spam.

Popick's strategy is getting noticed. VerticalResponse, which develops software for e-mail marketing campaigns, announced Monday an agreement to sell its iBuilder application to online CRM (customer relationship management) powerhouse Salesforce.com and its 4,600 corporate clients. That means VerticalResponse is now handling direct e-mail for about 20,000 businesses, including Brookstone, The Breast Cancer Fund, Gardeners Eden and PetCareRx.

But customers have not necessarily come easily. Popick and other marketing specialists founded VerticalResponse in February 2001, smack in the midst of the dot-com downturn. Economics forced the company to scrimp on marketing and buy second-hand computer equipment. These days, VerticalResponse maintains a skeletal full-time crew of 10 people, relying instead on part timers and corporate clients to spread its software.

Popick talked to CNET News.com about the danger of e-mail, the marketing potential of instant messaging, and the secret to scoring free paper clips in San Francisco.

Q: How do you differentiate your targeted direct e-mail from the vast quantities of spam that clog electronic mailboxes around the world?
A: Essentially it goes to the relationship that the sender has to the recipient. We make our clients agree that the people who receive the e-mail have opted in.

How do you enforce this rule?
We have an upload limit, so you can't buy a CD of 200,000 names and e-mail addresses and upload the entire list into our system. In fact, an alarm goes off if you try to upload more than 5,000 names...We also unsubscribe people as soon as they request (it). You are immediately taken off the list and will never be mailed to again.

If we even sense that a client is trying to send spam, we will cancel that account. We're doing our job, and we're making sure our customers are in compliance with our strict anti-spam policy. These are our servers and we want to protect our property, after all--and we don't want to clutter people's inboxes with stuff they don't want.

Is it tough to sell your product because of spam's horrible reputation?
In a way. E-mail marketing is the cheapest way to keep in touch, but it's not spam. There are businesses that don't take advantage of the medium because they think all commercial e-mail is spam.

How many people opt out of e-mail in a typical direct-marketing campaign?
It depends on the list (of e-mail addresses) that the client creates. If the list has never been mailed before, people can be jarred, and their unsubscribe list could be high. But even a high unsubscribe rate is under 10 percent. However, if you keep in contact with your customers, send out a newsletter regularly--say, two times per month--you could see an even lower unsubscribe rate.

"E-mail marketing is the cheapest way to keep in touch, but it's not spam."

Low unsubscribe rates are good, but how do you truly measure the success or failure of online direct marketing? How does it correlate with revenue?
A lot of times the company will track whether an e-mail takes the customer through to the final purchase. And there is anecdotal evidence, too. If a company's sales blipped pretty high the day the e-mail sales campaign started, that's a good sign.

So in most cases, it's tough to correlate direct marketing with revenue?
It's not that simple for many of our customers. Take real estate. Realtors are not necessarily trying to sell a house via e-mail. They're just looking at it from the perspective of the number of phone calls that the e-mail generated or the number of clicks they're getting on their site.

The bottom line is if you have a good relationship with your customers, you're going to drop an e-mail campaign and see the results immediately. But do a banner campaign--well, we all know that banner click rates are at an all-time low rate. E-mail continues to be on the rise. People aren't sick of too much e-mail yet.

Some people say the holy grail of advertising will be instant messenger. How important is IM for online marketers?
It's playing into our future incredibly. It's all we use in this office to communicate with each other, and absolutely it will take some role in the not-so-distant future in terms of customer-retention marketing. That having been said, I don't see it playing a role in customer acquisition. It's too intrusive. But if you've already got a relationship and you have permission, it's going to take a much bigger role.

So companies will send coupons or sale notifications to established companies via IM--but relatively few companies will send cold IMs to strangers?
Right. I don't think a lot of people will volunteer their IM handle--just like a lot of people didn't volunteer their e-mail address a few years ago. But if the company has a good relationship with the person, it's going to work.

What role will wireless play for online marketers, and how far are we from a world where the local bakery sends an alert to my cell phone that croissants are hot out of the oven?
It could play a huge role for some of our smaller businesses that are only interested in customers while they are in a particular Zip code. The challenge is to get that detailed information on someone. It's going to be a really pure, double-opt-in situation so that we have permission to know where they are at any given time. I don't think the phone companies are going to be giving out wireless numbers anytime soon. It's a ways off.

How optimistic are you that the volume of spam the average e-mail user receives will shrink?
I'm not at all. It's not going to stop. It's going to get worse. But we're trying. The education process has to come from us--the direct marketers and others using e-mail appropriately. We have to say to our customers, "Hey guys, it's up to you to give relevant content to your users because there's a great chance it will get lost in the clutter."

How has the downturn affected your business strategy?
We built the product as an easy-to-use tool for small and mid-sized businesses, but it's changed from a business perspective. We are now distributing our product through companies that need an add-on tool. Now we market and sell in a more distributed way, going through companies like Salesforce.com, so they can distribute our product to their clients.

You founded the company in February 2001, in the heart of San Francisco's dot-com disaster zone. How have the tough times shaped your business culture?
Because we started in the economic downturn, money raising was not easy. We had to rely on very few people to do a lot of things. We've had to cut corners. We save money by using guerilla marketing and buying servers on the cheap. We've had to really be smart about marketing.

How specifically have you saved money in the past month or two?

"People aren't sick of too much e-mail yet."

We've gone to auctions of dying dot-coms, and that's how we've gotten our servers. Actually, we try to get as much as we can from dying dot-coms. Once we walked into this office space near us where the company was going out of business, and we asked the people there to leave their desks and paper clips and everything else they could leave behind. It might not seem like a lot, but it helped out. We can only afford to be smart.

Do you practice what you preach and use targeted e-mail instead of traditional, big-ticket marketing as another way to save cash?
Definitely. We can't just go out and do a big media buy with lots of banners on a big site. We have to have a tight message with a target. For instance, if we're marketing to small retail businesses, it's usually the proprietor who needs to sign off on the deal. So we send e-mail directly to that person's e-mail address. The message is, "You can save money and easily get to people through e-mail marketing. You no longer have to use direct mail because it's killing trees and is ineffective."

How else do you use non-traditional or guerilla marketing to get customers?
A lot of our clients are small businesses, and it's pretty easy to figure out which Web hosting services cater to small businesses. So I'll call that service and say, "Do you send out a newsletter? If so, I'd like to be in it." Then I provide a description of what we do that goes out in the next newsletter. A lot of Webmasters are interested in our product because we help them with their job.

The other thing we've relied on is the viral-marketing contingent. A lot of wineries in Napa use us on a word-of-mouth basis. They may want to get rid of some stock by offering a lower price on some wines for good customers. They segment their database and pull out their good customers and then they can send them e-mail with the new price. Maybe they will also include a nice recipe that goes along with their choice wine pick.

Roughly half of your customers are technology companies, and the other half are retailers or other brick-and-mortar businesses. How much hand-holding and customer service do you need to give, particularly to the non-tech customers?
We definitely get more customer service calls from people who don't understand the technology or have been slow to adapt to the Web. They definitely require more hand-holding. But frankly, you can find people anywhere...who don't know what they're doing. Sometimes the people you think (are) furthest along need the most hand-holding.

I'd say 60 percent of customers know enough about their business to produce good lists and get good results. We have to educate the rest...through our Web site, FAQs (frequently asked questions) and articles. We constantly get the calls that say, "We're trying to upload 2.5 million names into your database, but it's not working." Well, sorry, but that's because we won't let you send that much e-mail.