E-mail marketing has become a crucial part of contemporary financial-services prospecting and sales. Along with pay-per-click advertising and social-media promotions, e-mail marketing is a powerful means of growing your business. However, since e-mailing generally costs less than other forms of marketing, it’s easy to get carried away, sending irrelevant e-mails to untargeted prospects (i.e., people in any industry). This may label you as an unethical e-mailer (at best) or a spammer (at worst).
As an association devoted to ethical, legal, and transparent business practices, the National Ethics Association encourages members (and non-members) to e-mail responsibly. This involves securing a prospect’s permission first and only mailing relevant, honest offers to targeted market segments. Sending vast quantifies of unsolicited bulk e-mails may generate sales in the short term, but harm your reputation over the long term. Plus, if you send indiscriminate bulk e-mails, ISPs may put you on their black lists, refusing to deliver your e-mails. And your own ISP may shut down your web site, effectively putting you out of business. Don’t let this happen to you!
A better approach is to make sure your e-mail marketing program is:
1. E-mail Legally: Comply Fully with the CAN-SPAM Act
Prior to 2003, the Internet was a “Wild West” in terms of unregulated e-mail marketing. However, in response to rising business and consumer complaints, the U.S. Congress passed the CAN-SPAM Act (“Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003”). The new law established rules for commercial e-mail and penalties (up to $16,000) for each violation. For the first time, marketers had the legal right to send unsolicited commercial e-mail as long as they followed the CAN-SPAM law and subsequent Federal Trade Commission rules.
To what types of e-mailing does the CAN-SPAM law apply? It covers “any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service.” The Federal Trade Commission categorizes e-mail content as follows:
- Commercial content – which advertises or promotes a commercial product or service, including content on a website operated for a commercial purpose;
- Transactional or relationship content – which facilitates an already agreed-upon transaction or updates a customer about an ongoing transaction; and
- Other content – which is neither commercial nor transactional or relationship.
According to the FTC, if the message contains only commercial content, its primary purpose is commercial and it must comply with the requirements of CAM-SPAM. If it contains only transactional or relationship content, its primary purpose is transactional or relational. In that case, it may not contain false or misleading routing information, but is otherwise exempt from most provisions of the CAN-SPAM Act. If it contains both types of content, the message must be primarily commercial in nature in order to be subject to CAN-SPAM.
Once you know your message is primarily commercial in nature, you must then comply with these rules*:
- Don’t use false or misleading header information. Your “From,” “To,” “Reply-To,” and routing information—including the originating domain name and email address–must be accurate and identify the person or business who initiated the message.
- Don’t use deceptive subject lines. The subject line must accurately reflect the content of the message.
- Identify the message as an ad. The law gives you a lot of leeway in how to do this, but you must disclose clearly and conspicuously that your message is an advertisement.
- Tell recipients where you’re located. Your message must include your valid physical postal address. This can be your current street address, a post office box you’ve registered with the U.S. Postal Service, or a private mailbox you’ve registered with a commercial mail-receiving agency established under Postal Service regulations.
- Tell recipients how to opt out of receiving future email from you. Your message must include a clear and conspicuous explanation of how the recipient can opt out of getting email from you in the future. Craft the notice in a way that’s easy for an ordinary person to recognize, read, and understand. Creative use of type size, color, and location can improve clarity. Give a return email address or another easy Internet-based way to allow people to communicate their choice to you. You may create a menu to allow a recipient to opt out of certain types of messages, but you must include the option to stop all commercial messages from you. Make sure your spam filter doesn’t block these opt-out requests.
- Honor opt-out requests promptly. Any opt-out mechanism you offer must be able to process opt-out requests for at least 30 days after you send your message. You must honor a recipient’s opt-out request within 10 business days. You can’t charge a fee, require the recipient to give you any personally identifying information beyond an email address, or make the recipient take any step other than sending a reply email or visiting a single page on an Internet website as a condition for honoring an opt-out request. Once people have told you they don’t want to receive more messages from you, you can’t sell or transfer their email addresses, even in the form of a mailing list. The only exception is that you may transfer the addresses to a company you’ve hired to help you comply with the CAN-SPAM Act.
- Monitor what others are doing on your behalf. The law makes clear that even if you hire another company to handle your email marketing, you can’t contract away your legal responsibility to comply with the law. Both the company whose product is promoted in the message and the company that actually sends the message may be held legally responsible.
Critics of CAN-SPAM claim there have been few prosecutions, resulting in millions of businesses ignoring the law. This may be true, but the National Ethics Association does not condone breaking the law just because you can. The better approach is to comply and reap the benefits of a stronger reputation, greater prospect/customer respect, and enhanced peace of mind.
Similarly, others have criticized the law for failing to stem the ever-rising flood of unsolicited bulk e-mails (over 90% of e-mail volume is spam, according to many experts). As mentioned earlier, the law allows unsolicited messages as long as they comply with CAN-SPAM requirements. Result: You might be a legal e-mailer, but still be unethical. So it’s important to move beyond legal requirements and to apply ethical standards to your e-mail marketing. We’ll discuss those in the next section.
2. E-mail Ethically: Send Permission-Based, Targeted Messages Only
Just because a marketing tactic is legal and in many cases effective doesn’t make it right. That’s the case with unsolicited bulk e-mail, also known as “spam.” Spamming has become an increasingly popular method of generating leads and sales. What’s so bad about this practice? Let us count the ways:
- First, spammers send 97.4 billion e-mails every day, according to Commtouch’s 2013 Internet Threats Trend Report). These messages clog the “pipes” of the Internet, often blocking the delivery of legitimate e-mail.
- Second, spam generates a $20 billion cost to society, say Google and Microsoft researchers, reflecting the time and effort that goes into blocking and disposing of unwanted e-mail messages.
- Third, spam is a huge productivity drain for America’s small businesses. Every second spent opening up and/or deleting an unwanted is a second that could have gone toward constructive work.
- Fourth, spammers trick users into confirming their e-mail addresses, creating even more spam down the road.
- Fifth, spammers often promote goods and services of dubious value or legality.
- Sixth, and finally, spam creates suspicion and annoyance among the public, resulting in lower open and click-through rates for legitimate e-mail messages. This increases the marketing costs for all.
What can you, a financial advisor, do about spam? Clearly, you should install effective spam filters to minimize productivity loss. But more importantly, you should reduce the Internet’s spam load by not sending unsolicited bulk e-mails. Instead, strive to create an e-mail program that’s:
- Highly targeted—i.e., it avoids sending e-mails to people who have little or no interest in your product. Spammers send promotions to millions of prospects in the hopes that only a handful will buy. Ethical e-mailers target their efforts more carefully (relevant prospect/meaningful offer) in order to market more efficiently and less invasively.
- Permission-based—i.e., it offers information or premiums to prospects in return for them agreeing to receive your future e-mails. Marketers who use double-opt-in methods (click an “agree” box on a web site, followed by clicking an e-mail URL) typically achieve the best results. Those who just assume consent (opt-out) get weaker results; they wind up with too many prospects with no interest in their products.
In addition to those two practices, ethical e-mailers should commit themselves to:
- Truth in advertising—Never intentionally mislead or deceive a prospect with your e-mail.
- Transparency—Fully disclose your company name and the true nature of your product or service.
- Legitimate e-mail address collection—Don’t harvest or scrape addresses from the Web.
- Reasonable address use—Refrain from sending too many messages in too short a time or otherwise taking advantage of your customer’s permission.
Many businesses “get” the importance of ethical e-mailing. But they worry about the extra effort and costs of moving to a targeted, permission-based system. This is where smart marketing comes in. Read on for further details.
3. E-mail Smartly: Balance Risks and Rewards and Follow Best Practices
Ethical e-mailing is the right thing to do. However, transitioning to a targeted, permission-based system when your existing prospects never granted permission can be difficult. That’s because you’ll be cutting yourself off from your revenue source. Considering risks vs. rewards will help you think through this dilemma.
Scenario A: High-Risk/High Reward Operation
If you have a high-volume e-mail operation, you will be at high risk of blacklisting and other negative consequences of spamming. Similarly, if you sell products of questionable value or legality or rely on dubious marketing appeals, you’ll also be at high risk, since people will be more likely to complain. In these cases, you’ll need to generate significant revenue to make the risks you’re taking worthwhile.
If the risk-reward balance is acceptable and if you haven’t had problems, you might decide to keep sending non-targeted bulk e-mails. However, if you send a different type of e-mail (different design, product, or offer), then you’ll be changing the nature of the marketer/prospect relationship and need to seek permission.
Now, what if you have non-opt-in prospects, but don’t e-mail them frequently? Then you should send an opt-in request before sending further e-mails. Reason: you don’t have an existing relationship, so starting an e-mail campaign without permission might be problematic.
Scenario B: Low-Risk/Low Reward Operation
Let’s assume you’re a low-risk e-mailer. In other words, you don’t send much e-mail and thus don’t generate many prospects that way. Selling high-value products or services with 100% truthful messaging reduces your risk even further. In this case, it makes sense to migrate to a targeted, permission-based system. The benefits of doing so are tangible:
- Higher response rate
- Less chance of generating consumer complaints
- No risk of getting on ISP blacklists
- No risk of ISP pulling plug on your site
- Less traffic clogging up the Internet
- Greater peace of mind
It will also make sense to refine your target segments and experiment with alternate offers and messaging in order to increase your conversions.
Scenario C: High-Risk/Low Reward Operation
What if you’re a high-risk, low-reward e-mailer? Then ask yourself why you’re assuming such a high risk for so little rewards. In most cases, it will make sense to adopt a permission-based system as quickly as possible.
Scenario D: Low-Risk/High Reward Operation
If this describes you, chances are you use targeted, permission-based e-mails. At the National Ethics Association, we believe most financial advisors and related firms should use this method. It’s efficient, effective, and ethical. What’s not to like?
If you decide to move to permission-based marketing, adhering to best practices is crucial. Here are some key techniques to consider:
- Be careful when renting e-mail lists. Do comprehensive due diligence so you’re confident all prospects have given legitimate consent. Also make sure the consent is for your specific product type, not just for a high-level category.
- Always remind people of the permission they gave. For example, at the top of the e-mail, explain why they’re getting your message (example: “When you subscribed to our newsletter, you agreed to receive periodic updates about new products and services.”) If they gave permission to an affiliate, remind them of this fact (“You are receiving this e-mail because you agreed to receive promotions from partners of XYZ Financial Services.”)
- Don’t abuse permissions. Just because someone gives you permission to e-mail him or her periodically doesn’t give you license to e-mail weekly or daily. Be sensible in determining your e-mail frequency.
- Manage your list carefully. Go through your prospect records to make sure you don’t have dubious or duplicate addresses. Delete those that can’t be validated. After sending an e-mail blast, you’ll inevitably receive bounce backs. Delete those immediately in order to avoid problems with your ISP.
E-mail marketing is a crucial strategy for growing your financial-services business. But don’t forget the importance of doing it the right way:
- E-mail legally—Comply with all the provisions of the CAN-SPAM Act of 2003.
- E-mail ethically—Treat prospects, customers, and ISPs as you would like to be treated—with respect.
- E-mail smartly—Balance risks with rewards and adhere to best practices in order to communicate professionalism to the marketplace.
In short, don’t just be expedient about your e-mail marketing. Commit yourself to e-mailing responsibly. You won’t regret it!
*Source: CAN-SPAM Act: A Compliance Guide for Business, U.S. Bureau of Consumer Protection Business Center
For more information about ethical sales practices, please visit the National Ethics Association’s Ethics Center at ethics.net. For information on affordable errors-and-omissions insurance for low-risk financial advisors, please visit EOforLess.com.