The use of permission-based marketing in the personalization process


Nowadays, many companies use permission marketing, which is described as ‘asking permission before sending the customers promotional messages’. With this way of marketing, companies try to add value to their products by creating a channel for two-way interaction and engagement. By asking permission, companies are able to personalize their content in such a way that it is more ‘anticipated, personal and relevant’.

As described in the article of Kumar et al. (2014), permission-based marketing can be used in opt-in or opt-out manner. By using the opt-in approach, companies ask permission before sending their customers promotional messages. When companies use the opt-out manner, no permission is asked for sending the promotional messages. Customers will have the option to opt-out on each occasion they receive the promotional messages. In order to use the permission-based marketing in an effective manner, companies desire to increase the amount of customer who opt-in, and decrease the amount of people who decide to opt-out. Therefore, it is important for managers to understand what drives consumers to opt-in or opt-out and in which way they are able to influence this process.

In this study, the researchers compared the direct mail with the permission-based e-mail program. Since the company is able to be more personal and relevant in the e-mail program, they strive for a high amount of customers who decide to opt-in. However, by increasing the frequency of direct mailings, the customers wait longer to opt-in for the e-mail program. This mean that companies should be careful since there is a cannibalization effect. The permission-based marketing allows managers to approach their consumers with more personal and relevant content, which could increase engagement, and potentially the sales. However, this differs in case the customers are already signed up for the e-mail program. The increase of direct mailings can initially make customers stay longer in the e-mail program. Nevertheless, companies should be careful with increasing the number of emails: after a certain threshold, the positive effect diminishes and even reverses. This suggests that not the frequency of the e-mails is important, but the content of the e-mails. The e-mails should be made up of personalized content (based on interest, preferences and purchase history), with matches the need of the customer.

An interesting practical finding of this study is how to manage customers’ opt-in and opt-out decisions strategically, in such a way that it increases the return on investments. Namely, most companies have a budget constraint, and, therefore, need to make decisions how to allocate their marketing budget to the several marketing channels. This research suggests that companies should strategically reallocate their recourses across the communication channels, in such a way that extends he length of subscription on the permission-based e-mail marketing. By doing so, the company is able to maximize the customers’ spending on their website.

In this research, only direct and e-mail marketing are used as (permission-based) communication channels. However, companies use an increasing amount of marketing methods these days, such as search engine advertising, retargeting or affiliate marketing. Therefore, in further research on the attributed effect of permission-based other marketing methods should be included to measure the effect more accurately. In this way, companies will be able to further optimize their marketing strategy in such a way that it fits each customer.

Manon Hoogendoorn
358345

References

Kumar, V., Zhang, X. (Alan) & Luo, A., 2014. Modeling Customer Opt-In and Opt-Out in a Permission Based Marketing Context. Journal of Marketing Research, 51(4), pp.403–419.

 

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