New research shows email service providers are in serious trouble

We can’t say it enough. Email marketing remains the leading channel for marketer ROI and is the preferred channel for customers to hear from their favorite brands. According to recent VB Insight research, personalized messaging is the leading indicator as to why email is so successful. And that’s exactly why some of the biggest email service providers (ESPs) could be in big trouble.

More targeted emails inherently means less emails. This is problematic when many large traditional ESPs structure their huge enterprise contracts to get paid on email volume.

I caught up with VB Insight analyst Andrew Jones, who authored a recent research report on email personalization. I asked him how traditional ESPs might hope to innovate in the future to counter this trend. “Part of personalization is knowing when NOT to email someone, and maybe engage them in another channel. That doesn’t play well into the traditional ESP pricing model. But there are plenty of other ways to make the email you do send more relevant. ESPs would be smart to begin by focusing there — with better data management, segmentation capabilities, trigger-based campaigns, dynamic content formatting, etc.,” he said.

ESPs may have to move quickly as well. In a related VB Insight survey of over 500 marketers, four in five were already doing some sort of email personalization.

To be fair, many ESPs have been adding more automation capabilities to address markets’ needs. For example, ExactTarget bought Pardot (before being acquired by Salesforce), StrongMail added campaign and cross-channel management features and rebranded as StrongView (recently acquired by HGGC), and MailChimp continues to add automation capabilities. With this being said, it will be difficult to continue using email as a blunt instrument. And multiyear, volume-incentivized contracts may be a thing of the past.

I asked Jones if he was surprised that most companies aren’t more advanced in using personalization tactics, despite the tools being readily available. “I liken it to the blind men around the elephant. The whole elephant is right there in front of you, but if you only look at one part at a time, your sense of reality can be very off. That’s the reality for many marketers today. But it’s changing rapidly.”

That rapid change means traditional email providers are going to be forced to behave more like marketing automation platforms.

Marketing automation platforms can store personally identifiable information (PII) for each individual, with segmentation and data management built right in to facilitate the design of single or multi-channel campaigns. As a result, email marketers won’t have to ask for data, because they will already have at least most of what they need within the platform.

In short, marketing automation makes email (and other channels) more efficient — and as a result, email marketers must evolve or face extinction.