Cause Marketing: Marketer builds email list with 20% conversion rate

by David Kirkpatrick, Reporter

CHALLENGE

Farmer's Market, a family-run company with two locations in Belleville, Illinois, sold local produce and other goods for more than 30 years. The business was built on two pillars -- one half was retail sales out of the brick-and-mortar locations, and the other half was wholesale sales to small independent grocery stores, restaurants, nursing homes and schools in the area.

Over time the wholesale business became concentrated in one chain of small grocery stores to the point that those sales were around 50% of Farmer's Market's yearly revenue. When the owner of those stores told Farmer's Market he was selling to the largest grocery chain in the St. Louis area, he gave five days notice. Farmer's Market had to act fast.

"We had one of those moments where you either have to decide to innovate and do some new things, or just go away," says Rick Delashmit, General Manager, Farmer's Market. "We literally had five days notice, and half of our revenue was disappearing."

CAMPAIGN

Delashmit thought email marketing could help drum up more business. Email was very attractive because of its low start-up costs, high relative return on investment, and potential appeal to the loyal customer base at Farmer's Market.

Step #1. Identify your strengths and weaknesses

The core strength of the company according to Delashmit was the depth of their customer relationships. In this case, being a smaller business was an advantage because there was a closer and more personal touch with each customer.

The main weakness was an inability to compete on price with larger chain grocery stores in the area, and with big box retailers that also offered grocery items.

With this in mind, deep discounting wasn't going to work, but taking advantage of both customer and community relationships would prove to be a winning combination.

Step #2. Create a program based on your strengths

This winning combination led to the creation of an email marketing campaign based around a new charitable program created by Farmer's Market.

The program was called "Farmer's 4 Good" which is actually a group of 55 different charitable efforts that address local education, faith, law enforcement, animal services and more.

When Farmer's Market customers opt-in for the email program they also identify a specific area of the Farmer's 4 Good program they want to support. Farmer's Market donates up to 10% of all subsequent purchases by the customer to a specified cause, such as:

o Pontiac Junior High

o Illinois Center for Autism

o Violence Prevention

"Every time you shop in our store we are going to put five to ten percent of your purchase -- not the profit of that purchase, but the revenue -- right back into something in the community that's important to you," Delashmit says.

After beginning the Farmer's 4 Good program, email signups skyrocketed. Delashmit described the email capture chart as a "hockey stick."

- Have a plan before you ask

The initial email marketing efforts were not tied to Farmer's 4 Good and consisted of simply asking customers for their email address at the checkout counter. It quickly became clear that employees were not completely comfortable soliciting customers for their email address because there was no plan was in place or benefits to offer.

"It was tough to solicit folks (for their email address) and have them willingly give it to us when there really wasn't a clear idea of exactly what we were going to with (the address)," said Delashmit. "Whether it was going to be couponing, or whether it was just going to be a monthly newsletter."

Step #3. Test sending offers to the list

With email collection now running at a brisk clip, Farmer's Market needed to start marketing to the list.

At the onset, Delashmit experimented with a number of approaches:

o Offer an emailed coupon

o Encourage email recipients to share the message on Facebook

o Offer something for free

After a few months of informal testing it became clear that putting the word "free" in email headers almost doubled the open rates. Many email marketers are wary about using "free" in subject lines because some spam filters will block the mail based on that particular word. In this effort that has not been a problem.

Delashmit stated, "Overall my bounces have never been over 10 percent aside from the occasional isolated incident with a particular ISP here in town. I go through the bounce reports periodically, and the vast majority of the bounces I am getting are folks who wrote their email address down so sloppily that we couldn't read it and get it correctly in the first place."

He added they scan the bad email to see if it was possible to "fix" the address, but most are simply deleted.

Delashmit settled on the following program:

o Sends email on Monday and Friday morning, and sometimes more often to react to events or special occasions

o Almost all email includes a coupon code the customer prints or writes by hand to use at the checkout counter

o Occasional messages are sent asking customers to clickthrough to the Farmer's 4 Good website to see how much money has been donated in the overall program, and for customers' to see how much has been donated to their specific cause

Step #4. Improve best-performing offers

"What we found out was that when we can offer something for free, then our open rates were going up quite dramatically," said Delashmit.

This presented some particular challenges because:

o The produce industry is not a high-margin business

o Perishability is an issue because some promotional items have a limited shelf life

o The norm in the industry is to tie a free item to a high purchase requirement

Farmer's Market went outside-the-box and decided to combine its "free" offer with a nominal purchase.

- Free offer at a fair price

Delashmit explained it was almost impossible to walk into a Farmer's Market location and spend less than $5, so they thought that was a fair price to tie to a free offer.

With this idea in mind, they started a "Spend Five, Get Five" program. The first effort was to give customers five bananas if they spent five dollars. They've since applied a similar concept to other food items such as strawberries, potatoes and baby carrots.

This program not only increased open rates for the email campaign, but the customers who were only required to spend five dollars to receive the offer were actually spending closer to 15 dollars.
RESULTS

Delashmit states starting the email marketing campaign was, "the best thing that's happened to our business." It forced the company to use innovation and ingenuity to develop fresh concepts, and it gave them the time, and impetus, to invest in their own business with a focus on the retail outlets.

When Farmer's Market lost a single wholesale customer that represented 50 percent of its revenue, the solution was to establish a successful email marketing campaign. Here are the results they've seen:

o The "Farmer's 4 Good" program has 11,000 participants in a city with a population of 38,000 -- almost a third of the community's population

o In 16 months the email list has grown to 16,000

o Putting the word "free" in the subject line increased open rates from 17% to 30%

o "Spend Five, Get Five" conversion rate is more than 20%

o Customers offered the value proposition of spending $5 for the free offer are spending an average of $13

o The overall bounce rate hasn't passed 10%

o The Farmer's 4 Good program has donated $37,642.95 to local causes

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