cMercury: Finding Returns in Precision Marketing

Discussion Questions

It was 15 min past midnight on 25 September 2019. Jacob M. George, the CEO of Caspar Technologies Pvt. Limited, sat in the backseat of his luxury sedan, enveloped in soothing music and the comfort of the ride. Despite the tranquil ambience, his mind was consumed by the late-night discussions with a key client, Pragati Singh, the co-founder and CTO of Villuvia.com. Caspar, the email marketing partner of Villuvia, had notified them the previous week about the impending renewal of their annual subscription to the email management system.

Villuvia, a rapidly expanding fashion jewellery retailer, had ambitious plans to establish brick-and-mortar stores alongside their existing e-commerce endeavours. With this newfound focus on offline retail, Pragati was re-evaluating their investments in digital marketing channels. However, they could not overlook the importance of retaining the customer base they had painstakingly built through e-commerce over the past five years. Jacob was acutely aware that their primary concern was the underperformance of certain online channels, which had been major revenue generators for this digitally born fashion retailer. Especially, their email marketing campaigns, which primarily targeted existing customers, were yielding a lower return on investment compared to the revenue generated from acquiring new customers through social media channels like Facebook and Google paid ads.

Jacob faced the challenging task of convincing Pragati to continue investing in email marketing despite diminishing returns. He believed that their new product, cMercury’s predictive intelligent email (PIE), could be the solution to rejuvenate Villuvia’s email campaigns. While email marketing traditionally had a lower ROI than other digital channels, Caspar’s machine learning-powered PIE campaign management technology had shown promising results in a test run. cMercury’s machine learning-based PIE emails delivered highly personalized product recommendations to each email subscriber, expected to significantly enhance customer engagement.

Initial responses to a few campaigns run with cMercury had not demonstrated a substantial improvement over the traditional and more cost-effective email campaign management system. Nevertheless, the Caspar team remained confident that accumulating several months of consumer data would yield outstanding results from their new technology.

Caspar Technologies Pvt. Limited

Jacob launched Caspar in 2016 with a vision to launch an indigenous email marketing services and omnichannel marketing platform. Prior to Caspar, Jacob had amassed over fifteen years of experience in the digital marketing solutions field. He had previously worked with RupeeMail, an innovative venture that utilized incentivized commercial email messages and had also established another venture called iCube before starting Caspar. iCube’s email marketing services primarily involved reselling partnerships with Lyris Inc., a global leader in the email marketing space, which was later acquired by Aurea Inc. in 2017.

Caspar’s journey began with Express Network as its first client, which quickly led to the acquisition of business accounts from online retailers like Myntra, Mydala and Letsbuy. In just three years, they became a driving force behind the email marketing efforts of numerous prominent Asian enterprises, boasting an impressive client roster that included Taj Hotels, IndiaMart, Titan Watches, Pepperfry, Metroshoes, Big Basket, Voylla.com and IAS Media, among others. Their success in email campaigns was particularly notable in the fashion and lingerie sectors, with brands like Clovia, Muji, Diesel, Gas, Scotch and Soda, Paul and Shark, Thomas Pink and Hunkemoller benefiting significantly from their services.

Jacob explained:

At Caspar, our passion lies in MarTech, and we firmly believe that campaign automation has the power to deliver the right message to the right customers at precisely the right time, eliminating waste and enhancing campaign efficiency.

Our journey was enriched by the experience gained while representing a global Email Service Provider during our previous venture, iCube. This experience empowered us to engineer and introduce a top-tier email marketing suite tailored specifically for Asian businesses. Among the array of features we offer, some of the most intriguing and unique are our abilities in conditional messaging and predictive intelligent emails.

Exhibit 1 illustrates Caspar’s journey. With years of experience in professional services businesses, Jacob, the founder, recognized that client–agency relationships formed the core of his business model. He organized teams of executives into what he termed ‘techies’ (technology and algorithm), ‘creators’ (content and creative) and ‘marketers’ (strategy and insights) functions, firmly believing that account management (acquisition and development) played a pivotal role in his business. Jacob emphasized the significance of client–agency relationships, stating:

While technology and automation are pivotal in innovative and performance-driven digital environments, the agency business thrives on client relationships. Managing these relationships goes beyond work output; it encompasses communication, feedback and transparency. At Casper, I personally oversee major accounts and do not entrust junior executives with client interactions.

In fact, he had a chart pinned to his office soft board labelled ‘Relationship Countercheck’ (refer to Exhibit 2). Lately, however, he began to wonder if the SaaS technology-driven, do-it-yourself, subscription-based model would still necessitate a service-focused approach. As his client portfolio expanded, he found it increasingly challenging to personally manage numerous accounts, and he still lacked confidence in any other executive to take on the client-facing role.

Villuvia Account

Villuvia was one of the key business accounts of Caspar and was using traditional email marketing technology for a year or so. Caspar recognized that digitally born retail brands often favoured digital marketing over their traditional brick-and-mortar counterparts.

Founded in 2013 by the couple Virat Singh and Pragati, Villuvia had evolved into India’s premier fashion jewellery destination, boasting a robust online presence and an extensive retail network of over 180 stores across India. The husband–wife duo, returning from a successful stint in the United States, envisioned an e-commerce venture in Bangalore. Their vision was centred on offering exquisite yet affordable jewellery. Crafted by master artisans from around the world and designed by exceptional artists, Villuvia redefined affordable luxury for the Indian middle class. The brand stood for exclusive, standout pieces that starred in a luxurious and seamless online shopping experience. Each piece of jewellery on Villuvia.com carried the assurance of quality and durability, with a particular focus on women’s needs, ensuring that shoppers did not need to fret over its quality and craftsmanship.

The online store had a unique appeal to consumers, describing their jewellery as akin to a cherished friend: ‘A Villuvia jewel is like your best friend, your 3 a.m. buddy, your BFF, someone who knows just what to do or say to bring that special glow to your face, make you feel fabulous inside, and look fantastic outside. Someone you can always count on.’

Over the five years, Villuvia showcased an unwavering commitment to customer satisfaction by a robust backend support system featuring cutting-edge technology and meticulous curation. This dedication was evident in their extensive collection of over 13,000 designs on the website, refreshed with nearly 1,000 new designs each week, as claimed by the company. Their online store attracted the patronage of over half a million customers, solidifying Villuvia.com as the nation’s leading jewellery site. By 2014, Villuvia jewellery had also become available on renowned online marketplaces like Amazon.com and Flipkart.com. Villuvia had effectively introduced the concept of offering high-quality, flawlessly crafted jewellery at affordable price points. Villuvia took immense pride in its commitment to preserving rare and traditional arts, crafts and narratives while creating contemporary accessories for its discerning patrons.

By 2015, despite its status as the foremost digital-first fashion jewellery brand in the subcontinent, Singh recognized that the online market represented just the tip of the iceberg. A substantial number of Indians still preferred to shop in brick-and-mortar stores. As a strategic move, the company relocated its headquarters to Jaipur in Rajasthan, a place steeped in royalty and renowned for its rich traditions in gems and jewellery.

To fully harness its infrastructure and expertise in curating affordable yet exquisite jewellery, Villuvia made its foray into physical retail. They opened their first store in Delhi, and within the subsequent three years, their footprint had expanded to include over 180 Villuvia stores across the country. This expansion allowed them to tap into the vast potential of both online and offline markets.

Fashion Jewellery in India ¹

In 2019, the Indian jewellery market was estimated to be worth ₹4,000 billion and was experiencing robust growth, exceeding 13%. With one-third of global jewellery sales occurring in the Asia-Pacific region, India stood as one of the world’s largest jewellery markets, just slightly below North America but nearly double the size of the European jewellery market (refer to Exhibit 5). However, in 2019, online jewellery shopping in India accounted for just about 2% of total jewellery sales, while the United States held approximately 34.5% and Europe claimed 17.8% of online channel shares. Consequently, online jewellery shopping in India was estimated at around ₹80 billion. This trend could be attributed to the preferences of the Indian consumer, who predominantly favoured a particular type of jewellery.

While India ranked as the second-largest producer of fashion jewellery after China, Indian consumers invested more in fine or precious metal jewellery. The market for costume jewellery or fashion jewellery was estimated to be around ₹200 billion, constituting approximately 0.5% of the total jewellery market. In contrast, countries like the United States saw costume jewellery accounting for over 80% of their jewellery market. In India, there was a societal inclination to invest in precious metal jewellery, with fashion jewellery not held in high social regard. Even diamond jewellery had only recently begun to gain popularity, owing to significant marketing efforts by the diamond industry. However, between 2016 and 2017, the fashion jewellery market experienced remarkable growth, expanding by 22%. Each year, the fashion jewellery market in India continued to grow steadily, driven by increased domestic demand and export opportunities. Consequently, the fashion jewellery market in India reached approximately ₹200 billion and maintained a steady growth rate of 20% CAGR.

Digital Marketing at Villuvia

The online marketing efforts at Villuvia were under the leadership of Pranav and his team, who had recently joined the company following a restructuring of the previous team. The Villuvia online marketing team consisted of three campaign executives, each responsible for different aspects of the digital marketing strategy. One executive oversaw paid advertising across web portals, social media platforms and search engines. Another managed earned media, which included handling social media accounts, creating content and driving viral marketing efforts. The third executive, Bose, was in charge of owned media, focusing on data-driven precision campaigns including SMS and email marketing. Additionally, there was a separate operational team dedicated to managing the online store and applications.

The current team was a new generation of digital marketers, primarily experienced in social media marketing. Their expertise had yielded impressive returns in Facebook and Google advertising campaigns, ranging from 100% to 200%. However, they lacked experience and familiarity with Caspar, its team and its software, which impacted the effectiveness of the email marketing campaigns. Exhibit 6a provides an explanation of the relationships between Caspar’s account management and the Villuvia online marketing team.

In 2019, the brand management or marketing team typically engaged with various external agencies for brand communications, including digital marketing agencies. Exhibit 6b illustrates the typical dynamics of marketers and their relationships with external agencies in this context.

September 25 Meeting

Pragati had scheduled a meeting at 19:00 hours to discuss the renewal of Villuvia’s email management software subscription with cMercury. Attending this meeting were several key executives, including Pranav Jain, who led Villuvia’s online marketing efforts. Pranav, a recent addition to the marketing team, oversaw all aspects of online marketing for Villuvia. Supporting him was Debabrata Bose, responsible for data-driven precision marketing. Bose was concerned about the declining trust in data-driven marketing among top management, evident in shrinking budgets while other expenditures on digital campaigns were on the rise.

Although Pranav was relatively new to the team, Bose was well aware that Pragati, the CMO, would evaluate budgets based on ROI figures, among other effectiveness and efficiency metrics. Jacob, the CEO of Caspar, had personally chosen to attend the meeting rather than delegating it to an account manager. This decision was influenced by the potential of the new AI-driven campaign management approach, which held great promise not only for cMercury but also for Caspar’s other clients. Villuvia held a significant position as one of Caspar’s key accounts, having been a longstanding client for numerous email campaigns.

Pragati initiated the discussion, saying, ‘Good evening to all, and I apologize for the late meeting; however, this couldn’t wait. As you’re aware, the festival season is fast approaching, and our competitors are intensifying their efforts. While our customer base is robust and growing, I’m not satisfied with how effectively we’ve harnessed their loyalty in terms of purchase frequency and monetary value. This issue is clearly reflected in the ROI figures from our past email marketing campaigns. Furthermore, our domain reputation is on the decline, which is a significant concern. We could potentially face restrictions or even blacklisting in data-driven email marketing, not to mention the potential harm to the customer experience due to inaccurate targeting.’

Bose intervened, stating, ‘Email marketing is very critical to reach existing customers and retain them. We all know that building customer relationships is critical in repeat purchases. With data-driven analytics, one needs to have patience as it takes time to have sufficient data to have a precise understanding and prediction of customer preferences. We have now established a proper knowledge transfer mechanism and rapport with the cMercury team and are confident that the effectiveness of email marketing is only going to go up. To be on the safer side, we could continue the machine learning managed process to avoid the uncertainties due to the team directly managing the emails.’

Pragati turned to Jacob and inquired, ‘Jacob, would you like to explain why we should continue with email marketing and what value can the ML technology-based predictive intelligent email bring?’

Jacob cleared his throat, prepared to elaborate on the subject. He began by showing a small presentation to highlight the features, process and workings of the new PIE in comparison to the traditional method (see Exhibits 2, 3 and 5 for explanation).

Pranav allowed Jacob to complete his presentation and then entered the discussion with a thoughtful perspective. He addressed Bose, saying, ‘Bose, while building customer relationships is important, data-driven marketing works better in highly evolved, competitive, mature industries. Shoppers are still relatively new to branded fashion jewellery in India, where imitation jewellery is generally looked down upon. Jewellery in India is still seen as an investment and a legacy and less about fashion. While the results of our most recent email campaign do look promising, I would like to compare ROIs across digital media. Social media advertising and paid search on search engines have yielded much better ROI, in the range of 100% to 200%, compared to our email campaigns.’

Pranav continued, emphasizing his concerns about the effect of email campaigns on the broader digital marketing budget. He stressed that without a well-curated email list and offers tailored to the recipients, email marketing had the potential to be perceived as spam, which could harm the domain’s reputation. Pranav further explained, ‘In fact, I’m actively advocating for online budgets, especially since the CMO believes there might be better ROIs in other areas like opening new stores, conducting activations, and investing in offline activities. My goal is to optimize all our digital marketing expenditures, and it appears that email campaigns might be impacting the overall ROI of our digital efforts negatively.’

Bose countered Pranav’s points, saying, ‘While I understand the value of new stores in attracting a large number of new customers, we shouldn’t simply let them slip away to competitors on their next purchase. Given the lower ticket size and novelty-seeking behaviour of our customer base, the frequency of purchase will be a key factor in determining profitability. Furthermore, we should consider that competition in the costume jewellery segment is likely to catch up soon. As this market develops, competitors may gain ground rather than us leveraging the repeat purchase potential in this category. I believe we should give the machine learning-managed process a try, as Jacob proposes. It can help us avoid uncertainties associated with human judgment.’

Jacob chimed in with additional information, stating, ‘We have already executed several campaigns using the ML-based predictive emails, and the results appear promising. We’ve observed a notable reduction in churn rates and an increase in unique clicks.’

Jacob proceeded to present the datasets he had brought along (Exhibits 7 and 8), showcasing a comparison of key performance metrics between traditional email marketing and the ML-based PIE approach.

Pranav, on the other hand, remained focused on targeted ads, which he believed were more effective in generating leads. He highlighted that their core strengths in digital marketing lay in contextual advertising on platforms like Facebook and Google paid search.

Pragati paused, taking a deep breath, and then continued, ‘While I agree that, at present, other online activities are delivering better ROIs, and offline activities are showing even more promising returns, given the fashion jewellery industry’s impressive annual growth rate of over 20 percent, I believe in maintaining a healthy mix of strategies. While we assess our current profitability, we must also consider future opportunities. We cannot afford to neglect our existing customers. Additionally, the recency of our interactions is a known key factor in response rates, which is why we should allocate a modest budget to email marketing. However, we must be vigilant not to let our domain reputation suffer due to poor targeting.’

Pragati continued, playfully taking a dig at both Jacob and Bose, ‘I’m not entirely convinced whether I should trust Jacob’s machine learning or Bose’s learning here. By the way, Jacob, I hope you’re not planning to charge us extra for this new technology you’re so enthusiastically promoting.’

Pranav swiftly chimed in, adding, ‘Unfortunately, it’s true. Jacob’s proposal comes at a considerably higher cost, with predictive mailing being five times more expensive than our usual method. Furthermore, we need to approach this cautiously until we gain full control over the channel, even if it’s the newly launched ML-based email management system.’

Jacob replied, expressing confidence in their ability to facilitate a quick knowledge transfer of the new module. He proposed a solution, saying, ‘We are confident that you can grasp the new module’s capabilities within a week. We are open to exploring a more agreeable price point. To assist you during this festival season and as you become more familiar with the system and gain confidence based on ROI numbers, we can offer a 50% reduction in the cost of the ML module. It’s important to note that this reduced price is not sustainable for us, primarily due to the expensive server space requirements for hosting the AI module. Therefore, this offer is a one-time opportunity.’

Jacob was eager to put his new technology to the test and find a compromise that worked for both parties.

Ride Back Home

Jacob replayed the meeting in his mind, reflecting on whether he had effectively presented his case for the new product. Introducing a new tool to a team during the first meeting wasn’t his preferred approach, and he wished he had met with Pranav separately before the meeting. While he had a strong relationship with Pragati, she increasingly relied on the recommendations of her growing marketing team.

After the meeting, he observed Pragati and Pranav engaged in animated discussions. He was confident that he had successfully conveyed the importance of considering domain reputation alongside profitability, as well as the significance of retaining and nurturing existing customers, given that acquiring new customers had become relatively easier and could lead to overinvestment.

Jacob contemplated sending a comparison table of key performance indicators for traditional email marketing versus ML PIE, which he had calculated during the discussion based on test campaign data. He also needed to assess the potential impact of his last-minute 50% discount offer on the projected ROIs. He reached for his laptop, ready to delve deeper into the analysis, using the data that was available (see supplemental material).

Supplemental Material