Can pricing solutions overcome spam?

Can pricing solutions overcome spam?March 26, 2008Amy Schmitzaemehrin@syr.edu

Email has undoubtedly confirmed its use as a powerful communication tool for marketers. At the same time, since its inception, its effectiveness has been steadily and rapidly eroded by the overwhelming multitude of unsolicited bulk emails that inundate every email account holder. In fact, despite the Can-Spam Act of 2003, the existence of spam has increased and helped put the success of email marketing at risk.

To combat the gush of spam, it has been recommended that marketers be required to subscribe to services that charge postage for delivery of email, essentially amounting to a tax to reduce the supply of unwanted electronic communications. However, this solution eliminates the unique feature of email — its interactivity.

“The postage mechanism does not seek to solicit any feedback from recipients pertaining to the relevance of the messages,” says Alex Thevaranjan, associate professor of accounting in the Whitman School of Management at Syracuse University. “The postage option simply imposes a fee on all communications.”

New research by Thevaranjan suggests that a better, but less commonly known, solution for marketers to combat spam is bonded senders. This option involves posting a bond with an intermediary that is forfeited if the recipient identifies the email as an unwanted communication.

“Our research shows that the bonded senders solution dominates the postage stamp solution,” says Thevaranjan. “Specifically, the bonded senders solution allows marketers in more categories to participate and yields greater profit to each marketer.”

The research goes on to show that a bonded senders solution improves targeting quality of marketers and increases the profits of every marketer. In fact, some inefficient marketers who were shut out under the postage stamp solution come to make profits under the bonded senders solution, since the bonded senders solution imposes a penalty only on emails rejected by the recipient, instead of on every email sent out.

“The bonded senders solution also reduces the aggregate number of unwanted communications, improving social welfare and the effectiveness of the electronic marketing strategy,” says Thevaranjan. “Because the bonded senders option brings value to the marketer and also results in fewer unwanted communications for the recipient, it appears to be an efficient tool for electronic marketing.”

Thevaranjan’s paper, forthcoming in the Journal of Interactive Marketing and co-authored with Joseph Kissan, associate professor in the University of Kansas School of Business, underscores the emphasis on and importance of combating spam.

“Our research clearly has implications for anyone interested in pricing solutions to combat span,” says Thevaranjan. “Our findings are encouraging to experts who wish to pursue investments that facilitate implementing the bonded senders option.”

Future research by Thevaranjan involves sales force compensation and the role of ethics in principal-agent models.