HOW TO CREATE BETTER E-MAIL NEWSLETTERS.

E-mail newsletters can be a powerful tool for building relationships with software customers, argues Sarah Stambler, an expert on electronic marketing. The cost of distribution is negligible, and it's easy to embed links that whisk readers to Web pages they might not otherwise visit regularly. Most importantly, Stambler points out, "a newsletter that delivers valuable content is likely to create customer loyalty and a competitive edge."

But Stambler also points out a poorly conceived e-mail newsletter can just as easily turn customers off. "These days everybody is creating electronic newsletters," she says. "It's not enough to offer free content--people have to be convinced to read your newsletter. If you're sending out a sweet, superficial piece, it's clear you don't understand who you're talking to."

Stambler recently offered these tips:

* Start by building a good e-mail list: One of the toughest challenges for would-be e-mail publishers, Stambler points out, is building a good contact database. "Every chance you get--in registration cards, surveys, and support calls--you should collect e-mail addresses. And be prepared to lose a lot of your names, too. The churn rate on e-mail lists can be as high as 40% a year."

* Develop the right editorial personality: E-mail is a very personal medium, so it's important to pick an editorial tone of voice that customers will relate to, Stambler notes. "If your users are Gen-Xers, you don't want to sound stuffy and formal--and if they're network administrators, it's risky to be too breezy." Ask tech support reps about how to pick the right editorial tone, she adds. "They talk to users all day long."

* Bring users into the loop: The best e-mail newsletters turn customers into a "virtual user group," says Stambler. Readers should be encouraged to contribute tips and application stories, she says, and to answer surveys about product usage and features. "This kind of interaction can produce a real bonding experience."

* Keep the copy short: E-mail newsletters occasionally run as long as a dozen printed pages, but "three or four screens" is about the right length for a newsletter that people will usually read on their PCs. Layout is important, Stambler adds. "You should announce all your headlines at the top of the e-mail message, in very clear language, so a reader can eyeball your content at once. Never make people scroll through the whole newsletter--they'll zap it away first."

* Publish several issues a month: "Even once a month online is like a century in print," Stambler says. "People forget you very quickly if there's no printed copy lying around on a desk." In fact, she feels frequency is far more important than length. "You might even want to send out a single Tip of the Day--that is, if you can come up with 300 tips a year."

* Avoid hard-sell marketing: If the newsletter feels like sales promotion, readers will ignore it, Stambler notes. "You can get away with an 80/20 rule--80% really good editorial content and 20% sales stuff." Even better, make sales offers flow logically from editorial content. Reports, add-ons, and upgrade offers can be hot items if they're presented as an "ancillary service to readers," she suggests.

* Be prepared for lots of interaction: "You can automate the distribution of an e-mail newsletter, but you're definitely going to hear back from people about all kinds of unexpected issues and suggestions that need personalized replies," says Stambler. "That's what happens when you have a real relationship with your customers."

Sarah Stambler, publisher, TechProse, 370 Central Park West, New York, N.Y. 10025; 212/222-1765. E-mail: [e-mail].