As a marketing tool, the e-mail newsletter might seem archaic compared with new media such as Twitter and Foursquare. Yet e-mail remains one of the most effective means of building relationships with customers and driving sales. "Most people look at everything in their inbox, even if it's just the subject line," says Stefan Tornquist, the U.S. research director of Econsultancy, a London firm that specializes in online marketing research. "That's not true of a Twitter feed." In fact, e-mail newsletters have experienced a recent boom, with companies such as Thrillist and Groupon profiting largely on the strength of their mailing lists. Here's how to make an e-mail newsletter work for your company:

Make a compelling offer
People need a good reason to add more e-mail to their overflowing inboxes. That makes the sign-up form almost as important as the newsletter itself. (Adding an e-mail address to your list without the owner's permission is a no-no.) Clearly state what benefits subscribers can expect, such as exclusive discounts or insider industry tips. Just make sure the incentive to sign up is closely tied to your business. "You shouldn't raffle off an iPad, because the people who sign up will probably only care about the iPad, not your company," says Gail Goodman, CEO of Constant Contact, a Waltham, Massachusetts–based company that makes e-mail marketing software.

Send often—but not too often
No business owner wants to gain a reputation as a spammer. But if you communicate too infrequently, customers may become less likely to remember your brand and less receptive to your sales pitches. "A lot of companies make the mistake of not being in front of customers all year long, but then in November and December, they'll start e-mailing every day," says Janine Popick, the CEO of VerticalResponse, a San Francisco–based company that provides online tools for running e-mail and direct mail marketing campaigns. For most companies, sending newsletters once or twice a month is optimal, she says.

That rule of thumb has worked well for The Girl & the Fig, which operates three restaurants and a catering business in Sonoma, California. The company publishes a monthly e-mail newsletter called Figbits, which typically includes recipes and information about upcoming events. The newsletter helped CEO Sondra Bernstein garner hundreds of preorders for her first cookbook as well as about 300 downloads of the company's new iPhone app in two days.

Choose a clean design
Be sure to include enough white space so each element of your newsletter is easy to find, says Tornquist. Another design tip: If you include images in your newsletter, bear in mind that many people read e-mail with graphics turned off. If your e-mail consists of large graphics, readers will see blank space. "I've seen e-mails in which the first thing you see is the 'unsubscribe' message, which isn't good," Popick says. "Make sure there's a mix of text and images."

Get personal
To cater to subscribers' interests, you will need to know more about them than their e-mail addresses. But take it one step at a time. If the newsletter sign-up form includes too many questions, visitors will be less likely to subscribe. Instead, send new subscribers a quick note a few days after they sign up. Mark Hurst, the founder of Creative Good, a New York City consulting firm, sends new subscribers an e-mail that asks about their careers and interests. Goodman recommends surveying the entire subscriber list once a year to get feedback on the content.

If readers have divergent interests, divvy your mailing list into segments and send targeted variations of the newsletter to each group. Some companies also use customer data, such as recently viewed or purchased items, to create custom e-mail marketing missives. For instance, after a customer books a trip on Kayak, a travel site based in Norwalk, Connecticut, the company e-mails a roundup of deals on hotels, car rentals, and other services in the destination city.

Encourage conversation
In addition to surveys, offer subscribers regular opportunities to interact. One way to do that is by including quick polls in newsletters. Susan Danziger, the founder and CEO of DailyLit, a site that sends users serialized versions of books by e-mail, regularly includes polls in her company's newsletter, which has some 350,000 subscribers. In the December newsletter, Danziger asked subscribers to submit New Year's literary resolutions—books they had always wanted to read—and linked to a forum on her website in which readers could post their answers. She also included links to some of DailyLit's classic titles, including War and Peace and Anna Karenina.

Make the subject line count
Without an attention-grabbing subject line, subscribers may not open your e-mail. Choose a specific, succinct phrase that highlights the most crucial information in the newsletter. More subscribers will open an e-mail titled 20 Percent Off Spring Styles than one called March Newsletter.

Don't oversell
Though the ultimate goal of an e-mail newsletter is to boost sales, be careful that your missives don't become a relentless bombardment of pitches. The best newsletters provide expert information that benefits readers. A fashion boutique, for instance, could publish a seasonal style guide; an enterprise software company could offer productivity tips for the office.

One rich source of inspiration, says Goodman, is the questions customers regularly ask sales and customer service reps. "A great way to do a newsletter is a question-and-answer format," she says. "It invites dialogue." Business-to-business companies, says Popick, can often draw newsletter ideas from the guides and white papers they send to clients and prospects. Of course, newsletter subscribers love deals and discounts, but don't cram a lot of promotions into one newsletter, says Tornquist, or the deals might get lost in the shuffle. For maximum impact, focus on a single offer and highlight it at the top of the page, so that subscribers see it as soon as they open the e-mail.

Tie in blogs and social media
If you already publish a blog, there is no need to create even more content for your newsletter. "Having a separate newsletter, a separate blog—it's almost overkill," Popick says. In fact, a newsletter is a great way to drive traffic to your blog and your social media content. Publish excerpts of your blog posts, with links to the full content. Some e-mail marketing services, including Constant Contact, offer tools that let subscribers share the newsletter with their Facebook and Twitter followers.

Keep tweaking
Open rates and clicks are the primary metrics used to determine a newsletter's effectiveness. The open rate, the percentage of recipients who view the body of an e-mail, primarily gauges the quality of the subject line, says Goodman. The links clicked within the body of the e-mail are a direct indicator of what content subscribers find most compelling. Target numbers vary by company. "I've seen small wineries with open rates north of 40 or 50 percent, and larger retailers at 12 to 15 percent," Popick says. "It's really all over the board."

After establishing a baseline, many companies conduct A/B tests, in which portions of the mailing list receive slight variations of a newsletter, to see which version is most effective. IDES, a Laramie, Wyoming-based company that provides information about plastics to engineering and manufacturing companies, regularly tests the subject lines and content of its newsletter, which is sent twice a month to 340,000 subscribers. In November, IDES tested two versions of a newsletter promoting the company's new search tool. Half of its subscribers saw an image-based ad with a blue button inviting them to click for more information. The others saw a text ad with a basic link. The text ad received 33 percent more clicks. Thanks to the tests, marketing manager Nathan Potter discovered that many recipients were blocking images in their e-mails. "We've learned to keep things pretty simple," he says.