Email Marketing 101: Determining the value of a subscriber

Hola Marketers. Today’s edition of Email Marketing 101 is here to school you on how to determine subscriber value. Have at it …

It’s a question often on the minds of email marketers: “How do I know how much a subscriber is worth?”

Being able to answer that question is critical, because acquiring subscribers usually comes at a cost, whether you are purchasing subscriber lists or investing in enticements, such as e-books, webinars or whitepapers. You don’t need an MBA to know that to stay in business you need the revenue from those email addresses to be greater than what you paid to acquire them.

Determining the value of an email subscriber is relatively straightforward, but slightly different methods apply based on whether your emails themselves are sources of revenue or if they are designed to drive revenue from other sources.

If your emails are revenue generators

The first step in determining subscriber value is to make sure your subscriber database is clean. Look through your list and remove users who haven’t opened email in the last year. Export users who are currently opted-in to receive emails and add up the total revenue they generate.

Now that you have your revenue number, simply divide it by the number of users to obtain your average revenue per subscriber (RPS). That number is the key to understanding how much you can afford to spend on email acquisition (a subject covered in depth by MarketingProfs here) and determining the profitability of your email marketing program.

According to Act-On, “If you know how much you can afford to spend in order to get a subscriber, plug that value into your list-building or lead-generation efforts, and you just drew a line of ‘profitable’ versus ‘not profitable’ for every single list-building tactic you use.”

If your emails aren’t sources of revenue

The ecommerce ecosystem is vast, and revenue for an increasing number of players is not directly linked to email, such as companies that advise and consult with marketers on strategy and tactics.

When email supports sales conversions in other channels, consider determining a figure called “average cost per action.”

“Even if you can’t attribute sales revenue directly to the marketing channel of your list, you can at least track responder actions and assign an average value to each action based on known advertising costs for obtaining said action,” according to MarketingProfs. “And if you can do that, you can equate an action taken by an existing subscriber to a monetary value.” You can find the mechanics of making that calculation here.

For marketers with several revenue sources, such as newsletters, webinars, ebooks and other products, it may be more important for them to understand the potential value of each revenue stream, rather than revenue per subscriber.

For instance, take the case of a company that generates $1 million in annual revenue and knows that it can attribute 20 percent of it, or $200,000, to its email newsletter. It can determine the value of net new business by removing all the client subscribers and dividing $200,000 by the remaining number of email subscribers. This method can also be used for “all time” and with both clients and non-clients, and include revenue from net new business, existing business, and upsells.