I just completed a webinar for the International Email Marketing Summit, which is run by my friends Tamara Gielen and Kath Pay. It went very well – rated a 4.5 out of 5.0 by attendees!
One attendee comment was short and sweet: “Excellent. Seriously.” My favorite bit of feedback was, “Handled dry subject very well” – as the topic was advanced email marketing metrics and analysis, which is often very dry.
Now, before you doze off, let me share with you one of the topics we discussed: the average value of an email address. The calculation is easy; but my use of the metric may be beyond what you’re currently doing.
Revenue generated from your email program
Average list size over that period of time
The most common usage of this metric is to advise you on how much you can spend to get a new email address for your list. Some people calculate lifetime value, but I like to take an annual value – that way, any revenue generated in years two and on (which are likely to be much less than in year one) are gravy.
Also note that this “new subscriber” phenomenon impacts your average value calculation, since it’s likely that newer subscribers are spending more than that, while longer term subscribers are spending less. But more on that later.
So let’s say you undertook acquisition tests using three different methods. After the test period, your initial analysis showed the following:
You’d continue using sources A and B for acquisition, but hold off on any more telemarketing (source C), since the cost per lead exceeded your average revenue per email address. Your estimated return on these names is just $0.63 for each $1 you spent.
Good enough. But your value of an email address shouldn’t end here.
You have these email addresses from telemarketing in your system; you may as well mail them. And if you’re smart, you’ll continue to track the revenue each of these sources generates for you. So you’re not only calculating the average value of all subscribers on your list, you’re tracking the value of an email address by each of the different sources you used to get them.
After a year (or even a few months), the data may look very different.
When you calculate the actual value of an email address from each of these sources, you’ll see that the telemarketing names, while more expensive, generate a lot more revenue for you. They’re bringing in $36.27, on average, per each email address – you’re earning $3.83 for each dollar you spent to acquire them, not a bad return.
At the same time, the list rental (source B), which looked like a good bet, is underperforming for your average subscriber – bringing in just $2.02 per email address, causing you to generate just $0.34 for each dollar you spent to acquire them.
By doing this analysis you’re able to stop spending money for lower-quality (less revenue-generating) new subscribers from this list rental – and you’re able to ramp your telemarketing efforts back up, which deliver high-quality, higher-spending subscribers.
Just as I’ve calculated average value by source, you can do the same by looking at the time a subscriber has been on your list (bringing us back to my comment above about new subscribers performing better than those who’ve been on the list a while).
I like to break out people who’ve been on the list less than a year, those who have been on more than a year but less than three, and those who’ve been on three or more years.
This gives you an even better figure to use to evaluate acquisition tests (you’ll likely find you can spend more to get new subscribers than you previously thought). It’s also something you can use on an ongoing basis (by comparing quarter-over-quarter or year-over-year) to see how well you’re doing at bringing in new subscribers to generate revenue from your email list.
Give it a try and let me know what you find!
Until next time,
Image on home page via Shutterstock.