How to calculate the value of an email subscriber

What if you were my boss or my client and I say this in our weekly meeting…

“Yo boss, I have this idea to get more email subscribers and the cost is going to be around $5 per subscriber, go for it?”

How do you feel with that question? Can you answer it? Are you thinking $5 is a lot of money to get a subscriber?

We’ll get back to this at the end of the lesson…

The value of your subscriber is one of the most important metrics in your entire email program, and one of the hardest to get in place.

Not because it’s hard to calculate, but because you need to do a little work to get to it.

Let me explain…

What exactly is the “value of an email subscriber”?

The value of your email subscribers answers one simple question: How much is an email subscriber worth to your business?

You’ve probably heard the term “Customer Lifetime Value.” CLV gives you the value of a customer, in this case we’re after the value of an email subscriber, so instead of looking at the lifetime of the customer relationship, we look at the lifetime of the subscription.

How to calculate the value of an email subscriber?

So how can you calculate the customer lifetime value of an email subscriber?

If you look online, you’ll find different answers for this question, some formulas are very complicated because they are created for big brands and corporate email programs. But as we’ve been doing in this course, let’s keep things simple so we can track them with ease and act on them.

We need to move from analysis to action faster than those big brands.

Here is the formula we’ll use:

Profits from email marketing / # of subscribers

Example:

Let’s say you made $1,000 in profits coming from email marketing campaigns with a list of 200 subscribers…

$1,000 / 200 = $5 << This is your email subscriber value.

As you can see, the formula is pretty darn simple. What you need to work on is tracking the revenue generated on email campaigns. We’ve talked earlier in the module about tracking conversions and adding a monetary value to them.

Tracking revenue

Once you have the revenue generated from email marketing, the number os subscribers is easy to get.

Why is this important?

Let’s go back to the question at the beginning of the lesson…

Do you know if you can afford to spend $5 on getting a subscriber?

It would be impossible to answer that question if you don’t know the value of your subscriber. The amount of money is completely irrelevant, $5 could be too high for you, or you could be comfortable spending $15 on CPA because your subscriber is worth much more than that.

Let me show you an example:

This is a series of ads we did on Facebook to get subscribers with a free course, they are very small budgets, nothing over $50. The “Sub Value” and “CPA %” are fictitious, I added them to show you how to do this.

Let’s take #1, which generated 83 signups with a budget of $42.45. The CPA in that case was $0.51. Then, if we pretend my subscriber value was $5, the cost per acquisition agains the profit is only 10.2%.

It’s a winner. Run that all day bro!

But if you see #5, only 2 signups were generated with $23.77. Hey, you can’t win every time, right?

CPA spreadsheet

The point is that by knowing my lifetime subscriber value, I can make marketing decisions like a boss. But if you don’t, you might be losing money without even knowing or might be budgeting low when you can really be much more aggressive.