How to calculate the value of an email subscriber
by Beka Rice
Quick question: how much is each subscriber on your email list worth to your business? Email marketing campaigns are vital for spreading brand awareness, boosting conversions, and fostering customer loyalty, but many store owners don’t actually know how much real dollar value their subscribers bring.
It’s essential for eCommerce entrepreneurs to comprehend the actual value per email subscriber to determine if the money they are funneling into campaigns is worth what they are getting in return. A deep understanding of your email subscriber value also helps you budget your campaigns, identify successful strategy elements, and quantify your marketing efforts.
What subscriber value tells you
Calculating the value of each subscriber helps you run a number of other important calculations for determining the efficacy of your email campaigns.
Campaign ROI. Identifying your return on investment (ROI) on specific campaigns is important for budgeting your email marketing dollars. By understanding how much each subscriber is worth, you can determine how much you should spend on each campaign and have a positive return on investment. If you’re ROI is negative or lower than expected, you should revisit your email marketing strategies to increase email value and boost revenue.
Customer lifetime value. The lifetime value of a customer (LTV) is an important factor in figuring out the amount of revenue you can expect each customer to bring in during their relationship with your business. When you compare this value with the cost of acquiring a customer, you determine if (and how much) you’re profiting from individual shoppers.
Monthly email value. Looking at how much money each person on your list is bringing in on a monthly basis can help you adjust your marketing spend through the year and account for things like seasonality.
Campaign value. Subscriber value demonstrates a definitive monetary value for email campaigns. By calculating the specific worth of individual subscribers, store owners gain a comprehensive view of overall campaign values.
Depending on the type of information you’re seeking, there are several ways to determine subscriber value.
Methods for calculating email subscriber value
Before computing the value of individual subscribers, you should review your current email list and remove any inactive users. Look over your email analytics to identify which subscribers have not opened emails in recent months and remove them. These ghost subscribers may actually bring down your email marketing campaign’s worth because you’re spending money to market to them without garnering any revenue.
Once you’ve cleaned out your list to include only users who regularly open or engage with your messages, you can use these two methods to quantify your results.
The simplest way to record individual subscriber value is by using this formula:
Monthly email revenue / # subscribers = revenue per subscriber (RPS)
Monthly email revenue = the amount of revenue you can attribute directly to your email marketing campaigns in a month.
To calculate subscriber value for an individual campaign:
Total revenue from specific email campaign / # subscribers sent to for that campaign = RPS for that campaign
From this calculation, you’ll get an estimated dollar amount for how much money each subscriber contributes to your business on a monthly, lifetime, or campaign basis. However, this isn’t the best formula for accuracy as it does not take into account overhead costs like the price of your email service provider, time and money spent on creating email campaigns, and creative costs, including copywriting and email design.
To determine a more accurate RPS, you can make this formula a bit more complex:
(Monthly email revenue – overhead costs) / # subscribers = RPS
Before using this formula, create a spreadsheet outlining every expense that goes into creating an email campaign including the percentage of employee salary or contractor fees that goes toward email marketing work. Add up all overhead costs and plug the number into the formula above.
One thing to note here: some people argue that fixed overhead costs (like personnel or software) should not be included in this calculation. You should do whatever you think will give you the most helpful information for running your business.
Shop owners can also use a metric called ROMI (return on marketing investment) to determine the value of marketing campaigns.
This formula is specifically designed to appraise the success of a single campaign, so it can’t be used to determine monthly or yearly subscriber value.
Revenue from email campaign / ((cost per email * total emails sent) + overhead + incentive cost) * 100%
Other email statistics to track
Aside from the overall value of an email subscriber, there are a handful of other metrics you can calculate to dig deeper into your email marketing analytics. Use these calculations to target specific areas of your strategy like click-thru and conversion rates. Measuring these numbers also illuminates how individual email subscribers are responding to your efforts and can pinpoint the effectiveness of your campaign.
1. Open rate
One of the simplest email marketing statistics, open rate, reveals how many subscribers opened your message. This number may reflect the effectiveness of your subject lines, though other factors can be at play, like send time and send frequency. If this rate is not as high as you would like, test different subject line methods to increase your open rate. Welcome email campaigns tend to have one of the highest open rates for marketing emails, generating an average of 50 percent.
The formula: # of unique opens / emails sent – emails bounced = open rate
2. Bounce rate
Bounce rate reports the number of emails that were not delivered. This could be a result of several problems: incorrect or outdated email addresses, server issues, or being marked as spam. Keep your email list up-to-date by tracking bounce rates to evaluate the quality of your email list and remove inactive subscribers. Average bounce rate varies by industry, but a typical bounce rate for emails falls between seven to 10 percent.
The formula: # of bounced emails / total emails sent * 100 = bounce rate
You can also use a service like Hunter’s Email Verifier or AeroLead’s Email address verifier to test the deliverability of email addresses in bulk.
3. CTR (click-thru rate)
Click-thru rate is an insightful measurement that starts to give you a picture of how successful your campaigns are. If the goal of your email campaign is to lead subscribers to a specific page on your site, determining the CTR will tell you of how many people actually clicked the link and visited that page.
The formula: (# unique clicks / # of delivered emails) * 100 = click-thru rate
4. CVR (conversion rate)
Email conversion rates go a step further than CTRs. This calculation determines how many people completed the desired action. If the goal of the campaign is to entice subscribers to make a purchase from the email, for example, determining your conversion rate will reveal how many people clicked the link and followed through with a purchase.
The formula: (# people who took desired action / # total emails delivered) * 100 = conversion rate
5. CTOR (click-to-open rate)
CTOR differs from CTR because it not only measures how many people clicked on a link or call to action in an email, but it compares this number to the total number of people who opened the email. Calculating your CTOR can give a better sense of how people reacted specifically to the content of an email because it removes the people who never opened it and therefore didn’t see your marketing message. In that way, it shows you have effective the contents of your emails are, by removing noise like subject and send time that affects CTR.
The formula: (# unique link clicks / # unique opens) * 100 = click-to-open-rate
6. ROI (return on investment)
Calculating your ROI is really important for any form of marketing—it lets you know what you’re getting back for what you’re spending, and if what you’re doing is worthwhile. Email marketing famously has a high average ROI—studies have put it at 3,800 (PDF) to 4,400 percent. In other words, that’s between $38 and $44 for every one dollar you invest. So when you calculate your ROI, if you’re hitting much lower numbers, or even losing money, it’s time to look for the flaw in your approach. That could be anything from deliverability issues to mediocre offer. In theory, the other calculations you’ve done in this section can help point you to the area or areas that are negatively affecting your ROI.
The formula: (revenue from email campaign – money invested in campaign) / money invested in campaign * 100 = ROI
Online calculation tools
Each of these statistics can be calculated manually, but email marketing products will do many of these calculations for you automatically. A handful of online tools also exist to quickly and accurately determine these numbers.
Sleeknote Email Marketing ROI
To compute your total email marketing ROI, this tool takes into account several other previously mentioned factors like open rate, CTR, and conversion rate. Enter your company’s numbers, and the tool will spit out an ROI measurement, as well as other useful numbers, including cost-per-conversion and cost-per-opened email.
Crazy Eye Marketing Email List Worth
Download this Google Sheets spreadsheet and plug in information about your business to automatically generate calculations on things like RPS, CTR, open rate, and CVR.
Email Marketing ROI
Another way to determine email ROI, this tool calculates the number on a yearly, monthly, or campaign basis. You can adjust the sliding scale for open rate, CTR, and conversion rate to examine how your stats might change based on other components of your email strategy.
Understanding your email campaign analytics
Email subscriber value reveals how much individual users are worth to your company and how much you should reasonably spend to acquire new leads. Other metrics, like open rate and CTR, can provide a more holistic view of your email marketing campaigns’ success.
Use these calculations to determine whether your campaigns are succeeding and identify areas that may need improvement.
Beka Rice is a Sr. Director of Product Management at GoDaddy where she focuses on building an amazing WooCommerce experience. She’s been working with WooCommerce since 2013 and has built dozens of plugins used by hundreds of thousands of online stores.