So, we’ve established that you have to know the value of each email subscriber. But once you know the value of each email subscriber, your goal is to increase that value.
If Jim’s current email subscribers net him $1.50 per month, his goal is to increase this average value. Therefore, Jim sets a goal to increase this number to $2.00 per month. Jim hires a new email marketer and gives her two goals:
1) Increase the number of email subscribers;
2) Increase the value of each email subscriber.
Let’s say your email subscribers churn at 5% per month.
This means that all your subscribers will be lost within 20 months.
Therefore, the LTV of your email subscribers can be estimated as $1.50 x 20 months = $30 per email subscriber.
However, most companies can’t sit australia phone number library around and wait 20 months to recoup their marketing spend. So you need to determine how quickly you can recoup your costs. There are a number of factors to consider when thinking about this. But the most important factor is this – if you have plenty of cash, you can afford to wait longer than if you have very little.
This is the secret sauce of well-funded e-commerce companies. They can spend money to acquire email subscribers and customers without having to generate a positive
ROI on keeping that subscriber/customer long-term.
However, if you are bootstrapped, you google information visible from your analytics account need to recoup your costs faster. There is no exact rule of thumb, but we assume that if you are bootstrapped, it will take 3 months, and if you have venture capital, it will take 7 months.
This means that if Jim’s business is self-funded, he should be able to acquire an email subscriber for $4.50, and if Jim’s business is capital-backed, he should be able to acquire an email subscriber for $10.50.
It lets you know when to expand
Most e-commerce companies simply choose to increase or decrease their budgets each month. However, the difficulty with all online text services businesses is that there are leading indicators. This means that you may not see an increase in sales and revenue for several months.
You want to make smart decisions about when and how to scale. To do this, you must make decisions based on both immediate actions (conversions into sales) and leading indicators (such as the number of email subscribers and how likely they are to purchase later).