How to calculate the lifetime value of an email subscriber

We were recently asked in our customer service inbox the following questions:

There are lots of reports out there, and you have some data about this on your blog, but I’m wondering if you have industry standards for these metrics? We’re doing some analysis on the value of an email address and I’m trying to find the industry standard for the “Lifetime”. What is the average lifetime value of an email subscriber? Is there an easy way in the WC platform to determine the lifetime value of a subscriber?

Terrific questions. First and easiest: there is no meaningful industry standard. We’ve talked about this before but it’s worth reiterating that there are such significant differences among companies even in the same niches that industry standards simply are not useful.

So let’s tackle the lifetime value of a subscriber. First, you’ll need an intelligent CRM that can tell you the lifetime value of your customers. For example, if you look in Salesforce.com, you can determine how long on average you’ve had clients and what revenue they’ve driven, if you’re tracking things carefully. If you don’t have access to that data or it’s not clean, then at the very least you should be able to tell who your customers are and how much as a whole you’ve earned from them in a given period of time.

How to calculate lifetime value

Here’s the methodology, if you want to calculate this out.

1. Get the value generated from your marketing efforts over a 12 month period. Note that in some companies, sales teams are responsible for generating their own pipelines and business, so you’ll want to isolate just what is the result of your marketing to the extent possible.

2. Determine the numbers and percentages of your conversions that came from email marketing, both assisted and last touch. You’ll find this in Google Analytics under Conversions > Multichannel Funnels > Assisted Conversions. For WhatCounts customers, look for WhatCountsEmail or Publicaster, depending on which platform you’re on.

3. Using the WhatCounts platform of your choice, run a report to count the total number of clicks in the time period you’re assessing. In the example above, we’ve counted out 14,038 clicks.

4. Establish what your click to conversion rate is by dividing total email conversions by clicks.

5. Multiply the total revenue by the percentage attributed to email to get the revenue generated by email.

6. Now divide the revenue by email by click ratio. You’ve now created a rough estimate of the value of an email click.

7. To assess the value of any subscriber now in your database, count up the number of clicks over the given time period you’ve chosen and multiply times the value of a click, and you can order, rank, and summarize their value.

If you’ve got longitudinal data that exceeds the scope of the time period you’ve done the above assessment for, be sure to run separate analyses for other time periods, as value changes over time.

What’s nice about this method of assessing value by click is that it allows you to not assign value to subscribers who haven’t done anything, who haven’t clicked on anything, and therefore have not been influenced by your email marketing. Most methods of computing subscriber value assign a blanket value to all subscribers, but all subscribers are not the same.

If you’d like to use the featured spreadsheet, click here.

Then go to File > Make a Copy… and duplicate this into your own Google Docs account.

If you’re a WhatCounts customer and you would like help with this reporting methodology, please contact our Strategic Services team and we’ll be happy to assist you.

Christopher S. Penn
Director of Inbound Marketing, WhatCounts