Jim sells flowers online for $15,000 a month.
He has 5,000 email subscribers.
This means that Jim makes $3.00 per month in gross revenue from each of his email subscribers.
But Jim is left with only 50% of that amount.
So Jim is effectively making $1.50 per month from each email subscriber he has.
Email Subscriber Cost Calculation Infographic
How to Determine How Much You Can Spend to Acquire an Email Subscriber for Your Email Marketing
At the most basic level, it seems like you could spend $1.50 to get an email subscriber for your e-commerce efforts. That would make sense, but something is missing. What's missing is:
1) How long do your email subscribers stay on your list;
2) How quickly do you need the money back?
Let's start with the first one..how long do your email subscribers stay on your list? Some of your email subscribers will drop off. This is because some people will unsubscribe, and others may cancel their email altogether. So it's important to understand how many people are dropping off your email list each month.
Let's say that 5 percent of your email subscribers unsubscribe each month.
This means that after 20 months all your subscribers will disappear.
So, the LTV of your email subscribers can be estimated at $1.50 per email subscriber x 20 months = $30.
But most companies can't sit around for 20 months waiting for their marketing spend to pay off. So you need to figure out how quickly you'll get a return. There are many factors to consider when considering this. But the most important factor is that if you have a lot of money, you can afford to wait longer than if you have very little money.
This is the secret of well-funded e-commerce companies. They can afford to spend money to acquire email subscribers and customers and not have to be ROI positive for that subscriber/customer for a long time.
But if you're a bootstrapper, you'll need to break even much faster. There's no exact rule, but let's say it's 3 months if you're a bootstrapper, and 7 months if you're VC-backed.
This means that Jim can afford to buy an email subscriber for $4.50 if his business is self-funded, and for $10.50 if he is funded.
The story gets better with email marketing for eCommerce when uk whatsapp numbers you know the value of each email subscriber
Okay, let's say Jim's company is self-sufficient. That means he can afford $4.50 to acquire an email subscriber. But that's only part of the story.
Let's say Jim can buy traffic for $1.00 per click. That means he needs 1 out of every 4.5 visitors to sign up for his email list. That's a lot and probably impossible. However, that also needs to be added to completed purchases.
So let's say Jim spends $100.
Let's say Jim gets 8 email subscriptions from 100 visitors who come to his website.
8 x 3 months x $1.50 = $36.
However, 2 people also purchased flowers worth an average of $100 per order from those 100 visitors.
If Jim doesn't consider the value of the subscribers he gets, Jim will calculate that he sold two orders. At $50 per order after deducting the cost of goods, this means that Jim spent $100 to make $100. So Jim decides to stop this marketing campaign.
3 months later, Jim's income remained the same because he had not found a growth channel. However, during these 3 months, Jim's actual sales could have been $100 + $36 (email). This means that his business could have grown during this time.
