What is a subscriber worth? (Really.)

Your Google Ad just netted a new subscriber – that’s great news. But before you pop the champagne, you should take a big step back because unless you’re selling your list*, a new subscriber is not an end to itself but step one in a path to your actual goal: Sales.

Follow this equation to find out what a subscriber is really worth to your business, and use that information to make smart decisions about recruiting more of them.

Step 1: Start with your ideal customer

If your business is like mine, you’ll have a good idea of your perfect customer match. They’ll have both an interest in your offer, and the ability to pay what you’re worth. Ideally, they will like your work so much that they want to continue the relationship, increasing their likelihood of buying again. Ask yourself, of your ideal customer:

  • When did she join your mailing list?
  • How long did it take her to buy something?
  • What is her average purchase price?
  • How often does she buy from you?

For example, Jane joined your mailing list 3 years ago. 15 months ago, she bought a sweater for $70, then 9 months ago she bought a hat and scarf, which together cost $60. Four months ago, in response to a 15% discount coupon you emailed to her, she spent another $120 on four items. Jane’s average purchase is $83 and her lifetime value is $250 (so far) and her spending patterns are escalating. But it took nearly two years of your emails for her to make her first purchase.

Jane’s email is worth $6.90 per month that she has been on your list, and that number will probably rise over time.

Step 2: Categorize the rest of your list

If you’ve been keeping good records, you will be able to make the next set of calculations accurately. The rest of us will have to make some educated guesses. Thinking about your list over the past year, ask yourself:

  • How many are people like Jane, who consistently buy from you multiple times a year?
  • How many people have bought only once? How many have never made a purchase?
  • How long have people been on your list? What percentage is more than a year, more than two years, three?

For example, looking your email list over the past three years, you can see that 90% have never bought anything from you, 5% have made one purchase, 3% have made two and 2% have made three or more purchases. Looking at the numbers, you can tell that even though they only make up 2% of your list, people like Jane make up 40% of your earnings.

Now, match those purchases with the amount of time on your list. For those lucrative 3-time buyers, how long did they spend on your list before they bought? What about the 1-time buyers? What’s different about the 2-time buyers compared with the 3+? Match the behavior groups with other information, like click-through and open rates, if you have them.

Step 3: Look for patterns

So what have we learned, apart from how much we love Jane? Well, we have sliced our list into groups from the most qualified leads to least, and we’ve matched those groups with length of time on your list. Your next set of questions will help you dive deeper:

  • Is there a pattern to these three-time buyers? For example, do they use coupon codes more often?
  • Are they in a particular demographic group?
  • What was the source of those addresses? Did many of them come from a particular social network or ad?
  • Have they all been on your list a certain amount of time? For example, maybe it takes three months for new subscribers to warm to you before they make a commitment.

Step 4: Use your data to make good list decisions

Hopefully, you’ve been able to see at least a couple of patterns in your data. Maybe the majority of Janes live in the west coast and joined your list as a result of your Instagram ads, so that means you should double down on advertising to California to find new customers. Using Jane as an indication, you can spend $6.85 per month per potential Jane and you’ll still come out ahead. Perhaps you discovered that a key difference between two-time buyers and 3+ was that the latter were much more likely to use coupons, so that means you should make sure you’re offering more deals, especially to that group.

Congratulations! You have cracked the code of your email list and worked out what a subscriber is actually worth. Better than that, you have some strategies for how to reach more of your most prized subscribers and level-up some potential top customers. Best of luck growing your business!

* Seriously, don’t ever do that.