How Much is an Email List Worth?By Los Silva
“Email has an ability many channels don’t: creating valuable, personal touches – at scale.” – David Newman
If you are not making the most out of your email list, or maybe don’t even have one yet, stop that right now.
Yes, an email list is literally a free pass to market your brand and products to a bunch of leads who are already kind of interested in what you have to offer. It is low effort, low cost and straightforward to run in the background of your business. And the best part, it can lead to BIG payouts. In fact, a 2019 study by DMA estimated that for every $1 spent on email marketing, you’d see a return of $42.
But if your email list is a little disorganized and you have neglected to track this metric, it is probably time to figure out how much your email list is worth.
Knowing how much each subscriber is worth to you is the first step to estimating the income your list generates. Not to mention the potential income it COULD generate.
So read on for a comprehensive guide of everything you need to keep track of your list and figure out its worth.
Why knowing the value of your email list is important
Email marketing is an effective, low-cost tool to help bring in extra revenue to your business. Figuring out what one subscriber, and heck the whole list, is actually worth to you is important for many reasons.
- It helps you make sure your email marketing is profitable and that your ROI (return on investment) is bigger than your spend
- It helps you determine what you can spend to get a new subscriber
- It helps you identify areas to improve and boost your list’s value now and in the future
- It helps you figure out which tactics are worth it when building your list
- If you ever decide to sell your business, you can leverage your list as a key asset in the negotiations
Important metrics to consider
When you embark upon email marketing, there are some basic metrics that it is important to track. These will help determine whether people are actually reading and enjoying your emails, and more importantly determine your financial gains
- Open rate – This refers to how many people actually open the email you send. According to a study by CampaignMonitor, the average open rate is 18%, but be aware this can change depending on the industry.
- Unsubscribe rate – As the name suggests, the unsubscribe rate means how many people unsubscribe from your emails per email sent. CampaignMonitor found that the average across all industries was 0.01%.
- Bounce rate – This refers to how many emails are never actually delivered, it might be time to clean these people from your list.
It is important to keep track of the above metrics. But for the calculation we are doing today, we can use the following two main metrics to figure out the value of your subscribers:
- Click-through rate (CTR)
- Conversion Rate (CR or CVR)
Click-through rate (CTR)
The click-through rate essentially refers to the percentage of people who open an email and click on the link inside.
The higher your CTR, the better. As it shows an engaged audience responding to your content and ultimately more sales for you.
How can you calculate your CTR? And what kind of numbers are normal? What should you be aiming for?
Well the CTR can be easily calculated with the following formula:
(Number of clicks/ number of emails delivered) x 100
And what is a ‘good’ CTR? Kinsta compared the average CTRs of four top email marketing channels which ranged from 2.6% to 3.43%.
While this can range significantly across different industries it gives you a good baseline to aim for right now. Out of 100 emails, a CTR of 3 is pretty normal.
Conversion Rate (CR or CVR)
The conversion rate refers to the percentage of people that actually made a purchase in direct response to receiving your email.
This rate lets you know whether your email marketing is actually leading to sales, and refers to the actual revenue you make from your email list. So again, naturally the higher this rate is, the better. As it means more cash for you.
You can also use the CR to calculate how many people completed a certain action in response to an email. For example, if you didn’t have a sale offer in an email, this could be how many people visited your website from a link in the email.
Calculating the CR is simple. Just use this formula:
(Number of people who made a purchase/ the number of emails delivered) x 100
And what kind of CR is ‘good’? What should you be aiming for? Many email marketing providers don’t actually provide this data, but according to Barilliance, the average conversion rate of emails is 1.22%.
That means, if you get one sale in every 100 emails, you are not doing too badly.
Tips to boost clicks and conversions
So if the key aim of email marketing is getting people to click and buy from your emails, how can you improve your CTR and CR?
The number one tip to get more people to pay attention to your emails and improve conversions is to provide consistently valuable content. This helps build trust with your audience and will make people much more likely to see the value in paying for your products too.
Put time and effort into planning and writing your email content. Choose interesting themes, topics and questions that will interest your readers.
You might find it difficult to decide how often you send out emails. You want people to know who you are but you don’t want to be another annoying marketing email overwhelming someone’s inbox. While that is very noble, the fact is, if you want to stick in your audience’s mind, you need to email regularly.
We recommend emailing at least once a week. Any less and people won’t even remember who you are, let alone buy anything from you. And hey, if you are following the above point and sending out valuable info, people don’t actually mind receiving emails.
Instead of just sending the same general offer and email campaigns to your whole list, design segmented campaigns that target specific segments of your list. Personalizing offers and content specifically for one demographic in your list is more likely to move people to purchase. They directly solve the problems of one group rather than offering a generic solution to everyone.
Try using personalized subject lines, like names and locations too. This will help your open and CTR rate as people will feel a stronger personal connection.
If you want to improve your CR rate, make it as easy and appealing as possible for your customers to buy. Work on your offer and make it as clear as possible, this goes both in your emails and once your client clicks through to your landing page. Further motivate people to purchase by working on your calls to action to make them more compelling.
Optimize your landing page
Whatever your offer might be, if you are using a landing page, make sure it is optimized for conversions. Complicated or illogical layouts can have a bigger impact than you think on the actions of the buyer, and reduce your CR. Cover the key points and pains of your target in a concise manner but don’t bombard people with too much information. If you do, they may get distracted and lose interest. It is also important to remove any non-essential links that will direct visitors away from your page. This can lead to people clicking off and never coming back.
Ideally, you will have a good idea of who your target market is and what motivates them. And doing continued market research into this is never a bad thing. However, it is difficult to be 100% sure of what will work and what won’t until you have tried and tested it. Try split testing a few different angles and incentives and see what gains more conversions.
Calculate what your subscribers are worth
Ok so now comes the calculation part. We have put together a simple process to calculate what one email subscriber is worth to you, as well as your full email list.
Before you begin
Make sure you are working with a cleaned-up, up-to-date version of your email list. It is best to go through and delete any inactive email accounts that haven’t opened or clicked on any of your emails for 6+ months. This will make your results as accurate as possible, even if you have to wave goodbye to a chunk of your total.
Now you will need 2 pieces of data for your calculation:
- Number of subscribers
To figure out your number of subscribers, simply count how many email addresses remain on your cleaned-up list. Remember this number as it will be key for your calculation.
To determine your revenue, you need to identify how much revenue you generated through the email list alone. This is what we call direct revenue and refers to the revenue directly generated from people who have clicked a link in one of your emails and made a purchase. Any other indirect revenue can be discounted for this calculation.
Over what period do you count the revenue? This is really up to you but we recommend using a period of 1 year. This is usually a long enough period to get some accurate numbers and is useful for people who have young businesses without more years of data. You can also count the direct revenue generated over more specific time periods depending on your needs:
- For the lifetime value (LTV) of a client aka the average amount of years a subscriber stays on your list (this is mainly useful for businesses that have been running their business and tracking their mailing lists for 3+ years)
- Per one month
- Per one campaign
This calculation determines the average revenue each email subscriber brings in per year.
Income from last year/ number of subscribers = yearly value of one subscriber
Let’s say last year your business made $15,000 of direct revenue, and your email list had 5000 subscribers.
$15,000 is the value of your email list per year.
Then $15,000 / 5000 = $3
Each subscriber is worth $3 to you per year.
Per lifetime value (LTV)
This calculation determines the average revenue generated by one subscriber over their whole life as a customer.
Do the same calculation as above, and take the average yearly profit of one subscriber.
Then calculate the LTV of a customer by taking the average length of time a customer stays subscribed to your list. We recommend you only do this if you have an email list that’s been going for 3+ years.
Then simply multiply the yearly average by the average LTV of a customer in years. The whole calculation will look like this.
(Income from last year/ number of subscribers) x LTV = Lifetime value of one subscriber
So using the same example where your business earns $15,000 yearly revenue and has 5000 email subscribers with an average LTV of 3 years.
($15,000 / 5000) x 3 = $9
Each subscriber is worth $9 to you over their lifetime.
If you prefer to determine your subscribers value per month, the calculation is very similar. Just switch out yearly revenue for monthly revenue in your calculation.
Average monthly income/ number of subscribers = monthly value of one subscriber
If your average monthly revenue is $1250 from 5000 subscribers, your calculation will look like this.
$1250 / 5000 = $0.25
Your list is worth $1250 to you per month.
And each subscriber is worth $0.25 to you per month.
Finally, if you have run a particular email campaign and want to judge the specific results, you may also choose to calculate per campaign. You can use this calculation when you do segmented campaigns that are not sent to all your email list subscribers.
Revenue from specific email campaign / number subscribers sent to for campaign = value of subscriber for campaign
Let’s say one email campaign generated $3000 in sales, and you sent the campaign emails to 2000 subscribers.
$3000 / 2000 = $1.50
Each subscriber was worth $1.50 for that specific campaign.
So what is your ROI?
So you can leave the calculating there. But there is one thing that we haven’t considered but you may wish to when calculating the value of your email list.
That is overhead costs.
Like with many aspects of your business, you need to invest money to make a return on that investment (ROI).
Although email marketing doesn’t have to cost the earth, it is not necessarily free. Even if you draft all the campaigns yourself, that is still using your time which has value. Expenses may include:
- Email marketing provider
- Template design
- Your time
Therefore, if you want to get more specific and calculate your ROI, then you may need to do a little more calculating. Work out your average costs per week and then multiply them to get the average per campaign, month or year, depending on the calculation you are using. Then subtract this ‘expenditure’ amount off your revenue before making your calculation.
For example, if working out your subscriber value per year.
Let’s say each week you spend $30 on a designer ($30 per hour x 1), $5 on your email service provider plus you dedicate 2 hours of your own time writing the content which comes to $80 ($40 per hour x 2).
Per week your costs total $115
Multiply this by 52 (weeks per year) to get your yearly overhead costs for your list.
$115 x 52 = $5,980
If your yearly revenue is $15,000 and you have 5000 subscribers, subtract the expenses before dividing by your subscriber numbers. Your new calculation will look like this.
(Income from last year – expenses)/ number of subscribers = yearly value of one subscriber
In this case it would be ($15,000 – $5,980) / 5000 = $1.80
Your ROI for each subscriber per year is $1.80.
You can apply this to any of the calculations above, adjusting the costs to the same revenue period.
Acquiring new subscribers
Now you know how much profit you can make from each subscriber, you can decide how much you can spend in acquiring new subscribers for the list.
You might spend money on creating an ebook as a lead magnet, or even run a paid Facebook ads campaign.
If your average subscriber will bring you $1.80 per year, you know that to remain profitable, you shouldn’t spend more than $1.80 to acquire one new subscriber.
Email marketing is still highly effective and has a lot of untapped potential to generate a fairly passive revenue. Understanding the basics and figuring out the value of your subscribers is first step to understanding the true value of email marketing.
It will help you realize what you can afford to spend on new subscribers and discover where you can boost CTR and CR to make the most of your list. Although there are lots of factors to consider, don’t let it get in the way of your email list success!