What Is A Subscriber Worth?

Lately I’ve come across a lot of blog and forum posts that ask how to determine the value of a subscriber.

This is an important question for any marketer. After all, if you don’t know what your subscribers are worth, then you can’t decide how much time, effort and money you’re willing to dedicate to building your list.

I’ve come across a lot of blog and forum posts that ask how to determine the value of a subscriber.

Good question. After all, if you don’t know what your subscribers are worth, then you can’t decide how much time, effort and money you’re willing to dedicate to building your list.


A Disclaimer

I’m not an accountant. This post isn’t about measuring keyword costs, setting optimal price points or determining revenue per mailing.

I’m more interested in how we define value when we ask “What is the value of a subscriber?”

Most of the posts I’ve read imply that subscriber value is simply revenue/sales divided by some action (such as the number of messages sent).

It’s easy to see why. If we define subscriber value that way, we can more easily calculate it, measure our costs against it, and correlate things we do to changes in it.

But is revenue all that makes up subscriber value?

I say no. Subscriber value comprises many factors.

I‘ll skip the part about how you’re in business for more than just the money, and that you really do want to meet your subscribers’ needs. Because let’s face it, if you don’t agree with that, you’re not still reading this post anyway.

Referrals

The precise impact of referrals is difficult to accurately measure, but nobody argues that they have an effect on your business. One example of this is when subscribers forward your messages to others. Another is people just talking about you, your messages and your business.

The more you can get your subscribers to refer you to others, the faster your list, and your business, will grow.

Feedback

If knowledge is power, then this is a big part of subscriber value.

Subscribers provide indirect feedback about your campaigns in the form of unsubscribe, open, and clickthrough rates. They also give you direct feedback by responding to your messages, posting on your blog, and giving testimonials.

Feedback helps you to improve your campaign and your business as a whole, at a much cheaper price than any marketing consultant will quote you.

Metrics can help to improve your revenue per subscriber, and you should take full advantage of them.

Just remember that your subscribers do more for you than just make purchases, and that you should be taking those other things into consideration when determining what your subscribers are worth.

P.S. Not All Subscribers Are Equal

It’s also worth noting that some groups of subscribers can be more valuable to you than others.

The groups that you find to be more valuable will vary depending on what your goals are for your subscriber list. For example, do you more highly value:

  • Newer subscribers, who more recently expressed interest, or long-time subscribers who you’ve built trust and credibility with?
  • Subscribers from a certain age group or geographical area?
  • “Advanced” subscribers who are more knowledgeable in your area of expertise, or “newbies” who are coming to you as their first source of information on a subject?

Also, I can’t leave this post without reminding you that qualified subscribers are better than non-qualified ones.

9 Comments

  1. Chris Lockwood

    2/1/2007 2:12 pm

    I think even if you just look at dollar return, it’s hard to tell what a subscriber is worth. Sure, you can easily calculate it for one mailing by dividing the revenue from that broadcast by the number of people it was sent to… but if you track this, you’ll find it varies wildly from one broadcast to another, depending on what you are promoting and when. People will always be subscribing and unsubscribing, so your current list will be an ever-changing group of people.

    I have often heard a rule of thumb that a subscriber is supposedly worth $1 per month, but when this is quoted, it’s never mentioned where it came from. Certainly it would have to depend on what niche you’re in, where you got your subscribers, the price of your products, your profit margin, etc., yet I see this $1 per person per month stated like it is a given fact. Does anyone know where this came from?

  2. Justin Premick

    2/1/2007 2:19 pm

    Chris,

    I’ve heard that $1/month figure before as well, but never any source given for it. Like you say, there are way too many factors playing into that revenue calculation for me to believe it’s an accurate amount for all or even a large proportion of publishers.

  3. Kerry Dye

    2/2/2007 4:28 am

    I calculate this in a different way. In my previous company, we calculated the average sale per customer, and the average conversion of the list. So e.g. ASPC was

  4. Brian Dolezal

    2/2/2007 12:26 pm

    Very interesting post. I agree, this can be a difficult thing to measure.

    For our company, we treat the expenses associated with maintaining our subscriber list and sending out our monthly newsletter as costs of doing business. We haven’t (yet) tried to ascribe a dollar value per subscriber. Similarly, we haven’t tried to associate a dollar value toward responding to email inquiries; we view both of these activities as just a part of our operational expenses.

    As noted, some of the issues encountered when trying to calculate a true dollar worth per subscriber would include type of product, seasonality, geographical region, length of sales cycle, and newsletter open rates & newsletter marketing format. The $1 per subscriber per month seems a little high to me; it sounds like someone just trying to apply a simple rule of thumb to a complex question. Which means, it doesn’t really mean much.

    Part of what allows us to take our approach is the low cost vs high value that aweber provides. If aweber truly charged what their service is worth, we might have to spend more time analyzing our subscribers rather than concentrating on our business. As it is, our time is much better spent generating content and exploiting new marketing opportunities.

  5. Larry Pike

    2/3/2007 6:12 am

    While I agree that customers and potential customers are more than their dollar value it is still useful to analyze the value of adding a name to your marketing list.

    A company I previously worked for sent catalogs to potential customers and tracked the dollar sales from the customers, calculating the value of each catalog. When it costs $5 to produce and ship a catalog, you better know what you will get back from sending out 500,000 of them! Their ROI per catalog hovered around $150 so when a book was sent to a niche that only produced an average of $50 per catalog, that niche was targeted more carefully.

    The cost of sending email at this time is negligible compared to mailing a catalog, yet our total efforts in marketing are not. So we want to know what it’s worth to add a potential customer to our list before we spend time and money on advertising.

    Today we calculate the lifetime value of a customer (IE: how much a customer spends with us on average during their lifetime) and divide that by the number of active email addresses on our list.

    While looking at a monthly figure is easier, looking at a lifetime value is more useful. The key issue… If you know that adding a name to your list will equate to $20 in sales during the time that name is on your list, then you can easily justify spending $.50 on PPC advertising or other marketing activities.

    And while you never want to reduce interpersonal encounters with customers to "what-are-you-worth-to-me" status, the overall picture is that building a list does involve financial decisions.

  6. Mike

    2/4/2007 5:13 pm

    I don’t think you can value the average subscriber on the average list as so many factors come into play.

    1. The data on the subscribers – industry, freshness, experience etc
    2. The objective of why the subscriber joined the mailing list. Information, keep updated, receive special offers etc

    Every mailing list will have a different value, so it’s best to try work out values on individual lists rather than come up with an average.

  7. Rod Beckwith

    2/8/2007 1:18 am

    Hello,

    There are too many factors to come into play for a precise number.

    The differences of subscribers becomes very apparent when you send an offer out and watch the unsubscribe rates.

    Rod

  8. Mike

    12/18/2008 12:01 am

    Well, just looking over the responses – what seems true is that the answer is different for each list. For YOUR list, you can do the math and arrive at a value per subscriber that is real – at least at the time of the calculation (as your business develops this value could increase or decrease I imagine).

  9. Andrew

    1/20/2009 6:07 pm

    Having read all the posts above I tend to agree with Larry, that while we should not have a "how-much-do-you-make-me" approach towards subscribers we do need to assign an average dollar value to each subscriber so we know the ROI on building our list.

    Mike you said
    "you can do the math and arrive at a value per subscriber that is real"

    This is something I’m grappling with right now.
    eg: Do I increase PPC spend on campaigns that achieve great sign up rates or use those funds to focus on campaigns that get actual conversions?
    You can’t make this decision without knowing (or at least estimating) the average value of each subscriber (no matter what the variables).

    For those of you who have already done this with some degree of success…

    Can you provide any generic advice on methods for determining subscriber lifetime value?

    eg: Are you tracking individual subscribers by email address or cookies, or are you simply taking revenue over a given period and dividing by the number of subscribers?
    If so, how are you segmenting subscriber revenue from other sales channels?
    What if they come back 3 months later an buy again?

    I’ve recently added Google Analytics tracking tags to each of the links in our subscriber emails in an attempt to track subscriber activity, but without a good history of metrics I can’t yet rely on these stats.