The Lifetime Value of an Email Address

Knowing the lifetime value of a customer gives marketers a means to measure the success of their campaigns and their return on investment. As Alan Pollock notes, knowing a customer’s lifetime value also gives marketers a means to determine how much money it is worth spending to acquire customers.

For email marketers, the lifetime value of an email address provides a metric by which to measure the return on investment for the cost of email marketing, which includes the cost of acquiring an email address and conducting ongoing campaigns.

While knowing lifetime value metrics is desirable for planning, measuring, and justifying marketing campaigns, there is, as Christopher Penn notes, no universal method or standard for calculating the lifetime value of a customer or email subscriber.

The methodologies tend to be complex and involve a number of variables that are arbitrary or difficult to determine, such as pinpointing exactly how much revenue is accrued by each customer as a result of marketing, and deciding how long the lifetime of a customer is.

As David Baker relates, “While the academic research on calculating the lifetime value of a customer is extensive and deep, “the more sophisticated formulas would make a particle physicist jealous.”

Similarly, on calculating the lifetime value of an email address, Baker says, “I will warn you, this isn’t easy! It takes a quant person.”

Nevertheless, an abundance of methodologies continue to be devised and put forth. Among the recent crop is a method for calculating the value of an email subscriber from Helen Taylor, who uses the following criteria gleaned from Experian CheetahMail’s analysis of customer email data:

• Standard life cycle of an email (a four-year period).
• Average email address received eight communications a month from any given brand.
• Average number of mailings received in any given campaign.
• Average number of mailings sent per client/month.
• Average transaction amount per email.

Also offering a method for calculating the value of an email subscriber is Jeanne Jennings, who, after asserting that revenue per email (RPE) is one of the most valuable metrics (aside from ROI) that you can track, reports that few organizations, large or small, actually do determine RPE.

Surveys, meanwhile, show that email marketing continues to provide a big bang for the buck. The conversion rates of targeted and triggered emails, including social media triggers, are driving success rates even higher. Surveys also show that the value of retaining customers vs. the cost of acquiring new customers is considerable.

The bottom line is that regardless of how you calculate the results, when customers are satisfied with your company and do repeat business over time, the outcome and the numbers will be positive.

A loyal and engaged customer can be a lucrative source of repeat sales, up-sales, cross-sales, and recommendations that yield more customers and sales. This I why, when you realize the revenue potential of an email subscriber’s business over time, the value of using an email appending service to obtain more customers’ email addresses becomes obvious.