What Is the Lifetime Value of an Email List or Membership Site Subscriber and How to Increase It

What Is the Lifetime Value of an Email List or Membership Site Subscriber and How to Increase It

Do you use email marketing? Or maybe you have a membership site or you are affiliated to one and started building your down-line. If you do, you might be interested in the lifetime value of your subscribers.

As internet marketers we need to have a clear image on the results we manage to pull out of the campaigns we set up. We usually know, after a few tests, how well our opt-in pages convert when receiving traffic from specific sources.

But how do we know if everything is worthy and what is the maximum of time and finances we can invest in advertising in order for our campaigns to be profitable?

The lifetime value of an email list or website subscriber does exactly that. It gives us a pretty good idea of how much profit we will make for every penny we invest.

Here is how this works:

For best estimates we will usually need a sample of at least 100 members to run the tests on (it really varies from case to case, but the more we have, the more conclusive results we will get).

Let’s say that we have 500 contacts in our email list and we introduce them to different opportunities (products or services) on weekly basis, asking them to take action.

Presumably, 5% of them will purchase something during the first 6 months onetime fee products that would cumulate a total of $100 in commissions for us, on average (e.g.: eBooks, software etc.) and they stop. The average lifetime value of one subscriber will be:

25 contacts x $100 / 500 (total contacts) = $2500 / 500 = $5.00

Now, let’s say that 2% out of 500 also subscribe to a membership program that we promote and they stay members for about 8 months (this is the average that ChrisFarrellMembership has, if you are promoting it) and we get $20 in commissions every month for each member.

This would mean that the lifetime value of every contact is:

(25 contacts x $100 + 10 contacts x $20 x 8 months) / 500 (total contacts) = $4100 / 500 = $8.20

Is this how much profit a subscriber will make us on average? No, it isn’t!

We did spend some money on advertising, remember, while building the list? However, if we eliminate the acquisition costs we will get to a net lifetime value.

After that, we may have other related costs: hosting, auto responder, internet and so on.

Why is it important to know the lifetime value of our subscribers?

There is one main reason for this. We mentioned above that we have to have a clear image on the results that we get from a marketing / advertising campaign. If we know that that campaign will bring us 500 subscribers that would generate $4100 in commissions, $8.20 / contact, it means that whatever we pay under that value will make us profit.

Joel Therien from GVO has an eBook – Your Quickstart Guide to Grow Your Business with Facebook – that he sells for $2.95. This also includes several bonuses.

The funny part is that after you purchase the eBook, you get a referral link to promote it yourself and, if somebody buys it through you, you get paid $5.00 (this is 170% commission).

How do you think he does that? He knows the lifetime value of his subscribers.

Some of them will definitely use GVO’s web-hosting services that come with loads of marketing tools included (auto responder, conference room etc.), so this makes him money for sure. Of course, since you bought the eBook, you get paid commissions, too, for every penny your referral spends on Joel’s programs.

How to increase the subscribers’ lifetime value?

First of all we have to make sure that we increase their active life by offering them a reason to keep spending money on our request. In order to do this, we have to recommend them only good quality products (usually that we tried ourselves and we know they work or we trust the source).

Our subscribers have to trust us and feel that they mean something to us, that they are respected. Some free tips from time to times and a “Thank you!” here and there are always welcomed.

Also, we have to make sure that we keep promoting products and services that are of interest to our list / members. If our audience is interested in online business opportunities we shouldnt start advertising beauty products or construction tools, not even from time to time.

Another way of increasing the lifetime value is by laser-targeting the audience, finding the exact people interested in what we have to offer. The marketing campaigns may be a bit more expensive in this case, but the long term revenue should increase, too.

Being able to analyse and gather knowledge over certain aspects of your business means being able to predict future events and do a better planning of your actions. This would lead to creating your own optimized development system while discovering your own recipe for achieving success.