How Much Should You Pay for Subscribers?
All list expansion efforts cost something, whether it’s time spent at events, money spent on paid ads or paid search marketing, or — as some sponsors have started doing at business events — offering attendees actual cash for their email addresses. Or it could cost you both time and money.
Plus, there’s all the time you spend finding ways to attract new subscribers. You might be left wondering: Why expand your list when it takes so much work?
Actually, there are multiple reasons to expand your email list:
- To reach new markets
- To replace the subscribers that you naturally lose through opt-outs and abandoned email addresses
- To get your marketing materials and information in front of as many people as possible
Calculate cost per acquisition
But how much should you pay for these new subscribers? That depends on how much value you expect those new subscribers to bring you. To spend smarter, calculate your cost per acquisition (CPA). Doing the math can show you which methods of list growth provide the best bang for your buck.
How do you calculate your CPA? Start by dividing the cost of the method by the number of subscribers it is likely to bring you. However, don’t forget to factor in the unsubscribe rate and the average sale (or order) amount resulting from that method (if applicable).
Ideally, your CPA should meet the following criteria:
- It is lower than your average sale amount.
- You are considering it in relation to your revenue per subscriber (RPS). For example, if you can directly attribute $500,000 of annual revenue to email marketing and your list has 20,000 subscribers, your annual RPS is $25. Try to keep the CPA much lower than that number.
- It is in the range of what you’re paying for other subscriber acquisition methods, such as webinar production and white papers.
- You have a hard limit for your spending. Staying within a preset range for your CPA helps ensure that your list growth is a profitable development.
Of course, it’s important to remember that not all uses of email lists are designed to drive sales in a direct way. In many cases, email marketing serves some function besides direct sales — such as building brand recognition, nurturing your relationship with customers, or developing their trust in you. All those factors do help drive sales, but in a less direct manner.
It all boils down to determining your CPA and sticking to it. Sure, the new subscribers you add might bring in much more revenue than you had expected — but by staying within your predetermined CPA range, you can protect your bottom line.
[cta]You don’t have to market harder — just market smarter. Contact the professionals at Proven Systems at (800) 720-5398 or firstname.lastname@example.org for a no-cost consultation to learn how we can help.[/cta]