Email Customer Lifecycle: The Value Conversation
It is an old truth that it costs much more to acquire new customers than it does to retain existing ones. Email marketers know this – recent research by Litmus shows “Subscriber Lifetime Value” is the single most important metric that email program owners are planning on tracking within the next 12 months.
Return Path recently launched a Lifecycle Mapping solution (read our report here). It provides a fresh new way of looking at how new subscribers interact with an email program during the first year of their relationship. Performance metrics are assigned to each lifecycle stage, measuring how well marketers acquire, on-board, engage, and retain new customers.
It also identifies areas for improvement – what are the greatest risk points, and how can they be addressed through changes in messaging strategy? But improvement typically requires investment, so in this article we provide three compelling illustrations of why it’s a financial no-brainer to optimise your email lifecycle! For each illustration, we assume an email list of 1M addresses, with average send frequency of 1x per week.
Extended Customer Lifetime Value (CLV)
The Direct Marketing Association (DMA) calculates the average lifetime value of an email address at £28.56 (± $37). We’ve also seen research published by Forbes showing:
- A 5% increase in customer retention can increase profitability by up to 75 percent.
- Around 80 percent of your future revenue comes from just 20 percent of existing customers.
- Attracting new customers costs 5x more than keeping existing customers.
Using the DMA data, our example sender’s program value is £28M ($37M). A one percent increase in overall CLV will create additional value of £285K ($370K).
Reduced List Churn:
Research by Getresponse shows list churn reduces a typical email list by 25 percent – 30 percent every year! This sounds astonishing until you do the numbers. IBM Watson’s latest benchmark report shows average churn metrics as follows:
- Hard bounce rate = 0.52 percent
- Unsubscribe rate = 0.12 percent
- Complaint rate = 0.01 percent 1
- We believe the complaint rate is actually under-reported. Return Path’s own reporting shows average complaint rates for 2017 at 17%
Added together you get 0.65 percent – that’s 33 percent list churn per year for our example sender! This has real costs – Bluecore calculates the average cost of each address lost at £14 ($18). This means list churn costs our example sender £4.7M ($6.1M). A one percent reduction in list churn will be worth £47K ($61K).
More Effective Messaging:
Epsilon reports that 83 percent of a typical email program’s volume is formed of offers and promotions. This has a major impact on lifecycle optimisation – in the same research almost 40 percent of respondents said if they could change one thing about their emails, they would make them less about promotions and more about providing information.
Non-marketing message types generate higher response rates. Average click rates for these emails are ± 3.9 percent, 2.3x greater than “Business as Usual” marketing emails. Lifecycle Mapping means email program owners can identify high-risk points for subscriber fatigue, then deploy more relevant and engaging messaging at those points to boost engagement – and make more money!
Cheetah Digital reports average value per email sent at £0.05 ($0.06). If our example sender replaces one percent of marketing emails with these higher performing emails, it will deliver a £24K ($31K) performance uplift (per year).
We have identified three very conservative 1% improvements in length of lifecycle, reduced list churn, and more effective messaging that will create an additional £350K ($460K) in program value for the example sender. Lifecycle Mapping provides the insights that help email program owners identify where these changes need to be made for maximum effectiveness. Talk to us now about how we can help achieve the same for your email program!
About Guy Hanson
Guy is a passionate advocate for intelligent use of customer data to drive responsive email programs. With a knowledge base that now spans nearly 15 years, he is a global e-mail expert and thought leader. Leading Return Path’s International Professional Services consulting team, Guy has worked with a broad range of clients across 5 continents to improve their email delivery, subscriber engagement and revenue generated. Outside of work, Guy is the Chairman of the DMA Email Council. In this role, he works with industry peers including brands, agencies, and service providers to promote the best interests of the email industry to a broader audience. He is also a regular contributor to the industry press.