But most companies can't sit around
Posted: Sun Dec 15, 2024 6:02 am
Ideally, you can assign the total revenue generated by your email subscribers and the actual average order values (AOV) of purchases made by your email subscribers. This will give you the most accurate picture and allow you to make further changes in the future.
Let's look at an example...
Jim's Online Flowers averages $30,000 in online sales per month.
Jim sees his eCommerce email marketing efforts averaging $15,000 per month.
Jim also knows that he has 5,000 email subscribers who receive his e-commerce marketing emails every month.
This means that each email subscriber Jim has brings him $3.00 in gross revenue.
This means that, theoretically, if Jim wants to grow his online income to $60,000 per month, he will need to figure out how to get 20,000 email subscribers.
But Jim can't stop there.
He has to consider the cost of goods sold to know how much he can spend to acquire an email subscriber.
So, let's say Jim spends $50 on each flower, which he sells for $1.00.
This means that Jim is better off using the following equation:
(Monthly revenue from email as a channel divided by the number of email subscribers) * Gross Profit = Net Monthly Revenue per Email Subscriber.
Net Monthly Revenue Per Email Subscriber
So, let's do some math.
Jim sells flowers online for $15,000 a month.
He has 5,000 email subscribers.
This means that Jim makes $3.00 per month in gross revenue from each of his email subscribers.
But Jim is left with only 50% of that amount.
So Jim is effectively making $1.50 per month from each email subscriber he has.
Email Subscriber Cost Calculation Infographic
How to Determine How Much You Can Spend to Acquire an Email Subscriber for Your Email Marketing
At the most basic level, it seems like you could spend $1.50 to get an email subscriber for your e-commerce efforts. That would make sense, but something is missing. What's missing is:
1) How long do your email subscribers stay on your list;
2) How quickly do you need the money back?
Let's start with the first one..how long do your email subscribers stay on your list? Some of your email subscribers will drop off. This is because some people will unsubscribe, and others may cancel their email altogether. So it's important to understand how many people are dropping off your email list each month.
Let's say that 5 percent of your email subscribers us whatsapp number list unsubscribe each month.
This means that after 20 months all your subscribers will disappear.
So, the LTV of your email subscribers can be estimated at $1.50 per email subscriber x 20 months = $30.
for 20 months waiting for their marketing spend to pay off. So you need to determine how quickly you'll get a return. There are many factors to consider when considering this. But the most important factor is that if you have a lot of money, you can afford to wait longer than if you have very little money.
This is the secret of well-funded e-commerce companies. They can afford to spend money to acquire email subscribers and customers and not have to be ROI positive for that subscriber/customer for a long time.
But if you're a bootstrapper, you'll need to break even much faster. There's no exact rule, but let's say it's 3 months if you're a bootstrapper, and 7 months if you're VC-backed.
This means that Jim can afford to buy an email subscriber for $4.50 if his business is self-funded, and for $10.50 if he is funded.
Let's look at an example...
Jim's Online Flowers averages $30,000 in online sales per month.
Jim sees his eCommerce email marketing efforts averaging $15,000 per month.
Jim also knows that he has 5,000 email subscribers who receive his e-commerce marketing emails every month.
This means that each email subscriber Jim has brings him $3.00 in gross revenue.
This means that, theoretically, if Jim wants to grow his online income to $60,000 per month, he will need to figure out how to get 20,000 email subscribers.
But Jim can't stop there.
He has to consider the cost of goods sold to know how much he can spend to acquire an email subscriber.
So, let's say Jim spends $50 on each flower, which he sells for $1.00.
This means that Jim is better off using the following equation:
(Monthly revenue from email as a channel divided by the number of email subscribers) * Gross Profit = Net Monthly Revenue per Email Subscriber.
Net Monthly Revenue Per Email Subscriber
So, let's do some math.
Jim sells flowers online for $15,000 a month.
He has 5,000 email subscribers.
This means that Jim makes $3.00 per month in gross revenue from each of his email subscribers.
But Jim is left with only 50% of that amount.
So Jim is effectively making $1.50 per month from each email subscriber he has.
Email Subscriber Cost Calculation Infographic
How to Determine How Much You Can Spend to Acquire an Email Subscriber for Your Email Marketing
At the most basic level, it seems like you could spend $1.50 to get an email subscriber for your e-commerce efforts. That would make sense, but something is missing. What's missing is:
1) How long do your email subscribers stay on your list;
2) How quickly do you need the money back?
Let's start with the first one..how long do your email subscribers stay on your list? Some of your email subscribers will drop off. This is because some people will unsubscribe, and others may cancel their email altogether. So it's important to understand how many people are dropping off your email list each month.
Let's say that 5 percent of your email subscribers us whatsapp number list unsubscribe each month.
This means that after 20 months all your subscribers will disappear.
So, the LTV of your email subscribers can be estimated at $1.50 per email subscriber x 20 months = $30.
for 20 months waiting for their marketing spend to pay off. So you need to determine how quickly you'll get a return. There are many factors to consider when considering this. But the most important factor is that if you have a lot of money, you can afford to wait longer than if you have very little money.
This is the secret of well-funded e-commerce companies. They can afford to spend money to acquire email subscribers and customers and not have to be ROI positive for that subscriber/customer for a long time.
But if you're a bootstrapper, you'll need to break even much faster. There's no exact rule, but let's say it's 3 months if you're a bootstrapper, and 7 months if you're VC-backed.
This means that Jim can afford to buy an email subscriber for $4.50 if his business is self-funded, and for $10.50 if he is funded.