How to Find Out How Much You Can Spend on Email Subscriber Acquisition for Your Ecommerce Email Marketing
At the simplest level, it seems like you could spend $1.50 to acquire an email subscriber for your ecommerce efforts. That would make sense, but there’s something missing. It’s missing:
1) How long do your email subscribers stay on your list;
2) How quickly do you need your 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 bounce. The reason is that some people unsubscribe and others may cancel their email completely. That's why it's important to understand how many people drop off your email list each month.
This means that all your subscribers will drop off in 20 months.
Therefore, the LTV of your email subscribers can be estimated at $1.50 per email subscriber x 20 months = $30.
But most companies can’t sit around for 20 months waiting for their marketing spend to pay back. So you have to define how quickly you’re going to get your money back. There are a number of factors that go into this. But the biggest factor is – if you have a lot of cash, you can afford to go for a longer period than if you have very little cash.
This is the secret of well-funded e-commerce companies. They can afford to spend money on acquiring email subscribers and customers and not have to have a positive long-term return on investment for that subscriber/customer.
But if you are bootstrapped, you will need to get paid much faster. There is no exact rule, but let's say it is 3 months if you are bootstrapped and 7 months if you have venture investments.
This means Jim should be able to afford to acquire email subscribers for $4.50 if his business is established and $10.50 if it is funded.
The story gets better with email marketing for ecommerce once you know the value of each email subscriber
Okay, so let's say Jim's company is bootstrapped. That means he can afford $4.50 to acquire an overseas chinese in usa data email subscriber. But that's only part of the story.
Let's say Jim is able to buy traffic for $1.00 per click. That means he would have to have 1 out of every 4.5 visitors sign up for his email list. That's very high and probably impossible. But even that needs to be added to the completed purchases.
So let's say Jim spends $100.
And let's say Jim gets 8 email signups from 100 visitors who come to his site.
8 x 3 months x $1.50 = $36.
But 2 people also bought flowers for an average of $100 per order from those 100 visitors.
If Jim doesn't factor in the value of the email subscribers he acquires, Jim calculates that he sold two orders. At $50 per order after his cost of goods, this means Jim spent $100 to earn $100. Jim therefore decides to stop this marketing effort.
3 months later, Jim's revenue is the same because he hasn't found a growth channel. However, during those three months, Jim's actual revenue could have been $100 + $36 (email). This means his business could have grown during that time.