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Comments Off on How Much Is A Customer Worth?

How Much Is A Customer Worth?

We’ve talked a lot about return on marketing investment in this blog.  It’s critical to business profitability.   But there are gaps in the formula for calculating this that many businesses have simply not closed.  For example, when you giveaway an item as an incentive to close a sale, or gain a subscriber to you email list, there is obviously some cost to you.  If it’s only a downloadable file, that cost is minimal, but still there is some number that needs to be factored in to determine its impact on your profit.

We’re going to list five steps here to help you calculate the lifetime value of a subscriber to your email list.

  1. How many subscribers do you have?
    • When you total your list, do not include those that have previously bounced or unsubscribed
  2. Get an estimate on sales generated in the past year
    • Examine clickthrough direct sales (this is usually the default figure used and likely will be very underestimated)
    • Use promotion codes to track sales not directly generated
    • Overall sales increases, including those from forwarded emails, sharing in social networks, and other less obvious ways
  3. Set Your Time Frame
    • Is your business seasonal, or does it make sense for you to calculate this annually?
  4. Calculate the value of the subscriber (V)
    Here’s an example from one of our online retailer sites:
     

    • Active email subscribers: 4,500 (X)
    • Sales attributed to direct clicks in email over past year: $275,000 (Y)
    • Apply the equation V=Y/X
    • Value of the subscriber = $61 per yearTo estimate the lifetime value of your subscriber, examine the average time between the first and most recent purchases in your database. We’ll assume that 1/3 buy from you just once, another 1/3 buy for two years, and the others for three years.
      • 1,500 subscribers x $61 = $91,500
      • 1,500 subscribers x $122 = $183,000
      • 1,500 subscribers x $183 = $$274,500
      • Total value is $384,300
      • Divide this by the number of subscribers (4500)
      • Estimated value per subscriber is $85.40 per subscriber
  5. Results Analysis
    We have to admit there are a lot of weaknesses to this method. It only calculates direct clicks, not peripheral action sales, it only views three years, etc.  But it does give us a rough idea of the lifetime value of that subscription.  So you can see that a promotion campaign costing $100 per subscriber is too expensive to  make sense, but $10 per subscriber would be much more likely to net a positive result. 

    All online merchants have unique circumstances, with differing characteristics to their databases. This system is meant to serve as a guideline to help you start down the path of ROI analysis and profitability.

Over the life span of your relationship with your customer, you may do many thousands of dollars worth of business.  In a future post we will discuss calculating this lifetime value so that you have a better sense of what you should be willing to spend to attract and keep that customer.

Comments Off on Eight Steps to Powerful, Irresistable Emails

Eight Steps to Powerful, Irresistable Emails

Email marketing is powerful, inexpensive, and frankly, a must for most small businesses and organizations today. So how can you make it work as well for you as you want it to?  We’ve adapted the following eight steps from a white paper by the email service, YesMail.

The content for your email is of course, hugely important, and the structure of your email matters more
than you might think.  By following these 8 steps, people won’t be able to help themselves; they’ll want
to open your emails and act on them (translation – they’ll read then buy).

1.  The more you know
The more familiar you are with your target audience, the better you can determine what the best
message is to convey to them.  Your message needs to be tailored to suit your objective and your
audience at the same time.

2.  Don’t go all “Tolstoy” on them
It’s not the time to struggle with your inner author. If you want to get overly descriptive and drawn
out, go write a book.  For email, you always need to keep your messages short and sweet. One or
two short paragraphs with brief sentences should be enough to get your message across.  People
don’t want to think too much and you’ve only got a few seconds to impress the reader enough to
click and take an action within your message.  Try being clever, or bring in some humor to the mix.
Think about how you react when you get a good email offer that engages you, and actually contains
something you really, really want.  Something you just have to have.  The response you desire is
almost caveman basic: “Offer good.  Me want to buy.”

3.  Get their attention
Clearly spell out the offer right up front.  Don’t let your audience lose interest in your message before
you even hit them with the goods.  Highlight the top reasons the offer is a must have and emphasize
the valid time frame for the offer right away.  This sense of urgency will be a nagging inner voice,
reminding them about this great deal.  Example:  “Limited time offer – 25% off Pool Repair when you
buy a deluxe pool cleaning kit by April 3rd, 2009!”  Summer is around the corner, that crack might get
bigger, and that kit will help Johnny keep the bugs and leaves out!  You get the idea.

4.  Taking action
Be sure to have call to action links to make it uber-easy for a customer to take the next step.  Include
links right at the beginning, in the middle and at the end of your email to help them take action.  In
addition to the offer itself, provide supporting documents, a free download, and a link to your website
for more information.  They are going to hop, skip and jump around your message.  Be ready for them
– and collect their contact information whenever it makes sense.

5.  Sally sells sea shells
You need to make sure your content reads well.  Read it out loud.  Seriously – find a quiet space, and let
it roll.  If your content reads like a tongue twister, or feels like you’re stumbling trying to get the words
out, it’s not going to be an easy read for the recipient.  It’s time to rewrite. When you’re confident in
your masterpiece, ask someone else to review it – they might have some great suggestions that you
didn’t even think of, or catch some grammatical errors that you skipped right over.

6.  Simplicity in design
A simple design is the most pleasing to the eye.  Don’t get overly complicated with format.  Loads of
graphics put the brain on sensory overload.   However, you need to strive for the right balance.  Have
a picture of your product or offering?  Add it in.  Offering a service of sorts?  Add in a nice graphic to
illustrate.  The right balance of pictures and text are an email’s best friend.
Be sure you are consistent with your style and image for follow on email campaigns – it helps the
customer remember you, and respond accordingly.

7.  Match the shoes with the bag
The subject line is the first thing folks will read when your email hits their inbox, so you need to make
sure your subject line relates to the topic of your email.  After your email is all laid out, it’s time to
think of the perfect subject line that will entice folks to open it up.

8.  Learn the lessons well, Grasshopper.
Track and measure your email campaigns.  Note how many emails bounce, get trashed without being
opened, and record how many visits you get to your website.  After a time, you can compare the
effectiveness of your campaigns and discern why one did better than another.  This will allow you to
learn from past mistakes, and make any tweaks you think necessary for the next round.
Your email marketing campaigns are sure to evolve as you fine tune your offerings with lessons learned
from past campaigns.  Give these proven and sound tactics a try. You’ve got nothing to lose, and many
sales to gain.