Last month we explored the first of two important digital marketing list subscriber metrics: CPA, the cost to acquire a new list member. I also presented a process for determining your maximum allowable CPA—that is, how much it's worth paying or investing to acquire a single subscriber.
This month we'll explore various approaches to assigning economic value to every subscriber already on your list.
Let's start with the clearest way first: the revenue-per-subscriber (RPS) method.
What Is RPS?
Revenue per subscriber (in email marketing commonly termed RPE—revenue-per-email) is a method for determining what each list member is worth to your business in cold hard cash: How much revenue does the average subscriber produce per year? Per quarter? Per campaign?
It's a relatively simple calculation when you can clearly attribute revenue to the specific channel of your list. For example, if you have an email marketing list and want to calculate RPS for the year, take all revenue attributed to your email marketing programs and divide it by the number of valid, deliverable email addresses on your list.
So for example, your annual email RPS might look like this:
- Annual revenue attributed to email marketing: $1,000,000
- Number of valid, deliverable subscribers: 25,000
- Annual email RPS ($1,000,000/25,000) = $40
In this example, on average each email list member produces $40 in revenue per year.