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Forrester: Calculate the Value of Your Email Subscribers

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Many interactive marketers rely on email subscriber valuation (ESV) to justify budgets and plan messaging strategies, according to a new report by Forrester Research, which presents a three-step formula for calculating ESV.

In 2008, Forrester introduced an ESV formula to help email marketers determine the relative value of email subscribers. In Forrester's new report, the research firm offers an updated formula for calculating ESV.

Below, a synopis of the new ESV formula, issued by Forrester: 

  1. Find out how much time you have to derive value from a subscriber. Calculate the estimated duration a subscriber will stay engaged with your email program (e.g., opens, clicks, conversions within a given time period), then subtract each subscriber's current time-on-file from her projected engaged tenure to determine the time remaining for engagement. 
  2. Determine the cost of acquiring and serving a subscriber. Acquisition costs can include list-rental, creative, and other development costs. Costs to serve email subscribers inlude message delivery (i.e., CPM fees), creative development, content management and hosting, staffing, and list-hygiene services.
  3. Calculate the direct revenues from each subscriber. Estimate the direct revenues (sales, account upgrades, bookings, etc.) generated via the email channel. If necessary, consult finance partners to adjust projected revenue back to present value using your organization's discount rate. 


Finally, to determine ESV, subtract the costs from the direct revenue.


Forrester's formula offers a basic framework for calculating ESV; however, it tells only part of the story, according to the report. To gain a richer picture of ESV, marketers should consider additional factors such as brand impact, cross-channel acquisition and engagement, influence status, and cost avoidance.

About the research: Findings are from Forrester's report titled "What's an Email Subscriber Worth?," issued on February 1, 2012.


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  • by Bill Kaplan, CEO, FreshAddress, Inc. Thu Feb 23, 2012 via web

    Properly calculating Email Subscriber Valuation (ESV) is critical to the optimization of every email marketing program. Forrester’s updated ESV formula is simple and straightforward but has overlooked a significant factor in the calculation: the COGS (Cost of Goods Sold) for a given product or service.

    If one neglects to take COGS into account, then the ESV for a product that generates $1 million in revenues and costs $100,000 to produce (i.e. $900,000 in profits) would be identical to the ESV for a product that generates $1 million in revenues but costs $900,000 to produce (i.e. $100,000 in profits). That could lead to some catastrophic marketing errors.

    To correct this formula, simply replace Forrester’s “Average Transaction Value” variable with “Average Profit per Transaction Value,” taking into account the costs to produce and deliver your product/service.

    Companies that haven’t determined their ESV should do this immediately so that they can properly evaluate the return on investment of their email acquisition and retention programs. From our experience working with hundreds of name brand companies and nonprofits to help them build and update their opt-in email address databases, it’s clear that investing in one’s email database – the foundation for any email marketing program – maximizes your deliverability and generates returns that are difficult to match through any other means. Good luck.

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