eBook - Silverpop

Time to Tackle Your List Churn
How can I keep more
Q: of my subscribers from
turning over every month?
Keeping subscribers active is one of the
A: most challenging issues for email marketers
today, given all the inbox competition for
your subscribers’ attention.
It sounds so simple, but it’s so hard to do: Real list
growth comes from reducing churn and, at the
same time, retaining more existing subscribers.
Looking at List Churn
While every list is different, the typical rule of
thumb is that about 30 percent of your list’s
email addresses will vanish each year from hard
bounces, abandoned/changed email addresses,
unsubscribes and spam complaints.
Just adding new addresses won’t solve the problem,
either. Consider these numbers:
Suppose you have a target to grow your list by
20 percent this year. But, if 30 percent of your
list disappears every year, you actually need to
grow it by 50 percent, which is your hurdle rate.
To grow a 100,000-record list to 120,000, you
must net 50,000 new subscribers. To grow a
1-million-record list to 1.2 million, you need real
growth of 500,000 subscribers respectively to
reach your goal. Ouch.
Do you know and track your list churn/growth
hurdle rate? If you don’t, simply add up the
monthly address churn, multiply by 12 and add
your annual growth goal. Presto, you have your
hurdle rate.
It gets tougher, too.
Up to now I have been describing measurable
list churn. But a percentage of your list goes
“silently” inactive each month. These people don’t
unsubscribe but basically check out and rarely, if
ever, open or click on your emails anymore.
Although there are no firm numbers, it’s estimated
that 1 percent to 2 percent of your list may be going
inactive each month. This adds another 10 percent
to 25 percent to your annual list hurdle rate.
And Now, Lifetime Customer Value
Oh, sure, retention isn’t as sexy as acquisition,
but it takes a smaller bite out of your marketing
budget and usually delivers a higher ROI.
While every company is different, a good rule of
thumb is the Bain and Co. analysis that you spend
about six to seven times more to acquire a new
customer than to retain the ones you have.
Most companies use some form of a Lifetime
Customer Value (LCV) calculation to understand
the cost of acquiring a customer and the Net
Present Value (NPV) of that customer’s business
during her useful economic life.
Simply put, LCV looks at what it costs you to
acquire and market to a customer, their retention
rate, average purchase amount and frequency,
and other factors. This results in an average value
of your customers over their lifetimes. You can
download both a simple and complex LCV calculator
from the Harvard Business School Toolkit.
Regardless of what formula or calculation
method you use, you must know, even roughly,
the value of your existing email customers
to the organization.
From this starting point, you can better assess
how much of your resources you should focus on
acquiring new email addresses versus retaining
and marketing to existing ones.
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