How much does it cost to get a new subscriber on your email list? It’s a question that too few marketers track or even know how to track (a quick Google search for “email subscriber acquisition cost” reveals an embarrassingly small amount of information on the topic).
Does that mean, then, that knowing your average email subscriber acquisition cost is a waste of time?
No. No it doesn’t.
In fact, you can’t really know the ROI of your email subscribers until you know how much each subscriber costs you.
Let me explain.
What is Email Subscriber Acquisition Cost (E-SAC)?
Email subscriber acquisition cost is an email marketing metric that tracks the average amount of money it takes to get a new subscriber on your email list. Some subscribers will cost almost nothing — maybe they’ll subscribe through a forwarded email from a friend or organic traffic — while others might cost hundreds of dollars.
Why is Email Subscriber Acquisition Cost important?
Email subscriber acquisition cost is important for a few different reasons.
First of all, when you know how much it costs to get a new subscriber on your list, and when you set benchmarks for that metric (based on various sources), you can track it and take actions to try and improve it.
Knowledge is power. And without knowing how much an email subscriber currently costs, you also can’t know whether your marketing efforts to decrease E-SAC are doing any good.
Second, and more importantly, determining the ROI of your email list requires access to two basic metrics: overhead costs and profit. In the case of email ROI, your subscriber acquisition cost is part of the overhead, and average lifetime subscriber value is its counterpart. With those two metrics in tow, add in other overhead costs and you can calculate the ROI of your email list.
This brings us to a final, critical note about subscriber acquisition cost.
When calculating subscriber acquisition cost, you might find that you’re spending a few hundred or even a few thousand dollars to acquire each subscriber. And while that seems like a lot of money, you must always place that number next to your average lifetime subscriber value to determine whether the cost is worth the reward.
In other words, having a “healthy” email subscriber acquisition cost is relative to how much money you make, on average, from each email subscriber. If, for instance, you’re acquiring subscribers for $100 each, but your average lifetime subscriber value is $3,000, that is a great investment. If, on the other hand, you’re acquiring subscribers for $100 each, but your average lifetime subscriber value is $50, then you’re losing money.
Now let’s talk about how to track email subscriber acquisition cost.
How to track Email Subscriber Acquisition Cost
The most effective way to track email subscriber acquisition cost is by applying it to a single marketing or advertising channel for a specific period of time. If you want to get the overall cost of a subscriber on your email list, then you can add up the E-SAC results of each channel and calculate the average.
The email subscriber acquisition cost can be calculated simply by dividing the paid ad costs (plus any additional marketing costs spent) on acquiring a new email subscriber by the number of new subscribers acquired.
As an example, if a company spent $100 on ads and other marketing costs in a month and acquired 200 new email subscribers, then their cost would be $.50 per email subscriber.
Here’s the formula you can use:
E-SAC = 100/200 = $.50 cents per subscriber
E-SAC = Total Cost Of Campaign/Number of Subscribers Gained
Of course, that formula can get complicated as you try to simultaneously apply “costs” to tangible and intangible expenses, resources, your own time and energy being one of those difficult-to-quantify tasks.
Here’s an example of how you might apply this formula in real life.
Example:
You run a paid advertising campaign to your downloadable lead-magnet.
It costs you $300 to create the lead magnet and $500 to create the landing page for that lead magnet (this cost might be negligible if you’re going to use the same lead magnet and landing page in other marketing campaigns, but in this case, we’re assuming that these elements were created exclusively for this campaign and are thus a part of the total costs).
You also paid $1,000 for resources and someone to run your paid advertisements.
The campaign runs for two weeks, your ad spend is $5,000, and you gain a total of 3,000 subscribers.
E-SAC = ($300 + $500 + $1,000 + $5,000) / 3,000
= $2.27 per email subscriber