While working at a large membership organization (numbers changed to preserve confidentiality), I learned about an aspect of email marketing that I hadn’t encountered before. This company has roughly 1 million members who pay an annual membership fee of about $500 per year. The members receive direct mail once a month, offering them many different products. In addition, about one-third of them are also signed up for emails, receiving about three emails per month.
I was trying to learn the lifetime value of the email subscribers. At first I assumed that the LTV should be based only on the products sold, since the membership fee was common to all members. But then I thought, “I wonder if the emails help decrease membership cancellations?”
To answer this question, I had the company’s analytical department track all members over a two-year period, comparing those who received direct mail only to those who received the direct mail plus the emails. The results were amazing.
As you’d expect, in both groups there were members who cancelled their membership. But those receiving emails were much more loyal as a group than those who received only direct mail. In fact, the emails saved 5.75 percent of the members from cancelling their membership over the two years. This made a major difference in the LTV of email subscribers. Here’s how the LTV of the email subscribers looked:
Previously, the company had been basing its email subscriber LTV only on the sales in the emails. With this data it saw that by far the most important aspect of the emails was the reduction in the membership cancellation rate.
Why do emails boost persistence? Because emails are a conversation with members. They’re interactive. They encourage members to respond to surveys, to watch videos, to ask questions and get answers. Email subscribers feel closer to the company than those who receive direct mail alone. Persistence applies to many different companies.
Arthur Middleton Hughes’ most recent book, “Strategic Database Marketing 4th Edition” (McGraw-Hill 2012), has information on computing email subscriber LTV.
Related Resources:
1) Blog: "Unengaged Subscribers Are Costing You"
2) Webinar: "Inactive Email Subscribers: Tips for Taming the Beast"
3) Blog: "Inactive Subscribers and the Potato Skin Myth"