Discover how one special interest consumer publisher uses low-priced eBooks to increase the lifetime value of his email marketing database by 59 percent.
Executive Summary
- Most email marketing databases are built using free giveaways
- One publisher decided to try building his email marketing database by offering new prospects $1.99 eBooks on a variety of hobbies and crafts
- The two year lifetime value of his email marketing database is up 59 percent
I’ve seen publishers who give away eBooks to build their email marketing database and I’ve met publishers who rely on eBooks as a major profit generator. Recently I met a publisher who sells $1.99 eBooks as his major source of new customers for his email marketing database. Let me explain his strategy.
Opportunity: This publisher started out giving away eBooks to build his email marketing database. On average, he was generating about 65 cents per lead during the first 12 months selling other eBooks, newsletters and products. His average cost, across all sources, to acquire a new name was about 20 cents, so he was netting 40 cents in the first 12 months. For 2004, he generated about 700,000 new names, which generated about $280,000 in operating profits (before hosting and overhead). Not bad, considering that 45 percent of his new email marketing database names would still be good after the first 12 months.
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He decided to test selling several new eBooks early this year for $1.99 to build his email marketing database. He knew the initial conversion rate would go down and his cost per new name would go up, but he wondered if the lifetime value of a new customer might be considerably higher.
Results: Conversion rates dropped from 34 percent to six percent and his cost per new customer jumped from 25 cents to $2.88, including the cost of processing the $1.99 order. Revenue per customer jumped almost ten times, from 65 cents to $6.54. As an added bonus, his annual retention rate for new customers who bought an eBook for $1.99 is tracking toward an estimated 67 percent, or 22 points, higher than for new customers who took a free eBook to join his email marketing database. First year contribution is estimated to be 50 percent higher and he forecasts that his two-year contribution will improve by 59 percent. See the email marketing database Source Evaluation below for his detailed source evaluation. Note that he is using New Customers quantities for both columns that assume one or the other program to produce all his orders on a go forward basis.
Lesson: While free information products may be a compelling way to build an email marketing database, an entry path that includes a bit more consumer commitment may be a better approach for some special interest publishers.
Note: As always, the details of the case have been modified to protect the identity of the publisher and the program.
