• by Loren McDonald , Op-Ed Contributor, April 18, 2013

For many companies, revenue or conversion activity mirrors something similar to the 80/20 rule, with 20% of their customers/subscribers contributing 80% of revenue.

No matter whether your company sees 90% of your revenue coming from 10% of customers or 70/30, a small percentage of your database is likely doing all the work.

What implications does this have for your email-marketing program? If you are like a lot of marketers, you focus on filling the top of the funnel in an economical manner and increasing your mailing frequency to your entire database. Why not? This approach works to deliver more revenue.

But if that sounds like your approach to email marketing, perhaps it’s time to rethink how you define and approach database growth to increase your percentage of higher-value repeat customers.

A New Framework for Database Growth

My model has six elements:

1. Acquisition: Look beyond traditional approaches. Continue to deploy the tried-and-true approaches to list building, but focus much more of your efforts on optimizing these existing sources. Try new sources, and reallocate budgets to the sources that drive the most valuable customers.

Test new approaches including at every touchpoint, such as POS opt-in, email receipts, your call center, at events, your social and mobile channels such as SMS-to-email and QR codes. 

Optimize existing approaches, whether it be moving your opt-in box from the bottom of the page to the top, giving social sign-up a whirl, launching a pop-over, or blowing up and redesigning your registration forms for better completion rates.

2. Maximize deliverability and inbox placement. Your acquisition sources and processes directly affect your deliverability. The money you spend to acquire new addresses is wasted if you can't get your emails not just delivered, but delivered into the inbox.

Do the math: If 5%, 10% or 15% of messages to new subscribers are not reaching their inboxes, your ROI and revenue from these acquisition efforts have taken a fairly significant hit.

The more care you take at the start of the process – using high-quality sources, validating emails and onboarding new subscribers – the better your deliverability will be on the other end. Following that onboarding process, ensure that subscribers are engaged and that your messages are not being routed to the junk folder.

3. Minimize inactives. If 40% to 50% of your database is inactive by some measure, what are you doing about it?

Your list growth efforts must focus on minimizing the number of subscribers who will eventually become inactive. Create automated onboarding and "early activation" programs to dissuade new subscribers from going completely inactive.

You must also continue to create value for subscribers by communicating and marketing to them as individuals based on their behavior and preferences.

4. Reduce list churn. Suppose you want to grow your email list by 20% in a year. If you lose 30% of your database each year to list churn, then you actually have to acquire 50% more subscribers. Ouch.

Your database growth strategy has to start with retention and reducing churn. This means address validation, vigilant list hygiene, designing preference centers that encourage and enable subscribers to change preferences instead of unsubscribing, and evolving frequency to maximize revenue without producing too many unsubscribes.

5.  Nurture the subscribers you have. Simply throwing new subscribers into the top of the funnel and then crossing your fingers is irresponsible. Rather than treating these new and recent subscribers all the same way, nurture them as individuals based on their behavior, acquisition sources and score or propensity to buy based on predictive modeling.

Here’s where you use automation to move individual subscribers from one buyer or value stage to the next, such as one-time purchasers to repeat, loyal customers. 

6. Focus on your high-value customers. Identify your highest-value customers: not just those who buy, but also the ones who buy the most often, have higher order values and are most profitable to your company. Then, map these subscribers to acquisition sources to determine which ones produce the highest-value subscribers.

If you want your email program to deliver the results you need, it might well be time to start at the beginning and rethink your approach to growing your database.

Until next time, take it up a notch!