Email automation is your best friend when it comes to increasing customer lifetime value (CLV).
What is an automated email? It’s a single email or series of emails that are triggered to send based on customer actions. You set the emails up and then let them run in the background while you focus on other things. For example, when a new customer signs up for your software this action probably triggers a thank you email. That’s a basic example of an automated email because the email goes out without you having to do anything.
That’s great, but email automation can do so much more for you. Today we’ll talk about how to use specific types of automated emails to increase your CLV. Let’s start with a real world example. Say you work for Sprout Social, a company that sells social media management software. Sprout Social offers four different pricing tiers for their product.
The pricing ranges from $59 per user per month for the Standard edition and goes all the way up to $249 per user per month for the Enterprise edition. The more you pay the more features you have access to. There are three types of automated emails a software company like Sprout Social should be running:
- Engagement emails
- Re-engagement emails
- Upsell emails
These three types of emails increase CLV by helping software companies do one or more of the following: keep customers active for a longer period of time than they currently stick (on average), or get more money from customers even if the length of time they stay active doesn’t increase. Let’s dive into the details so you can see exactly how these emails work to increase CLV.
Engagement emails help you keep new customers active when they would otherwise leave after a free trial (or a very short period of time). Let’s say you sell a software product similar to Sprout Social that nets you $50 profit per month on average. Let’s also say many of your new users cancel their subscription after just 1 month.
That means you’re only making $50 off of each user. In this very basic scenario your CLV is just $50. However, if you put together an automated email series that helps users find success with your product they are much less likely to cancel their account early on. Let’s call this series of emails an engagement series. This engagement series should be sent as soon as someone signs up for a new account. The engagement emails should help the new user:
- Become familiar with how to use the product
- Point out popular features
- Share case studies on how other companies are using the product with success
- Remind the customer of how to reach out to support if he or she has any questions
Because you’re now helping each customer successfully use your product it’s unlikely he or she will cancel after just one month. For example, when you first sign up for Sprout Social they encourage you to link your social media accounts to the software. Without doing this you won’t be able to use the majority of features that the platform offers. After a couple of days you receive another email with helpful tips on how to use the platform and how to reach customer support.
This automated email series helps Sprout
Social’s customers become invested in using the platform – and reminds them to reach out for help with any issues. Your automated series can do that too! Okay, let’s be conservative and say that after launching your automated engagement campaign your customers are now keeping their accounts active for 6 months on average.
That means you took your CLV from $50 (1 month) to $300 (6 months) per user just by sending a few automated emails. That’s an additional $250 you made without lifting a finger. Now multiply that additional $250 by 1,000 customers and you’ll make an additional $250,000 every 6 months. If you multiply that $250 by 10,000 customers you’ll make an additional $2,000,000 every 6 months! That’s the beauty of automated emails – they help you make more money without having to do more work.
Similar to engagement emails, re-engagement emails help you extend the amount of time a customer keeps his or her account active. Let’s say you notice that a user named Bob hasn’t logged into his account for 10 days. Uh-oh, that’s hardly ever a good sign. It could be that Bob’s on vacation, or it could be that he no longer sees value in using your product. That does not mean value isn’t there, it just means that Bob has temporarily lost sight of the value your product provides. It’s time to remind him with an automated re-engagement email series. This particular email series should:
- Point out features that Bob isn’t using but may be interested in
- Create excitement about new features coming down the line
- Share content (link to a blog post, white paper, case study, webinar etc.) that reminds Bob why your product helps him be more productive
For example, check out this email from Sprout Social that points out features that an unengaged user may find interesting:
A few days later the following case study goes out reminding users of the value that the platform provides for other brands that use it to its fullest extent:
And then they send an invite for an educational webinar to show the users exactly what they can be doing with the software to improve their marketing.
Sprout Social uses these automated emails to re-engage their customers and you should too. If you get many users like Bob to re-engage with your software you increase your CLV. For example, let’s say Bob had been a customer for 8 months when he stopped logging in to your software. At $50 per month profit you had made $400 on Bob’s account after 8 months.
If he cancels his account at the end of the 8th month, $400 is all you’ll ever make from him. However, if you re-engage Bob and now he keeps his account active for another 8 months you’ve made $800 in total from him ($400 for the first 8 months and an additional $400 for the next 8 months). That’s double his previous CLV. If we multiply Bob’s scenario by 1,000 other users just like him, you’ve made an additional $400,000 ($400 extra x 1,000 users) just by using an automated email series. Not bad for an email campaign that runs in the background without you having to lift a finger once it’s working well.
Engagement and re-engagement emails help you increase the length of time a customer stays active with you thus increasing your profit over time. As you may have suspected, automated upsell emails help you make more money starting right now.
If you remember, Sprout Social has four pricing tiers that range from $59 per user per month all the way up to $249 per user per month. Many of Sprout Social’s new accounts probably fall into one of the lower pricing tiers. Often users will want to try a new product and get comfortable with it before upgrading into a more expensive tier. Unfortunately, many customers will get used to the limited feature set they start with and will continue using that account level indefinitely.
If you don’t have a big sales team or your sales team has trouble getting your customers on the phone, automated emails can help you upsell. Let’s say the majority of Sprout Social users join at the $99 per user per month level and the average customer account stays active for 3 years or 36 months. We don’t know how much profit Sprout Social makes off of each $99 account, but let’s just say they make a net profit of $50 per month.
That means over the course of 36 months they’ll make $1,800 per user. However, if they can use automated upsell emails to move a $99 user into the $149 tier after three months, they’ll make a lot more money over the lifetime of that customer. Multiply that across their user base and you’re looking at a vastly improved bottom line each quarter.
I don’t have any specific examples of Sprout Social’s upsell emails but let’s take a glance at Hootsuite’s upsell emails since it’s a similar product. After you’ve been a free account user for a while Hootsuite will send you the following email:
If you don’t active your upgrade they’ll automatically send a follow up email reminder:
You don’t have to offer a free trial of a premium account, you could try upselling directly into the higher tier. If your users have found a lot of value in features at the lower tier they may be included to upgrade and pay right away once you remind them of the additional features they may be missing out on. However, a free trial of a premium account could be a great option if you notice not a lot of people taking action on your hard upsell emails.
Evaluating Email Performance
In the first part of this post we talked a lot about how automated emails run in the background without you having to lift a finger. While the whole point of automated emails is to help you increase CLV without having to manually nurture customers it’s not exactly a “set it and forget it” system either. Yes, you setup an email workflow based on customer triggers; however, you still have to keep an eye on your results to ensure that the automated emails are successful.
Key Metrics to Track
To evaluate the effectiveness of your automated email campaigns it’s important to keep an eye on the following metrics:
- Open rate – Don’t just look at what your open rate for each individual email is, but look at the pattern in the email series. If your email series contains 7 emails sent over the course of 2 weeks but most people stop opening emails after the 4th one in the sequence is sent, you need to consider why. Is it because they are taking the action you want after the fourth email and the others aren’t needed, or is it because they are totally disengaged? Some users will totally disengage for genuine reasons and you have to respect that and let them go. However, if many users are opening your emails but then not taking action it’s time to optimize. You can often improve your response rate to emails by writing better subject lines, sending emails on the right day of the week at the right time, writing more compelling copy and so on.
- Click Through Rate (CTR) – Having a strong open rate is important for your automated email campaigns. After all, if a user doesn’t open the email you have 0% opportunity to persuade the user to take action. After you get the user to open the email though you also need them to click-through to your website or app. Do you notice a lot of users opening the emails but failing to click-through? That probably means that you’re doing enough to pique their interest but not enough to get them to take action. If that’s the case you should optimize your email copy to be more persuasive.
- Conversion rate – Let’s say both your open rates and your CTR is strong but your users still aren’t taking the action you want. It’s time to figure out why. If they’re logging back in to your software but then leaving right away you might try adding a chat feature to your site. Chat windows give your users an opportunity to provide you with real-time feedback helping you earn more of their business. If you see users clicking through an upsell email but not completing checkout you might want to test the checkout process. Is the UX easy? Are there any errors? Is it clear how much more money the user is going to be charged? Is your cancellation policy easy to understand? Remove as many trust barriers as you can to encourage users to complete the upgrade process.
- Increased CLV – Finally, it’s important to track your increased CLV. That might go without saying, but this post wouldn’t be complete without mentioning it. If you are not seeing signs pointing to increase CLV it’s time to change up your email topics and be more persuasive!
Now that you have a strong understanding of the types of automated emails you should be sending to increase CLV you are ready to get started. The first step is to map out what your email workflows will look like; you must determine what actions (or inactions) will trigger an email to send Once your workflow is mapped out you need to write, design and setup your emails. If this sounds like time consuming work – it is. The good news is that once the automated email campaigns are setup you’ll only be making optimization tweaks down the road to improve results. Over time you’ll get your automated emails to the point where they are helping you drive more profit while you completely focus on other projects. If you have any questions about anything in this post please leave a comment below and I’ll do my best to answer.