Latest / The Email Marketing Podcast with Fexingo: Newsletters, Open Rates, and Subscriber Growth / How Email List Growth Rate Predicts Revenue
Transcript
- Lucas: So there's a metric that most email marketers I talk to say they track, but when I ask them what their number actually is, they go quiet. It's list growth rate. And it's not the same as subscriber count. Luna: Right, because subscriber count is a vanity metric. You could have a hundred thousand contacts and half of them haven't opened an email in six months. Lucas: Exactly. And growth rate is the percentage your list is growing over a period of time, net of unsubscribes and bounces. It tells you whether your program is actually healthy, whether new people are coming in faster than the decay. Luna: So what's a good growth rate? I've seen benchmarks of ten percent a year, but that feels low for a lot of companies. Lucas: It depends on your industry and how long you've been running. For a mature e-commerce brand, ten to fifteen percent annual growth is solid. For a newer brand, you might be at fifty percent or more. But the key is being intentional about it. I've got a case study in mind that really shows the power of focusing on this number. Luna: Who's the brand? Lucas: It's a mid-sized e-commerce company selling home goods. They had about two hundred thousand subscribers, but their growth rate had flatlined around three percent a year. They were adding maybe six thousand new names a year, but they were losing almost as many to unsubscribes and bounces. So they were treading water. Luna: And what did they change? Lucas: They decided to make growth rate their North Star metric instead of raw list size. So they set a target of fifteen percent annual growth, and they reverse-engineered what that meant: they needed to add about thirty thousand net new subscribers a year, which meant they had to fill the top of the funnel much harder. Luna: So how did they actually get the growth? Was it a lead magnet or something else? Lucas: They did a few things. First, they overhauled their signup forms. They had a single-field email signup, and they switched to a two-step opt-in where the first step is just a button — like, 'Get 15 percent off your first order' — and then the second step captures the email. That lifted their conversion rate by twenty-three percent. Luna: Oh, so the friction of typing in your email is actually the barrier, not the offer. Interesting. Lucas: Right. And they also launched a referral program. For every friend you referred who made a purchase, you'd get a twenty-five-dollar credit. They promoted it in their transactional emails, which are the emails people actually read, and that one channel alone contributed about forty percent of their new subscribers. Luna: That's a big chunk. But I'm wondering — if you're growing that fast, do you risk bringing in a bunch of people who aren't actually interested? I mean, a twenty-five-dollar credit is a pretty strong incentive to sign up. Lucas: That's the tension, and they handled it by tracking engagement separately. They looked at who was opening and clicking in the first ninety days. What they found was that referred subscribers were actually more engaged than their average new subscriber. They were twice as likely to make a second purchase within six months. Luna: So referrals bring in higher-quality subscribers because there's a social signal. That makes sense. But what about the broader email list? Did they see any deliverability issues from the rapid growth? Lucas: They did initially. Their bounce rate spiked because some of the referral emails were entered incorrectly, and one of their welcome emails got flagged as spam for a few people. But they fixed that by validating every new email on signup — you know, using a zero-bounce service — and they cleaned their list of invalid addresses every month. Their deliverability actually improved. Luna: And what was the revenue impact? I'm guessing they didn't do all this for a higher number on a dashboard. Lucas: Their revenue from email went up thirty-eight percent over the next twelve months. But here's the thing: it wasn't just because they had more subscribers. They also changed their sending strategy. They started sending a weekly newsletter to the whole list, but they segmented it based on where each subscriber came from. Referred subscribers got a different welcome sequence than, say, someone who signed up from the checkout page. Luna: So the growth rate wasn't just about adding bodies, it was about adding the right kinds of bodies and then treating them differently. Lucas: Exactly. And that's the thing I want listeners to take away. If you're just tracking subscriber count, you're measuring the height of a tree. Growth rate tells you whether the tree is still growing, and whether the roots are healthy. It's a leading indicator, not a lagging one. Luna: So for someone listening who wants to apply this, what's the first step? Should they just look at their current growth rate? Lucas: Yeah, calculate it first. Take the number of new subscribers you added in the last month, subtract the unsubscribes and bounces, and divide by your total list size. That's your monthly growth rate. Then annualize it — multiply by twelve, or just look at it over a year. If you're under ten percent, you've got a growth problem. Luna: And if you're at fifteen or twenty percent, are you golden? Lucas: Not necessarily, because growth rate doesn't tell you anything about engagement. You could be growing at thirty percent but have a seventy percent inactive rate. The ideal is to pair growth rate with a reactivation rate or an engagement score. That's how you know you're growing a list that actually produces revenue. Luna: Speaking of producing revenue, I'm curious about the economics. In that case study, did the referral program cost more than it brought in? I mean, twenty-five dollars per referred purchase sounds expensive. Lucas: They measured that carefully. The average referred customer spent about ninety dollars in their first year, and their gross margin was around fifty percent. So the referral cost was about half the profit from that first purchase. But because referred customers were more likely to come back, the lifetime value ended up being much higher. They were actually the most profitable segment after about eighteen months. Luna: That's a strong argument for investing in growth, not just in the top line but in the quality of the list. Lucas: Right. And one more thing they did that I found clever: they put a growth rate target in their weekly marketing meeting. Every Monday, they'd review the number of new subscribers, the unsubscribes, and the bounces. That kept everyone focused on the goal, from the copywriter to the web developer. It wasn't just an email marketing metric; it became a company-wide goal. Luna: That's a good point. Growth rate is something the whole marketing team can influence, not just the email person. But I have to ask — is there a downside to focusing too much on growth rate? Could you end up with a bloated list if you're not careful? Lucas: Sure, if you're aggressive with incentives or you buy lists, you'll see a short-term spike but your engagement will tank. That's why they set a floor on engagement. They wouldn't let the growth rate push the overall open rate below twenty-five percent. If it did, they'd dial back the incentives and focus more on segmentation. Luna: So it's a balance. You want growth, but not at the expense of the health of the list. Lucas: Exactly. And I think that's where a lot of brands go wrong. They chase growth for its own sake, and then they end up with a list of people who don't remember why they subscribed. But when you frame it as growth rate, you're forced to think about the whole lifecycle: acquisition, engagement, and retention. It's a more holistic way to manage your email program. Luna: And that's the kind of thinking that really moves the needle. It's not just about tactics; it's about the metric you choose to anchor your strategy. Lucas: And honestly, if today's conversation has given you a new lens on your own email list, that's the kind of thing that makes it worth doing. If it has, and you want to support the show, there's a link at buy me a coffee dot com slash fexingo. Every little bit helps keep these conversations going. Luna: Yeah, and it's something we genuinely appreciate. It's a small way to say this matters. Lucas: But back to growth rate — I think the real takeaway is that you don't need to overhaul everything at once. Just start measuring it. Set a target. See where your list is leaking. Even a one percent improvement in growth rate can compound into significant revenue over time. Luna: That's a nice note to end on. So if you're listening and you've never calculated your growth rate, that's your homework. Lucas: It is. And if you already track it, ask yourself if it's actually driving your decisions or if it's just a number on a dashboard. The brands that win are the ones that make it a true North Star. Luna: Well said. That's all for today, folks. Thanks for hanging out with us.