How to Measure the Value of Your Subscribers

Updated Oct. 21, 2020

Peter Drucker once said that the purpose of business is to “create a customer.” I believe this is true. But marketers (and other business executives) take the term “customer” too literally.

Many think a customer is created when they purchase the product or solution the company offers.

I argue that a one-time sale does NOT necessarily mean you’ve created a true customer. Similarly, I argue that businesses can create customers who haven’t purchased any product or service.

As Drucker himself said, “It is the customer who determines what a business is. For it is the customer (alone) who, through being willing to pay for a good or for a service, converts economic resources into wealth, things into goods.”

Great marketing adds value that customers are willing to invest in and that can create wealth for the business. But not all customer investments involve a purchase. They can include things like time, attention, referral, personal data, and brand loyalty, all of which can be converted into wealth for the business.

Media companies understand this. As one television executive stated almost 20 years ago in the book Audience Economics, “I can’t think of another business that makes one product, but sells a different product. We make programs and put them on the air. We are not selling the programs; we are selling the people that watch the programs.”

If you watched the recent documentary The Social Dilemma, you have another understanding of how relevant this model is in today’s digital marketplace.

Content marketing offers traditional product and service companies the opportunity to expand the classic definition of a customer and how wealth can be created in the business.

What is marketing’s value?

I’ve written about the different value journeys of audiences and customers and how they are assets to the business.

Modern marketers are measured by their ability to move prospective buyers through a process that increases their value to the business along the way to become what we think of as a customer (someone who makes a purchase). As the theory goes, a qualified lead is worth more than a visitor, and a sales opportunity (or a filled shopping cart) is worth more than a qualified lead, and a sale is worth more than an opportunity. Marketers then value their marketing based on dividing the total marketing dollars spent by the sum of the revenue (or potential revenue) created at each stage gate.

But this calculation is where we get the side-eye from the chief financial officer. The classic challenge of solving marketing’s ROI has always been associating a tangible value of that “potential revenue.”

Put simply: How much value does an unrealized visitor, lead, or qualified opportunity really have? The technically correct answer is zero since those potential customers never purchased anything and the revenue-to-marketing-cost ratio is the only thing that matters.

But wait a minute, didn’t I just say content marketing offers a way to expand the definition of how a customer is classically defined and how wealth can be created in the business?

Why yes, I did.

What if we looked at some or all of those unrealized visitors, leads, and qualified sales as a media company would?

What if we saw our relationship with audiences as we do our relationship with customers? What if we viewed them as an asset that can increase in value over time?

We wouldn’t simply measure the size of the audience. We would measure how much the audience – specifically, the different kinds of audience members – adds wealth to the business.

Measuring the value of all customers tells so much more about the health of the business than simply measuring the number of paying customers.

This is something today’s media companies understand. The astronomical business value of media companies like Facebook, Google, Netflix, Amazon (yes, it is a media company), and others that adopted a media business model isn’t only based on the fact they can reach millions (or billions) of people. Their business value comes because they reach millions of people who actively, willingly, and trustingly desire to be reached.

But how do you assign a monetary value to someone in your audience who actively and willingly participates but may not now (or ever) spend money on your product or service?

What is an audience valuation?

Let’s back up a minute.

Have you heard this classic joke? An economist, a physicist, and a chemist are stranded on a desert island. One day a can of food washes up on the beach. The physicist and chemist each devise ingenious methods of how to open the can. When it is the economist’s turn he simply says, “OK, assume there is a can opener.”

Maybe it’s not that funny.

Like valuing companies, valuing audiences is fuzzy and complex even for media companies where this is common practice. Assigning a real value to the audience’s investment of time, data, attention, loyalty, and engagement hinges a lot on what we actually DO with that participation.

Exploring how to establish audience valuation is not as much an accounting exercise as it is a marketing exercise that helps you apply monetary value to other parts of the business. In other words, to paraphrase the media company executive quoted earlier, you’re not valuing the content the audience consumes, you’re valuing the audiences that consume the content.

For example, the value of Cleveland Clinic’s Health Essentials blog is NOT that it increases the number of patients to the hospital (though it arguably does that as well). Rather, the value is that it drives brand awareness, increases affinity with the brand, provides incredible market research insight, and (most pointedly) generates significant revenue every month through advertising.

Cleveland Clinic realizes actual monetary value from a content marketing effort from an audience that will almost exclusively never become a Cleveland Clinic patient.

What is an audience asset?

The simplest definition of “audience” is a group of people who gather to view or listen to performances or who consume or admire content – a book, art, or other media.

Put more simply: Audiences are groups of people willing to invest their time, attention, and actions on the content you create.

If the goal is to put a financial value on the depth and dimension of the investment the audience makes, then it makes sense to place a higher value on the audience members who give you this investment willingly and consistently. Let’s call them “subscribers.”

What makes a subscriber measurable is that they are someone you can reach (and know you’ve reached) any time you choose. That makes them even more valuable because you can’t truly know which Facebook “likes,” Twitter followers, or podcast subscribers, you have reached.

So, let’s refine our definition of an audience asset to say the goal is to measure addressable subscribers.

One note, I realize that technologies exist that make people on different platforms addressable even if the audience hasn’t provided an email, phone number, or physical address. However, subscribers have higher value because they gave permission for you to reach them at will (in their inboxes, mailboxes, or mobile phones).

In defining an audience asset, let’s limit it to people who have provided identifiable information that allows you to deliver them messages at your choosing.

With that in mind, let’s measure.

Setting investment goals for the audience asset?

You add wealth to business only two ways, as Peter Drucker would say – saving costs or increasing revenue. As your audience grows, you can assemble business goals that accomplish one or multiples of those objectives.

Here are a few hypothesized goals to consider:

• Use the first-party data from audiences to increase efficiency on your traditional media buy or consumer research, or to drive better personalization in an e-commerce channel. CPG company Kraft-Heinz seems to be expanding its efforts in this arena.
• Sell access to your audience’s high traffic and content engagement to non-competitive companies. This is how Cleveland Clinic is monetizing its brand awareness efforts. This is also how a small software company like Terminus can self-fund its customer event and transform what would have been a cost item in a marketing budget into a revenue generator.
• Build a revenue-generation platform that also drives awareness for a niche business. This is what data and research company FreightWaves did in 2016, by launching FreightWaves TV and FreightWaves Radio, and it has seen 250% growth in both its media and data businesses.
• Create media properties that build valuable audiences to drive funding for other projects. This is clearly what the Girl Scouts of America have in mind with their new CircleAround digital magazine. They created funding partnerships with Shutterstock and Verizon in order to drive revenue for local Girl Scout missions.

Image source

This also is why computer maker Rasberry Pi built a division of the company to publish magazines and books to drive revenue for its foundation that provides low-cost computers for kids.

All these goals are supported with willing, addressable subscribers. But just as these goals vary in scope, so too do their aspirations with their audiences.  Put simply: All subscribers are valuable, but not all subscribers are equally valuable.

How to assign subscriber asset value

Just as for a media company, the net present value of any audience asset is a snapshot in time. Today, your audience may be small but engaged and willing to take many actions that move it toward your goals. Tomorrow, the audience may be bigger but unengaged and unwilling to help you.

Your goal is to care for the asset as you would any other. You might measure and segment the audience based on its activity.  For example, at CMI we measure unengaged audiences, our fans, and our superfans. We model subscribers as customers – increasing (or decreasing) lifetime value. Today’s engaged and active subscriber is tomorrow’s disengaged subscriber (or an unsubscriber.)

While other departments look at increasing customer value by continued purchases over time, marketers can look at increasing subscriber value as its loyalty, activity, depth of relationship, and willingness to take actions over time.      

Remember, you can measure both the audiences that meet audience-related goals as well as audiences that help you achieve more traditional marketing and sales goals.

For example, you can “measure the crosses.” If the audience is meant to support a more efficient or effective sales goal, measure the difference between the paths it takes to get there. Some subscribers will cross over into the traditional marketing process. When they do, their value becomes the difference between the cost of acquiring that lead or customer through traditional methods vs. the audience development method.

ServiceNow is a great example of this. It launched its publication Workflow Quarterly in 2019.

In the first year, it saw a 66% growth in subscribers. More importantly, it sees that subscribers are 73% more likely to take the action of completing a form on the website. Not only does this give ServiceNow a more efficient lead generator, but it provides higher quality customer data when they make a purchase.

And, of course, you also can measure the other path – those who don’t convert into traditional marketing leads and opportunities based on monetizable goals. Think about how to monetize subscribers or segments of subscribers and assign value based on that. Remember how Cleveland Clinic monetizes its Health Essentials blog? One subscriber segment represents the opportunity for increased local patients. It’s a meaningful but small percentage of the millions of the blog’s visitors. The wider, national segment of “health-conscious” subscribers represented the opportunity for Cleveland Clinic to sell access through advertising from insurance companies, technology companies, and others. Health Essentials became a brand and marketing program that pays for itself through its audience asset.

As you reflect on your audience-building approach, what emerges can be both a snapshot of a monetary valuation of the existing subscriber base and a model for new scenarios to increase that value over time.

Your audience asset framework going forward

Content marketers face pressures to show the results of their work. If you only do content marketing as a replacement for advertising, your program will fail.

A successful content marketing approach is more expensive than advertising. But because content marketing can provide multiple lines of integrated value across the business, the investment can be justified.

And that investment isn’t in the content. It’s in the result of the content – the subscribed audience. Content’s only value is in the extent to which it moves, builds, or keeps an audience engaged.

I’m still working out this model. It will get better and better over time. I hope it can set a foundation that helps businesses define what they’re really investing in.

I still believe that the purpose of a business is, as Peter Drucker would say, to “create a customer.” But I also believe that in 2020, we can extend the definition of a customer to encompass a person who doesn’t buy one of our products and services. I’ve never purchased a Google or Facebook product, or a Twitter service, or a piece of content from Reddit. But I’m certainly a customer of them all.

Cover image by Joseph Kalinowski/Content Marketing Institute