The Power and Profitability of the Customer Newsletter..Seriously!

As part of my consulting practice, Good Karma Marketing, I try to create value for small businesses through simple, pragmatic marketing solutions with rational results. Recently, I worked with a small digital marketing agency and I thought this post would be valuable for the digital marketers out there with new marketing agencies. I support your bravery and relentless pursuit of revenue!

One of the hard parts about being a new agency or a team that’s expanding in a new direction is how to get started. Some teams are great at SEO, marketing strategy or creating great messaging and product positioning, but what if you want to expand your business and offer new services to your current customers? What should you offer? How do you sell it? How much do you charge? All great questions and I’ve got a simple place for you to start.

Discover the power and profitability of the customer newsletter service. It’s a relatively simple service to deliver, but it can have a tremendous impact on your business and a great ROI for your clients.

Really? A newsletter? Yes! Before your business clients start worrying about social media, an HTML5 responsive website, AdWords, display advertising or anything else – make sure they have an outstanding customer newsletter.

A good customer newsletter will:

Establish a trusted relationship with the customer. It’s an online world, but customers still buy from vendors and brands they know, trust and have bought from in the past. A well-constructed newsletter with important and relevant content is delivering value. You’ll know it’s valuable and be able to prove it when they read and respond to it.

Deliver upsells of related products and services. Again, it’s easier, faster and cheaper to sell related products and services to people who have already bought at least once. In fact, it’s at least 5x more expensive to acquire new customers than to sell to existing ones!

Increase referrals to other potential customers. Prospective customers have already done research. Many times they’re simply looking for referrals who have had success. Ask for and promote customer success stories in the newsletter.

Demonstrate cost-effective marketing and great ROI. The newsletter targets the most valuable prospect of all – the current customer. By creating a template, sticking to a consistent frequency, and leveraging the power of email marketing software, landing pages, auto-response – you can deliver a complete, effective and profitable campaign for your clients. Repeatedly!

Example Structure

Section #1: What’s New

Successful businesses rarely stand still – what’s changed that’s great for the customer? Do they have a new product or service that’s an add-on? New packaging/pricing for extending a subscription or generating an upgrade?

Section #2: Customer Spotlight

Demonstrate customer successes. Make sure they know they’re not alone! Include a customer Q&A or customer success story with a picture and a quote.

Section #3: Industry Spotlight

Educational 3rd party article/blog post. There’s a lot of content out there. However, it’s not all good or accurate. Be selective. Credit the source. Another ‘authority’ will support your topic or create added interest and validation.

Section #4: The all important call-to-action

Create a single (or at most two) call(s) to action. What do you want the customer to do, specifically? Call now, Order Today – you get the idea. Take them to a landing page with a focused offer. This will give you an opportunity to create context and not distract them with other visual noise (i.e. do not drop them onto a home page of the website). Then, make sure you have set up an auto-response off the landing page to ensure the customer gets a confirmation message and follow-up.

How often? What is the frequency?

The customer newsletter is an awesome offering because it’s something that you can do right away. However, it’s critical to determine how often it makes sense to engage with the customer. Consider the difference in a B2B world versus a B2C client’s target audience. B2B will likely be less often, while a B2C customer might expect multiple emails per month. Have you ever heard the saying “Just because you can, doesn’t mean you should”? Start with one email per month and go from there. It’s easy to add more communications, but difficult to recover from a bunch of unsubscribes from over-communicating in the first 30 days.

Important: You can always ask for feedback from the audience BEFORE they vote with their Unsubscribe button!

How big is the opportunity?

It has been my experience that successful agencies know how to keep their business repeatable. So, why did I suggest the customer newsletter? It’s repeatable. Furthermore, the newsletter service is an easy way to have an ongoing relationship with your clients.

What is the cost and pricing model?

The service should be very affordable to clients. Therefore, it’s a relatively short sales cycle and your clients can see almost immediate value add. It’s a service that agency owner/principals are not required to deliver and can still be successful. A much more junior (i.e. cheaper) resource can be applied to research and deliver – more margin.

Ok, let’s break it down. Clearly, this model is an approximation and won’t be an exact calculation for everyone, but it will give you a framework to use.

Cost model

Part of the secret sauce to making the service profitable is understanding how to allocate the costs for successful delivery and managing the content.

Resources

Communications/Journalism Major, 0-2 years experience
Approximately $20-$25/hr.

Content costs

Newsletter development: ~4 hrs.

Section #1: What’s New

• 1-2 paragraphs created by the client, formatted by agency (0.5-1.0 hrs.)

Section #2: Customer Spotlight

• Should consist of a short phone interview, write-up and a photo of the customer: (1.5 hrs.)

Section #3: Industry Spotlight

• Find/link to 3rd party educational article: (0.5 hrs.)
• General formatting & test send: (1.0 hrs.)

Note: there should be a one-time setup cost in your model to upload the customer list and create the landing page with a great call to action.

Pricing Structure

Now that you have a cost model, let’s review a pricing strategy.

• Gross Margin Analytics: Target 65%+ gross margins for your list pricing (about 3x markup)
• Resource: $75/hr. ($25×3)
• Content, $300/newsletter ($75×4)
• Allocate your costs for software per/client (approx. $150)

Total monthly newsletter retainer: $450-$500 per month per client. Something to think about: $300 per month is still 50% gross margins!

Here’s some additional thoughts and recommendations to consider. If more hours are required, raise the retainer, but keep the fee less than $1,000/mo. It’s more important to sell as many newsletter services as possible. Similarly, as an overall pricing strategy, it’s worth discounting to $300-$400/mo. to get more clients on retainer.

Power and profitability, revisited.

Remember, this service is a powerful strategy for moving clients from project-based services to retainer-based services. Your profitability is not only the immediate revenue and margin benefits of the service, but now you’re part of your client’s ongoing marketing process.

If you convert 10 clients @$500/mo. that’s $5,000/mo. in retainers and a very high probability of delivering great ROI for your clients that will lead to additional business.