What is RFM?
Our RFM dashboard helps you to understand customer behaviour by dividing customers into segments based on their transaction history. You can identify top customers and those who are about to churn and tailor your marketing accordingly. RFM stands for:
- Recency – how recently a customer has made a purchase
- Frequency – how often a customer makes a purchase
- Monetary – how much money a customer spends on their purchases
To calculate RFM we take a feed of your transaction data including purchase dates and purchase amounts.
How can you use RFM?
Each of your customers will be classified into a segment based on their RFM score. We create the RFM segments for you within your list so you can target them with different tactics with the aim of increasing their monetary spend over time.
For example, you could set up an automation to target ‘champions’ with a series of perks or send a single campaign to ‘Do not lose’ customers offering a deep discount to get them to purchase again. Using these targeted offers means you don’t cut into your revenue margins unnecessarily (e.g. by having to offer a deep discount to all customers rather than just lapsing ones).
How do we calculate RFM Scores
Using your transaction data we give every customer a Recency, Frequency and Monetary score. The scoring variables are agreed with you during the setup and onboarding phase. We appreciate that every business is different, so our custom approach to RFM modelling enables us to set it up precisely for you.
- Recency example
- Recently purchased – last purchase was 10 days or less ago
- Not recently purchased – last purchase was greater than 10 days ago
- Frequency example
- Frequently purchased – purchased 10 times or more
- Infrequently purchased – Purchased less than 10 times
- Monetary example
- Big spender – Spent £100 or more
- Low spender – Spent less than £100
We categorise customers into 8 segments based on the following scoring.
|Champions||Recently purchased||Frequently purchased||Big spender|
|Loyal||Recently purchased||Frequently purchased||Low spender|
|High potential||Recently purchased||Infrequently purchased||Big spender|
|Recent||Recently purchased||Infrequently purchased||Low spender|
|Need nurturing||Not recently purchased||Frequently purchased||Big spender|
|At risk||Not recently purchased||Frequently purchased||Low spender|
|Do not lose||Not recently purchased||Infrequently purchased||Big spender|
|Lost||Not recently purchased||Infrequently purchased||Low spender|
RFM Best Practice
For each RFM segment use different strategies and best practice to drive increased ROI and improve the customer experience. To get an idea of how these RFM segments can inform your marketing strategy, we’ve included some of the common tactics below. To find out how you can apply these tactics to your business and for further advice, contact your Customer Success Manager.
- Offer your champions perks for being such loyal customers and to keep them in this segment
- Promote exclusivity by making these customers part of a unique loyalty scheme
- Promote high value products/bundle deals to this segment to increase their monetary value
- Recommend related products or services to increase how much they spend
- High Potential
- Send automated replenishment emails to increase their purchase frequency
- Offer loyalty benefits if they purchase more frequently
- Promote your best selling products or services with the use of social proof
- Recommend related products or services to push up frequency and monetary values
- Need Nurturing
- Recommend new and improved products and services to encourage them to purchase again
- Test discount levels to drive them to make a purchase
- At Risk
- Test levels of incentives with the use of a control group
- Create urgency to buy now through limited time special offers
- Do not lose
- Offer deep cut offers to drive them to spend
- Use social proof in your emails to encourage purchases
- Test re-engagement emails with small groups and then target the segment with the most successful copy
- Try using other channels like Facebook Audiences to re-engage this segment