Issue: Customer relationship management ، Clustering (segmentation of customers)
RFM analysis for successful customer segmentation – Part III
the writer :
Mr. Engineer Behnam Behzadi Far / Respected manager of relationship with customers of Mustafavi Saffron brand
Using RFM segmentation for your business
Managers and marketers have been using RFM-based customer segmentation to optimize their ROI in marketing and business activities for a long time. This is usually done by sending targeted messages to those 11 segments we discussed earlier or some other custom segmentation of our own choosing.
- RFM For better email marketing (Email Marketing)
Create segmented lists from RFM analysis in your email marketing software (MailChimp, Campaign Monitor, etc.). Then run an automated Drip Campaign on each segment. If possible, automate the transfer of people from one RFM section to another, between split lists.
You can also segment by open and close rates, clicks, and products purchased. This gives you a very precise focus of the relevant sections. This strategy greatly improves results.
- RFM to improve customer lifetime value
The amount a customer spends with you over the course of their lifetime depends on several factors. RFM can help you in many different aspects; Including reducing customer churn, offering mutual upsells and cross-sells to segments that are more likely to respond, increasing loyalty and referrals, selling high-priced and luxury items, and more.
Just be careful. Don’t overdo it. If you constantly send marketing campaigns to a segment of your customers, they might get irritated and stop buying.
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RFM for newly introduced products
Promoting new products to loyal customers is a great way to get initial traction and feedback. You can reach out to your heroes and loyal customers even before you build the product. They can give you great insight into how to build and promote your product. This group of people will also happily refer your product to their influential circles and increase your sales.
- RFM to increase user loyalty and engagement
If you had a loyalty program to run, your most potential loyal customers might be the first group you might target. In fact, your goal is to make sure their initial experience with your product and service is pleasant and memorable. Do some timely and well-planned ads, you will definitely increase the probability of them buying.
Also remember that sending educational content to these customers will also increase their engagement with your brand.
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RFM to reduce customer churn rate
If you remember, we divided our customers into 11 sections. The last two categories are At Risk and Hibernating. These two groups need special attention from your side. Send a dedicated email or even call to reconnect with these customers. You should even offer repeat purchases with great discounts or conduct surveys to address their concerns before competitors or other brands steal them from you.
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RFM to minimize marketing costs and improve RoI (return on investment)
Marketing campaigns without a target can be expensive. Focusing on a smaller subset of customers significantly reduces costs, allows you to conduct more experiments and gain more experience, and experience data-driven decision making that is reliable.
In fact, RFM is rooted in direct marketing. When the costs of printing and shipping and publishing catalogs can be reduced by targeting only the customers who are most likely to respond to these campaigns. Therefore, it doesn’t matter whether you are doing digital marketing, print or media content production, customer segmentation (RFM) will reduce your costs and improve your return on investment.
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RFM For remarketing campaigns(Remarketing)/ Retargeting (Retargeting)
Remarketing is a smart technique where you show your ads/incentives to people who have visited your site at least once but are now browsing or shopping on another site. They will see your ads on other sites they visit, this trick will improve click-through rates and overall effectiveness.
A simple way to use RFM in remarketing is to transfer part of your customers, especially recent customers or promising ones, to the campaigns you are using. Then show them the incentive schemes.
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RFM to better understand your business
Most small businesses do not fully understand their customers. They may not be aware of their customer’s demographic or firmographic information. Collecting and understanding this information can also be time-consuming and expensive.
RFM analysis becomes a fast way to understand your customers’ behavior and because it is based on real transaction history, your reports and analysis will be of much higher quality.
Summary and suggestions
The RFM technique is a proven model that helps retailers and e-commerce businesses maximize the return on their marketing investments.
Some advantages of RFM
RFM is useful for many different types of business. Online businesses, retail, direct marketing, subscriptions, non-profits, etc.
You know the different segments of your customers and you can identify your best customers.
RFM helps build highly targeted marketing campaigns.
It helps in marketing based on customer relationship and customer loyalty.
Combine it with other tools to get detailed analysis of your customers and gain accurate customer insights.
RFM reduces marketing costs due to optimized targeting.
It reduces the negative reactions of customers due to targeting the control of customer behavior.
Some limitations of RFM
It may not be useful when most customers are only one-time buyers.
When you only sell one product and that too once, RFM may not be appropriate.
RFM is an analysis based on the history of customer activities. It is not a design or decision making tool for the landscape.
Without a software (tool), calculating RFM scores and segmentation can be complicated.
Allocating too many campaigns to a specific segment of customers can cause them dissatisfaction and discomfort.
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