How to use the RFM Model & Analysis to Drive Continuous Ecommerce Growth (2018)
Articles,  Blog

How to use the RFM Model & Analysis to Drive Continuous Ecommerce Growth (2018)


There is a little known about the RFM
analysis in e-commerce. However when using it you can get a clear vision
about what’s working and what’s not in your e-commerce who are your most
important customers and who’s your ideal customer profile. Right now you are
losing a ton of opportunities because you are not using the RFM model. You
don’t know which are the most valuable customer segments and according to RJ
Metrics after 24 months 50% of the revenue is being generated by the
returning customers of your ecommerce RFM is your ally in the retention game
when you know your customers buying behaviors you are one step closer
towards decoding their needs and their preferences so it is a step closer to
starting a meaningful conversation I’m Valentin Radu, CEO of Omniconvert the growth marketing platform for e-commerce. websites aiming for data-driven growth
today I’m gonna show you what RFM segmentation is and what you should do
about it in order to grow your ecommerce keep watching the RFM model has been around since
the 70’s it allowed the direct mailing marketers to know things about their audience based on the recency, frequency and monetary value the first
step in building an RFM model is to have a look at your own customer database and
extract the historical data available for calculating the recency frequency
and monetary values right now you have in your database a lot of
one-night-standers a lot of Don Juans but you also have two lovers or even your
soulmate but I’ll tell you more about these a bit later in the video you are
so wrong if you think ecommerce it’s about a one-night stand. No, it’s about
generating constant emotions it’s about habit forming it’s about being
data-driven and analyzing what’s going on in the mind of your customers this is
why it’s crucial to know your buyer persona through their buying behaviors
this can help you begin a relevant conversation which may
lead to a happy customer, and long lasting relationship with a happy end of course
how often have you asked yourself these questions but how do you actually do this you get
something like five five five a customer with five as a score for recency means
the most recent customer a customer fight for frequency means a customer
which is in the group of the most frequent buyers. And a customer which gets five as a score for monetary value means a customer which is in the group of the
most valuable customers the ones that spent the most on your website. So mainly the segments are built like this: In terms of Recency, you cut the whole database of customers into five different groups. Five means the best score, that means the most recent customers one means the smallest score that means the customers
which both long time ago and two three four means you’ve got the picture so in
terms of monetary you do the same five is for the group of customers that
bought the most one is for the group of customers that both the least, and in
terms of frequency let’s say the average customer made 4,4 orders on
your website but 5 stands for the group of customers that placed more than
fifteen orders on your website and one means the group of customers that placed only one order. In this manner you can understand which are the most important
champions in your database and which are the ones that you need to treat
completely differently. Look at the RFMmodel as a maze, if you change one value from the equation you are suddenly dealing with a new type of customer with
a different buying behavior and different needs so you need different
marketing tactics to address him. let’s play a game!
what you have here is a group of customers who bought from you a long
time ago they placed a few orders, but those orders were very
valuable what do you need to do here? You can’t afford to lose these customers,
maybe write them a handwritten letter or give them a courtesy call asking about
their experience and give them a special treatment to re-engage them. What about
five one five? These are customers that bought recently from you, only one time,
but very expensive products. They have a lot of potential so you need to treat
them very, very, very carefully so what can you do about these RFM segments you
have here the true lovers you have the soulmates you have the Don Juans or the
one-night-standers you have the both to lose customers. So you might want to do a brainstorming with your team and come up with benefits that you can give them
throughout their buyer journey so you can give them things like personal
assistant a handwritten note or special discount codes or vouchers that allow
them to install the habit form. Also if you want to discover things about your
buyer persona like lifetime value customer acquisition cost or how to run
cohort analysis make sure you check out our Omniconvert plug-in especially built
for Magento ecommerce platform this extension empowers you to just push
a button and automatically grab all the data around your two lovers and soul
mates and everything that I’ve talked about before, without you bothering with
data and calculations. If you learned something useful from this video let’s
have a long-lasting relationship so make sure you subscribe to our YouTube
channel let me know in the comments below what is the most actionable
insight that you will be starting to implement as of tomorrow

3 Comments

Leave a Reply

Your email address will not be published. Required fields are marked *