In Reloadify, it is possible to filter profiles based on an RFM analysis. But what is an RFM analysis? With an RFM analysis, your customer base is segmented based on customer value. This allows you to see exactly who your best customers are and which customers you should pay more attention to. Indispensable for targeted mailing! After all, you don't want to approach a loyal customer the same as a sleeping customer.
How does an RFM analysis work?
To assign customer value, an RFM analysis assigns scores to a profile. The scores are assigned based on the following points:
Recency: How recently has a profile made a purchase? The more often a purchase is made, the better. Good to know: after 10 months, a purchase is no longer recent and the lowest score is assigned.
Frequency: How often does a profile make a purchase? The more often a profile makes a purchase, the better. Only purchases ordered over the past year count in the rating, up to a maximum of 10 purchases. Anything over 10 purchases results in a maximum score.
Monetary: How much money does the profile spend? With this score, a profile's highest spend is compared to the highest order value of all profiles over the past year. The closer to the highest order value, the higher the score.
All RFM scores are translated to a score in the range 1 to 5. Here, 1 is the lowest a profile can score, and 5 is the highest. An RFM score is simply 3 digits in a row, always in the order Recency > Frequency > Monetary.
❗️ When calculating RFM scores, only completed orders are considered.
Fortunately, you don't have to work on assigning values to your customer profiles yourself. Reloadify takes care of it for you! All you have to do is add segments based on RFM scores.
Segmenting based on RFM scores
To keep track of how many and which customers have certain RFM scores, you can create segments. For each segment, you filter by scores. Per line you filter on 1 of the points: Recency, Frequency or Monetary. Do you prefer to filter on an exact RFM score? Then add 3 lines and differentiate per line.
💡 The monetary score can be pulled out of context if a handful of customers (or even 1 customer) has a much higher order value than the average order value. You easily check if this is the case by checking how many profiles match a monetary score of 4 or higher. Are these only a few profiles? In that case it is best to filter only on the recency and frequency score and, for example, add a maximum order amount.
Mailing based on RFM scores: 10 examples
To get you started with your segments, we've listed some examples of customer groups for you.
R4-5 F4-5 M4-5: Top customers
These profiles score high on all 3 points. These are also the profiles that generate the most sales. It goes without saying that you don't want to lose this group. Reward this group of customers for their loyalty and they will keep coming back to you for a long time.
R1-2 F4-5 M4-5: Non-losing customers
These customers have purchased from you more often in the past and have a high costumer lifetime value. But, this group is starting to become inactive. Introduce them to your entire assortment through an upsell or cross sell campaign.
R4-5 F4-5 M1: Profiles with many small purchases
The profiles with this score order regularly, but have low sales. You eventually want to push this group to a higher order amount. Use an upsell or cross sell campaign, or send a combination of these with a discount code. This way you increase the chance of larger purchases.
R3-5 F1 M3-5: Promising customers
These are profiles that have recently placed a high order with you. Usually this group includes customers with potentially high customer value. Tip: Develop your personal relationship with these customers so that they will order from you more often. Build a flow of emails around this group of customers. The power of repetition is very important here.
R4-5 F1 M1: New customers
These customers have very recently made their first purchase from you. They still lack frequency and value. They are not yet completely familiar with your webshop and all the benefits you have to offer them. It pays to set up a flow for your new customers! Introduce yourself, what do you offer and at what price? What benefits do you have to offer? In addition, use a cross sell campaign to showcase the rest of your assortment. The more the new customers become familiar with you, the more likely they are to order from you more often.
R1 F4-5 M1: Returning buyers
The returning buyer knows how to find you. However, they still lack value and activity. Show this group what else you have to offer.
R3-5 F1-3 M1-3: Potentially loyal customers
Potentially loyal customers are new customers who have already purchased from you more than 1 time. Develop your relationship with this group and chances are they will become loyal customers.
R3 F3 M3: Average customers
These are not your best, but they are not the worst customers either. It pays to give your average customers a little more personal attention.
R1-2 F1-2 M1-2: Sleepers
The sleepers need more attention. They haven't bought anything from you in a while and haven't done so often. You want to wake them up and get them to place an order more often. One way to boost their profiles is to create urgency.
R1 F1-2 M1-2: Lost customers
These profiles score lowest on all points and are in danger of forgetting you. Enough reason to give them some extra attention! But it is difficult to reach this group. So start small. First send them an e-mail with the reason why they should order from you.
Of course, it is entirely up to you to determine what RFM scores belong to what type of client for you. Keep testing, monitoring and fine-tuning. In the end, testing will learn what works best for your shop.