Retaining customers with RFM segmenting

A Repeat Customer Insights customer was asking what they could do with RFM segmenting to retain customers better.

For retaining existing customers you'll want to reach customers who are good customers but haven't ordered recently. Especially if your product line lends itself to frequent reorders (e.g. consumable products).

For this you'll want to use the more detailed RFM segments. Each component is scored from 5 (best 20%) to 1 (lowest 20%).

Customers who haven't ordered recently would have a lower Recency (R) of say 2-4. If that's too many customers, you can create sub-segments by adding in the number of purchases (Frequency, F score) and/or the amount they spent (Monetary, M score).

Some examples:

R of 2-4 and F of 3-5 would be customers who have purchased many times but not recently. Great for a campaign to show off new products, sales, or customer loyalty-types of offers.

R of 2-4 and M of 4-5 would be customers who have spent a lot of money in total but not recently. Great for a campaign around where you offer higher-cost product bundles (e.g. $200 worth of product for $150 or $100 worth for $80).

Those can even be combined: R of 2-4, F of 3-5, and M of 4-5. Those would be your best customers who haven't come back recently. Though you'll want to make sure you have enough customers in that segment, aim for at least 200.

(There's a whole bunch of other RFM segments you can create here too, the app gives you 125 segments with RFM alone)

Eric Davis

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Topics: Customer segmenting Rfm Customer retention

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