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HOW TO GO ABOUT RFM ANALYSIS CUSTOMER SEGMENTATION

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HOW TO GO ABOUT RFM ANALYSIS CUSTOMER SEGMENTATION 1

Do you want to know about RFM? Are you looking towards understanding the RFM analysis? Well, we got you covered here.

Usually people are pretty confused about What is RFM. Well, it is a business model, affecting the overall growth of online businesses by analyzing the till-date customer and marketer experience. RFM analysis includes three parameters of a consumer’s or customer’s activity. Recency, Frequency, and Monetary value. As a whole, three answers decide a customer’s place on your value chart as a businessman.

These are, how recent has a customer bought from you? How frequently do they visit you or buy something from you and lastly how much money have they spent on your products? All these are decisive for whether a customer belongs to the 20% of the gold or 80% of the common consumers. Resultantly, customers are divided into eleven groups or classes and are treated accordingly.

Champions

This is the class of those who are the winners. Whether a customer is a champion or not cannot be decided on the base of one parameter. For example, if a person has bought a product in the last 24 hours and has paid a huge amount for it, is he/she a champion? No, the data is not enough to decide. Because even though he/she has been on top in recency and monetary value, but is he/she frequent?

The case may be that he/she has never visited you before. So what are the odds that he/she will revisit? Very less. So, you cannot decide unless you have worked upon all the three parameters of a customer’s behavior and activity with you. These are the customers that will market your brand for free and deserve credits, like membership cards, and special offers.

Loyal customers

These are the second-highest in ranking resulting from RFM analysis and are the customers who are very responsive and often buy from you. They respond to market strategies more than the others. These are the customers you need to convert. Ask them for reviews. Send them customized emails and let them know that they matter.

Potential customers

These are the customers who can be your loyal customers and the champions. These are those who even though are not frequent but have bought recently and spent a good amount.

Recent customers

Depicting what this group includes, these are the customers who are recent but not frequent. These are the customers you need to build your consumer-marketer interaction because they have the potential to convert into loyalists.

Promising customers

They are neither good in monetary value nor frequency but have recently bought from your store. These are the people who need to know your product range, your services, and product quality. You need to create an awareness of your brand and offer them more products that are similar to the one they have bought.

Attention-needy customers

These are the customers who were once frequent but are now losing interest. Their recency is also affected. You need to hold on to them and ask them for reviews, so you can plan for more effective customer-related and marketing strategies.

These five groups belong to the good segments of the RFM. These customers need to be treated specially with customized emails, subscription and membership offer, reviews, and loyalty programs. They play a greater role (the 20% of the Pareto principle) in the growth of an e-commerce business.

The other segments

The other segments include customers which are below average in two of the parameters but are extra-ordinary in the third, according to RFM analysis. These include about to sleep, at risk, can’t lose, hibernating, and lost customers. Effective and aggressive e-com strategies are required to revive these customers.

 

Kelly Passarelly
Kelly Passarelly is a creative thinker who loves writing and working in a challenging environment.

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