Startups Can Apply RFM Analysis To Improve Email Marketing

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Champions: These are customers who have made recent purchases, frequently make purchases, and spend a lot of money. They are your most valuable customers and should be treated as such.

Loyal Customers: These are customers who may not make purchases as frequently as Champions, but still spend a significant amount of money with your business.

Potential Loyalists: These customers have made recent purchases but do not make purchases frequently enough to be considered Champions or Loyal Customers yet.

Risky Customers: These customers have not made a purchase in a long time and do not make purchases frequently. They are at risk of churning and should be targeted with retention strategies.

Using the RFM model, you can create targeted email campaigns for each of these customer segments. For example, you could create a special offer for your Champions or send a re-engagement campaign to your Risky Customers.

While advanced segmentation and retention models can be helpful, the real focus should be on the email itself. Use the insights from RFM analysis to create personalised email messages that speak directly to your customers’ behaviours and preferences. With a little creativity, you can increase revenue and incentivise customer behaviour through your email marketing campaigns. In the RFM model, the recency component (R) measures the number of days since a customer’s last purchase. Customers who have made a purchase more recently are considered to have higher potential than those who have not made a purchase in a long time.The frequency component (F) measures the total number of purchases a customer has made. Customers who have made more purchases in total are considered to be of higher value than those who have made fewer purchases.

The monetary value component (M) measures the total amount of money a customer has spent. Customers who have spent more money are considered to be of higher value than those who have spent less money. By using the RFM model to segment customers based on their recency, frequency, and monetary value, businesses can create targeted marketing campaigns that speak directly to each customer segment’s needs and preferences.