RFM™ for
Windows
Users Guide




  The Database Marketing Institute, Ltd.
      2100 South Ocean Drive 16A
    Fort Lauder...
RFM™ for Windows ® USER’S GUIDE




                    For Helena




     Copyright © 2007 The Database Marketing Instit...
TABLE OF CONTENTS

1 INTRODUCING RFM™ FOR
WINDOWS®.....................................10
About RFM™ for Windows®............
RFM™ for Windows ® USER’S GUIDE
Creating an Output File.........................................................29

Creati...
How you can use Summary Reports.....................................46

Viewing the output...................................
RFM™ for Windows ® USER’S GUIDE

4 ADVANCED TUTORIAL – SORT,
APPEND, GRAPHS AND CHARTS 82
Appending Response Data............
Two conflicting goals of RFM..............................................112

Break Even Response Rate .....................
RFM™ for Windows ® USER’S GUIDE

8 COUNT, COMPARE AND
REFORMAT...................................130
Reformatting Database...
14 IMPORTING FROM SDF........156

15 EXPORTING TO DBF FORMAT
.......................................................160

1...
1         Introducing RFM™ for
                  Windows®

About RFM™ for Windows®
     Welcome to RFM™ for Windows®. You ...
INTRODUCING RFM FOR WINDOWS
    Hughes, Arthur, 123 Main, “$2,341.00”,95/06/21,456

    Stored in each customer record sho...
RFM™ for Windows ® USER’S GUIDE

RFM™ for Windows® Terminology
     The following table explains the terms you will need t...
INTRODUCING RFM FOR WINDOWS
Cost per piece. The cost per piece of an outgoing promotion
(direct mail or telemarketing). Th...
2            Getting Started


Windows Run Instructions

    When you get the RFM™ for Windows® CD, put it into the
      ...
GETTING STARTED
    When setup has finished, it will create an icon that looks like




    this:




Loading the Program
...
RFM™ for Windows ® USER’S GUIDE




     You may want to go directly to the program, but let’s assume
     for the moment ...
GETTING STARTED




Click the yellow up arrow to the right of the Look In box until




you find your CD disk (D disk) whi...
RFM™ for Windows ® USER’S GUIDE

Entering the Password

     As soon as you enter the RFM program for the first time, you
...
GETTING STARTED
    If, by any chance, the password you enter does not work, do
    not panic. Try it again, and if it sti...
RFM™ for Windows ® USER’S GUIDE

Starting and Stopping RFM™ for Windows®
     You can start RFM™ for Windows® from the Pro...
GETTING STARTED
comma. Most database software systems have an option for
exporting their databases into comma delimited fo...
RFM™ for Windows ® USER’S GUIDE




Opening an Existing File




     In the upper left corner there is an Open Button. Cl...
GETTING STARTED




Use this browse facility to locate the directory and file name
that identifies your saved comma-delimi...
RFM™ for Windows ® USER’S GUIDE
     Numbers Option.
      In the upper right is a numbers option. Numbers inserts line
  ...
GETTING STARTED
Export to SDF – See Chapter 15
Export to DBF – See Chapter 16
Export to Excel – See Chapter 18
Create RFM ...
RFM™ for Windows ® USER’S GUIDE




     Aggregate Records.
     The Aggregation Function is used to combine a file of ord...
GETTING STARTED
code or some other identification, you can use this button to
count how many products of each type were pu...
RFM™ for Windows ® USER’S GUIDE

     Convert Date. RFM for Windows permits you to convert two
     digit dates to four di...
GETTING STARTED




Creating an Output File
     The top bar has a space for the Output File Name. A name
     already app...
RFM™ for Windows ® USER’S GUIDE
     and Total Dollar Amount. If it finds bad data in any of these
     three fields, it w...
GETTING STARTED
first check the validity of the data in these three areas. If the
data is blank or incorrect, the record c...
RFM™ for Windows ® USER’S GUIDE



Output Sort Specification




     The output from RFM™ for Windows® may be sorted in o...
GETTING STARTED




Include rejects with output.
     You have an option to have the rejected records included
     with y...
RFM™ for Windows ® USER’S GUIDE
     Net Revenue Per Sale. (Order Margin). This box asks for
     the profit from a succes...
GETTING STARTED
     that, for you, you can get away with 3.5 or 3.2 or some other
     number, and still have accurate re...
RFM™ for Windows ® USER’S GUIDE
     Selecting Recency Click the arrow to the right of the
     Recency Field box. All the...
GETTING STARTED




Determining the RFM Division Numbers




    To the right of the RFM Field Name Boxes are three Divisi...
RFM™ for Windows ® USER’S GUIDE
     powerful discriminator. The rationale for division numbers is
     covered at length ...
GETTING STARTED

When you have entered all your field specifications, click the
button for Create and RFM™ for Windows® wi...
RFM™ for Windows ® USER’S GUIDE
     and the highest quintile for dollar amount. If the divisions are
     all “5”, there ...
GETTING STARTED
    bad data. Clean up your records, and run RFM™ for
    Windows® again before you do any serious marketi...
RFM™ for Windows ® USER’S GUIDE
     While RFM for Windows is creating and appending RFM
     codes to your database recor...
GETTING STARTED
    Here is what the Frequency summary looks like:




    This shows that the top 20% of all customers ra...
RFM™ for Windows ® USER’S GUIDE
     widths can be altered. Finally, the entire summary table can
     be copied to the Wi...
GETTING STARTED



Saving your report to a file




     At the bottom of the Report screen, there is a save option.
     ...
RFM™ for Windows ® USER’S GUIDE

Calling Up Previously Saved Reports
     If you have previously saved some reports, you c...
GETTING STARTED
        This shows that the top 20% of your customers from
the standpoint of frequency of purchase account...
RFM™ for Windows ® USER’S GUIDE
     be including in our analysis people who have not purchased
     from us for many year...
GETTING STARTED




This shows the last part of each record where the RFM
codes have been appended. The file is sorted in ...
RFM™ for Windows ® USER’S GUIDE

Printing a report on RFM Coding.




     This is a complete report. It has your name, yo...
GETTING STARTED




An Nth is a smaller file which is a statistical replica of your
master database. It is used for test m...
RFM™ for Windows ® USER’S GUIDE
     records reduce until it is 40,000. Do this for any sized output
     file to produce ...
GETTING STARTED




Here, we are seeking the location of the RFM cells in your
database record. It is in field 14. When th...
RFM™ for Windows ® USER’S GUIDE
     what would be copied to your windows clipboard would be the
     following:
     555 ...
GETTING STARTED



Select Records by RFM Cell Code
     With your RFM coded database opened and visible, click the
     Se...
RFM™ for Windows ® USER’S GUIDE




     Next, click the codes box, and your screen will fill up with the
     codes of th...
GETTING STARTED




You know which RFM cells you want to select for your rollout.
These are the cells that broke even or b...
RFM™ for Windows ® USER’S GUIDE




     Your output file name shows in the box below. You may
     change it if you wish....
GETTING STARTED




Now, with the fields to be selected highlighted in the viewing
area, all records which have the correc...
3     RFM™ for Windows® Basic
            Tutorial
    This basic tutorial takes you step by step through RFM™ for
    Win...
HOW AND WHY RFM WORKS

Opening an input file.
      RFM™ for Windows® works with customer databases in
     many different...
RFM™ for Windows ® USER’S GUIDE




     With your mouse, click the down arrow in the lower right to
     display more rec...
HOW AND WHY RFM WORKS
Last name, etc.). Your database may not have a header
record. In that case, if it is on, click the m...
RFM™ for Windows ® USER’S GUIDE

     Moving to the Right. Using your mouse, click the right
     arrow at the bottom of t...
HOW AND WHY RFM WORKS




Starting RFM Coding.
      To begin RFM coding, click the RFM button in the upper left
     corn...
RFM™ for Windows ® USER’S GUIDE


     Output Sort Order. RFM™ for Windows® suggests
     producing your output in input f...
HOW AND WHY RFM WORKS
$99.50 The item costs you $50, and it costs $9.50 to process
the order and ship it. Your net profit ...
RFM™ for Windows ® USER’S GUIDE
     test file mail cost. Suppose, for example, that you have been
     given a budget for...
HOW AND WHY RFM WORKS
Click it. The field number (9) will jump up into the Recency
Box. Do the same thing with Frequency a...
RFM™ for Windows ® USER’S GUIDE




     Creating the RFM Codes. RFM for Windows® will go
     through some powerful sorti...
HOW AND WHY RFM WORKS
Printing the Report. Click the Print button, and a report on
your RFM coding will be visible. Here i...
RFM™ for Windows ® USER’S GUIDE




     In the last column, you see the three digit RFM code. None of
     them end with ...
HOW AND WHY RFM WORKS
The number in the test file is 742. Use the arrows to increase
the size of the Nth. You will see the...
RFM™ for Windows ® USER’S GUIDE
     Database Output. Below this line is a box for the name of
     the database output fi...
HOW AND WHY RFM WORKS




Locating the RFM field. Click the arrow next to the RFM
box. You will see the record layout of t...
RFM™ for Windows ® USER’S GUIDE
     Opening Excel or Lotus. If you have Excel or Lotus on your
     PC, open one of them,...
HOW AND WHY RFM WORKS

Selecting records by RFM code.
      This panel is used to choose records from your database by
   ...
RFM™ for Windows ® USER’S GUIDE

     Highlighting Cells. With one hand, hold the Shift Key
     down. With your other han...
HOW AND WHY RFM WORKS

Compare – Learning more about RFM Data

    The final function in this basic tutorial is compare: e...
RFM™ for Windows ® USER’S GUIDE
      The date format was automatically determined when we
     located the recency field....
HOW AND WHY RFM WORKS




Completion of this selection brings the basic tutorial to a
close. You now know how to use RFM™ ...
4 Advanced Tutorial – Sort,
Append, Graphs and Charts
 In this chapter, we are going to do some advanced marketing
 work. ...
HOW AND WHY RFM WORKS




You will note that we have selected the option “Input file
order” rather than “Sorted by RFM”. W...
RFM™ for Windows ® USER’S GUIDE




     The sorting process goes on as before, except that with this
     larger file, it...
HOW AND WHY RFM WORKS




Appending Response Data
    Let us assume that you have done a promotion to the people
    liste...
RFM™ for Windows ® USER’S GUIDE




     We must now locate the response data. It is found in
     TESTRESP.dbf. Let’s exa...
HOW AND WHY RFM WORKS




 Click the append button again and insert the TESTRESP.dbf
file in the middle box of the panel. ...
RFM™ for Windows ® USER’S GUIDE
     Two responses from the same customer are just as good,
     financially and marketing...
HOW AND WHY RFM WORKS
We are now ready to run the append program which will
create a new file consisting of the customer n...
RFM™ for Windows ® USER’S GUIDE




      As you can see, several customers made purchases which
     are appended to thei...
HOW AND WHY RFM WORKS




This panel calls for us to find the location of the RFM code
and the purchases in the input reco...
About RFM ™ for Windows®
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About RFM ™ for Windows®

  1. 1. RFM™ for Windows Users Guide The Database Marketing Institute, Ltd. 2100 South Ocean Drive 16A Fort Lauderdale, FL 33316 USA dbmarkets@aol.com 2007 1
  2. 2. RFM™ for Windows ® USER’S GUIDE For Helena Copyright © 2007 The Database Marketing Institute, Ltd. All Rights Reserved. 2
  3. 3. TABLE OF CONTENTS 1 INTRODUCING RFM™ FOR WINDOWS®.....................................10 About RFM™ for Windows®................................................10 Before you begin ....................................................................10 Working with Windows..........................................................11 RFM™ for Windows® Terminology.....................................12 2 GETTING STARTED................14 Windows Run Instructions.....................................................14 Loading the Program..............................................................15 Entering the Password............................................................18 Installing RFM™ for Windows®..........................................19 Starting and Stopping RFM™ for Windows®.....................20 Getting Help............................................................................20 Preparing customer files for RFM™ .....................................20 Comma Delimited Format.....................................................20 Opening an Existing File........................................................22 RFM™ for Windows® Function Buttons.............................24 Appending RFM Cell Codes to a Database..........................28 3
  4. 4. RFM™ for Windows ® USER’S GUIDE Creating an Output File.........................................................29 Creating a Bad Data File........................................................29 Rejected Records.....................................................................30 Bad Data Problems.................................................................30 Output Sort Specification.......................................................32 Basic vs Classic RFM..............................................................32 Include rejects with output....................................................33 Break Even and Test Size Calculation...................................33 RFM Field Selection...............................................................35 Detecting the Date Format.....................................................36 Determining the RFM Division Numbers.............................37 What if you lack one of the three RFM fields?....................38 Creating the RFM Codes........................................................38 Sorting and Writing Output Data.........................................40 Report on Results of RFM Coding. ......................................40 Summary Reports...................................................................41 How Summary Tables are Accessed......................................43 Tabbing from Summary to Summary...................................44 Saving your report to a file...................................................45 Calling Up Previously Saved Reports...................................46 4
  5. 5. How you can use Summary Reports.....................................46 Viewing the output..................................................................48 Printing a report on RFM Coding.........................................50 Creating an Nth File...............................................................50 Copy to Windows Clipboard..................................................52 Select Records by RFM Cell Code........................................55 3 RFM™ FOR WINDOWS® BASIC TUTORIAL.......................................60 Program Load. .......................................................................60 Opening an input file..............................................................61 Finding Specific Records........................................................64 Starting RFM Coding.............................................................65 Break Even and Cell Calculation. ........................................66 Field Locator Panel.................................................................68 Reports on RFM Operations..................................................70 Selecting an Nth.......................................................................72 Copy to Clipboard.................................................................74 Selecting records by RFM code.............................................77 Compare – Learning more about RFM Data.......................79 5
  6. 6. RFM™ for Windows ® USER’S GUIDE 4 ADVANCED TUTORIAL – SORT, APPEND, GRAPHS AND CHARTS 82 Appending Response Data......................................................85 Creating Graphs and Charts.................................................90 Counting Data in your Database...........................................97 Sorting Data in your Database...............................................98 5 HOW AND WHY RFM WORKS .......................................................100 How it works..........................................................................100 How the program finds responsive customers. .................101 What if you have no time for a test?...................................104 Adding Non-RFM Codes......................................................105 Why it works..........................................................................105 Strategy for use of RFM.......................................................108 Creating an instant success..................................................109 When NOT to use RFM........................................................110 6 DETERMINING RFM DIVISIONS ........................................................112 Determining the correct RFM divisions..............................112 6
  7. 7. Two conflicting goals of RFM..............................................112 Break Even Response Rate .................................................113 Minimum Test Cell Size........................................................113 Experience Adjustment.........................................................115 RFM Test Cells Needed.........................................................116 Recency is the most powerful...............................................118 When Data is Lacking...........................................................118 RFM Divisions for Small Databases....................................118 Saving Past RFM Cell Codes...............................................119 7 TRACKING RFM CELL RESPONSE...................................120 Why tracking is needed........................................................120 How Codes should be tracked..............................................120 Appending Purchase Data to your Database......................121 Determining the Break Even Response Rate......................122 Selecting Cells for Mailing...................................................123 ................................................................................................124 Should you exclude test promotion recipients?..................125 Should you exclude respondents to the test?......................125 Selecting by Recency, Frequency or Monetary..................126 7
  8. 8. RFM™ for Windows ® USER’S GUIDE 8 COUNT, COMPARE AND REFORMAT...................................130 Reformatting Database Records..........................................130 Using Compare to Improve your Marketing......................131 Using Count...........................................................................132 9 UPDATING YOUR CUSTOMER DATABASE....................................136 When to update.....................................................................136 How to update your database..............................................136 When your database does not import comma-delimited. .137 10 A CASE STUDY......................138 Running the Test....................................................................139 Computing the Break Even Response Rate........................139 Rollout Results.......................................................................140 The theory behind the success. ...........................................142 11 WHAT IS HALF LIFE?............143 12 WHAT IS SDF?.......................150 13 EXPORTING TO SDF.............152 8
  9. 9. 14 IMPORTING FROM SDF........156 15 EXPORTING TO DBF FORMAT .......................................................160 16 THE AGGREGATION FUNCTION .......................................................163 17 THE AUDIO TUTORIAL..........166 18IMPORTING AND EXPORTING FROM EXCEL................................168 19 TROUBLE SHOOTING...........174 20 HOW TO KEEP UP WITH DATABASE MARKETING AND COMMERCE ON THE WEB..........178 Magazines...............................................................................178 Books about Database Marketing and the Web.................179 Conventions & Seminars......................................................181 INDEX............................................182 9
  10. 10. 1 Introducing RFM™ for Windows® About RFM™ for Windows® Welcome to RFM™ for Windows®. You have purchased the marketing system that produces more profits from a customer database than any other segmentation method. If you have a customer database of more than 5,000 names, that contains purchase history, and run a test as described here, you should make profits which represent many times the cost of this product on your first rollout offer to your customers. RFM™ for Windows® automatically adds RFM Cell Codes to your customer database. With these RFM Cell Codes you can determine your best customers, determine your most responsive customers, and make profits on promotions to your current customers. Before you begin Before you use RFM™ for Windows® ,you must have certain prerequisites. They are: An IBM compatible Personal Computer with a Pentium (or faster) chip, 16 megabytes of memory (32 megabytes is better), and storage space on disk for approximately two and a half times the space needed for your customer database. The Microsoft ® Windows™ operating system Windows XP or Windows Vista, or later versions. A customer database which contains customer purchase history including most recent purchase date, number of transactions, and total dollar amounts. To be useful, the database should have customer data that goes back for one or more years. To be used as input to RFM™ for Windows®, the data from the database must be in dbf format, in Microsoft Excel format or converted to comma delimited format. Comma Delimited means that every field in the database should be separated by a comma, and those fields that include commas, should be enclosed in quotes. Example: 10
  11. 11. INTRODUCING RFM FOR WINDOWS Hughes, Arthur, 123 Main, “$2,341.00”,95/06/21,456 Stored in each customer record should be the Most Recent Purchase Date. The data must be in numbers (not letters) and may be separated by slashes, dashes or nothing: 030623. The year may be in the form 2003 or 03, but it must be consistent in every customer record. Also stored in each record must be the Total Number of Transactions or Purchases, since some period in the past, such as the initiation of the database. There are scores of different ways of calculating this number. For a bank it could be the total number of checks written, or the number of months of continuous service. For a phone company it could be the total number of calls, or the minutes used, or months of service. For a department store it could be the total number of visits, orders, or items purchased. Use whatever you can lay your hands on which serves to separate the frequent buyer from the less frequent buyer. Finally, each record must contain the Total Dollars Spent with you since some date in the past. It could be total dollars spent per year, or total of all year dollars or average dollars per year or per month. Working with Windows Before you begin working with RFM™ for Windows®, you should understand the basics of Microsoft ® Windows™. Like other Windows-based products, RFM™ for Windows® presents an easy-to-use graphical user interface. Because RFM™ for Windows® operates in the Windows environment, it uses the standard Windows rules for selecting icons, menus, menu items, and options in dialog boxes. Before you use RFM for Windows® you should know how to:  Choose and cancel commands  Move, move within, and cancel dialog boxes  Work with command buttons, text boxes, list boxes, option buttons, and check boxes. Note: for information, refer to the Microsoft Windows User’s Guide. 11
  12. 12. RFM™ for Windows ® USER’S GUIDE RFM™ for Windows® Terminology The following table explains the terms you will need to know to follow instructions in this User’s Guide and in the online Help. Terms and Definition RFM Recency, Frequency, Monetary RFM Cell Segment of the customer database with a unique RFM Cell Code RFM Cell Code Three digit number that identifies each RFM Cell. Recency Most recent purchase date Frequency Number of purchases Monetary Total dollar amount Nth Test sample of database which is an exact statistical replica of the database Input File The name of the comma delimited customer file used as input for RFM for Windows® Output File The name of the comma delimited customer file which has had RFM codes appended to it. Comma Delimited Database converted to a format where each field is separated by a comma Test Promotion A test mailing or other marketing effort to an Nth of the RFM coded database. The purpose of the test is to determine the Response Rate of each Test RFM Cell. Rollout Promotion A mailing or other marketing effort to a portion of the entire universe, based on the results of the test. Response Rate Number of responses to a promotion to each RFM cell divided by number mailed to that cell. Break Even Rate The Response Rate for an RFM cell which exactly pays for the cost of the promotion to that cell. Equals cost per piece mailed divided by the average net revenue per sale. Contacts Contacts refers to the number of people contacted in a specific promotion. For direct mail, it would be the number of pieces mailed. Divisions This word refers to the number of breakdowns of Recency, Frequency and Monetary. If we divide Recency into five groups, or quintiles, each is called a division. Order Margin This is the net revenue per successful sale. If you sell something for $100 which costs you $40, and the telemarketing, fulfillment, credits, returns, etc. cost you another $15, then the total cost is $55 and the order margin is $45. 12
  13. 13. INTRODUCING RFM FOR WINDOWS Cost per piece. The cost per piece of an outgoing promotion (direct mail or telemarketing). This would be equal to the total cost of the creative, printing, personalization, inserting, mailing and postage. 13
  14. 14. 2 Getting Started Windows Run Instructions When you get the RFM™ for Windows® CD, put it into the CD reader of your computer. Typically, the CD reader is the D drive, but it may be the E drive or some other letter. For this manual, we will assume it is the D drive. If it is some other drive, just substitute the correct letter for D in the following instructions. RFM™for Windows® release 4.5 works with Windows XP or Windows Vista or any later version of Windows. The following instructions assume that you have Windows XP, but the routines are similar for the other software systems. With the CD in your CD reader, hit the Start button, and click Run. Enter D:Setup.exe. The setup program will load. It will ask you for your Name and Company and a serial number. The serial number is located on the paper sleeve in which your RFM™for Windows® CD is contained. Enter that number when called for. Use the Typical program setup. 14
  15. 15. GETTING STARTED When setup has finished, it will create an icon that looks like this: Loading the Program Click on the RFM™for Windows® icon, and the program will load. You will see the following screen: 15
  16. 16. RFM™ for Windows ® USER’S GUIDE You may want to go directly to the program, but let’s assume for the moment that you decide to begin with the audio tutorial. Click the right button to view the Tutorial To use the audio tutorial, you must have your RFM™ CD in your CD reader, since the tutorial works from the CD, not from your hard disk. The program may go directly to the tutorial, but more likely it will at first give you an error screen that looks like this. If so, don’t worry. Click the OK button, and use the following screen to find the location of the Tutorial program on your CD. 16
  17. 17. GETTING STARTED Click the yellow up arrow to the right of the Look In box until you find your CD disk (D disk) which will have the tutorial folder on it. Click on the Tutorial folder and make it jump up to the Look In window. Inside the Tutorial folder you will find the program Demo32.exe. Click it until it appears in the File Name box, then open it. You will see the first page of the Tutorial. For more on the Tutorial, skip to Chapter 17 of this manual. 17
  18. 18. RFM™ for Windows ® USER’S GUIDE Entering the Password As soon as you enter the RFM program for the first time, you will be prompted to secure a password. You may obtain this password from Arthur.hughes@dbmarketing.com All you need is to email this information:  Number of records in your customer database  Name  Position  Company  Address  Phone and Fax  Email address You will receive a password within 24 hours. If you don’t, call Arthur Hughes at 954 767 4558 or email to him at Arthur.Hughes@dbmarketing.com and you will receive one by email. The password will look like this: AQW-BER-GH-77 It must be in ALL CAPS. It must contain the dashes as shown. Enter your password in your computer when you see this screen: 18
  19. 19. GETTING STARTED If, by any chance, the password you enter does not work, do not panic. Try it again, and if it still does not work, call one of the above numbers and you will receive immediate assistance. The password determines the parameters of your program. It determines how long your access to the program is valid, and how many records you may process with the program. Installing RFM™ for Windows®  Starting, opening files, and quitting RFM™ for Windows®  Preparing customer database files for RFM™ for Windows®  Determining the RFM divisions required  Running an RFM Demo  Installing RFM™ for Windows® You need the following hardware and software to install and run RFM for Windows®: An IBM compatible PC. with a Mouse and a VGA monitor Windows XP or higher, 256 Megabytes of main memory. 4 Megabytes of hard disk space, plus twice the space needed by your customer marketing database for storage or input and output to RFM™ for Windows® 1) Insert the Install Disk in your CD Drive 2) Start Windows by typing win and press ENTER. 3) From the Program Manager, choose File/Run. 4) Run setup and choose OK. 5) Follow the prompts on the screen to complete the setup. 6) You will need a serial number and a password. For a serial number, use the number that came with the software, or use 66448. 7) For a password, you should contact the Institute at arthur.hughes@dbmarketing.com to request a password. Be sure to give them your name, position, company, address, phone, email and where you bought the product or if it is a trial version. 19
  20. 20. RFM™ for Windows ® USER’S GUIDE Starting and Stopping RFM™ for Windows® You can start RFM™ for Windows® from the Program Manager when you run Windows. 1) Display the Program Manager window. 2) Double Click the RFM™ for Windows® icon. 3) To quit RFM™ for Windows®, click Exit at any time. Getting Help With your mouse. RFM™ for Windows® is full of help. Every dialog box contains a button with a question mark. Clicking that button leads you immediately into extensive help dealing with the panel you are viewing at the time. On the Keyboard. At any time, press F1 to display information about where you are in RFM™ for Windows®. In the Menu. Choose Help to see a menu of Help Commands. In the Help Window. Click the search button. Help shows you the topics relating to your selection. Select a topic and read it. Preparing customer files for RFM™ RFM codes can be added to any customer database, providing that the database has three pre-requisites: 1. A field for Most Recent Date 2. A field for Total Number of Transactions 3. A field for Total Dollar Amount The details of these three fields are covered later in this manual. A customer database containing these three fields (plus other data as desired) can be in dbf, fixed field or Comma Delimited Format. Comma Delimited Format Comma delimited format is a file arrangement in which each field (name, address, city, zipcode, etc.) is separated by a 20
  21. 21. GETTING STARTED comma. Most database software systems have an option for exporting their databases into comma delimited format. If yours does not, you have several other options. If you have Microsoft Excel, you can convert your database to Excel. From there, comma delimited output is one option. The saved database may have the extension .csv, or .ws or no extension at all. RFM™ for Windows® will accept any of these extensions, but will check to be sure that the data is in comma delimited format before processing your files for RFM. RFM™ for Windows® will return your data in the same format, with four new fields (ten characters) added at the end of your database record. A comma delimited file has each field separated by a comma. If the field contains commas, the field has quotes around it. Here is an example of a comma delimited record: Arthur, Hughes, “Senior Strategist”, e-Dialog",”Fort Lauderdale”,FL,33316 In this record, one field (position) contains a comma, so this field is enclosed in quotes. The remaining fields do not need quotes. Some comma delimited records have quotes around every field, just to be safe. That is acceptable. In a comma- delimited format, every field must be in the same position in every record. The output of RFM™ for Windows® is a comma-delimited database record that has RFM codes appended (using commas) at the end of the record. Each record will have appended the following: R,F,M,RFM These are a code for Recency, one for Frequency, one for Monetary and all three in one field, separated by commas. RFM for Windows 4.5 will also accept files in dbf format. It can also export files to dbf format. 21
  22. 22. RFM™ for Windows ® USER’S GUIDE Opening an Existing File In the upper left corner there is an Open Button. Click this button and you will see an Open Window. 22
  23. 23. GETTING STARTED Use this browse facility to locate the directory and file name that identifies your saved comma-delimited database. Click this file name so that it appears in the Input File Name box. Click OK. If you are running RFM™ for Windows® for the first time, you may wish to use the DEMOBASE.CSV which is provided with the software. If so, click DEMOBASE.CSV. Click OK. The following screen will appear: To the right of the function buttons on the top, you will see two options: Header and Numbers. Header Option This option instructs RFM™ for Windows® to treat the first record of your database as a header. Header records usually contain the names of the fields (First Name, Last Name, Address) instead of data. When viewing an opened file, if this button contains an X, the first line remains at the top of the screen. If you click this button, the X will disappear, and the first record will not be treated as a header. 23
  24. 24. RFM™ for Windows ® USER’S GUIDE Numbers Option. In the upper right is a numbers option. Numbers inserts line numbers so you can see where you are in your database. Click the numbers button to turn off the numbers. You will see the line numbers disappear on the left side of the screen. Click again and they come back. Leave them on. They are useful. Viewing Records. Use the arrows at the top and bottom right to move up and down in your database. Use the arrows down at the bottom to move left and right in the database. With the header option displaying a mark, put your cursor in the lines between fields in the top record on the screen, holding the left button of your mouse down, and open up small fields so you can see the data. File Viewing Area The area where records can be viewed is called the File Viewing Area. You will use this area to view input files, output files, bad data files, etc. It is the Main Screen of RFM™ for Windows®. RFM™ for Windows® Function Buttons Along the top left of your screen, you will see 20 function buttons: Open, Import from SDF, Export to SDF, Export to DBF, Create RFM Codes, Sort, Append Data, Nth Select, Select by RFM Codes, Select records by Field, Aggregate records, Count, Graphs and Charts, Compare, Half Life Computation, Copy RFM Codes to Clipboard, Find, Add/Change Header, Convert Date, and Help. Open. Open is used to open a file for viewing. The name of the opened file is visible in the upper left line below the function buttons. Later on, you will want to view your output and other files. You can use this same screen, opening the files with your open button, and observing them in the same way as you are now doing with your database. Import from SDF – See chapters 13-14 Import from Excel – See Chapter 18 24
  25. 25. GETTING STARTED Export to SDF – See Chapter 15 Export to DBF – See Chapter 16 Export to Excel – See Chapter 18 Create RFM Codes. The RFM button starts a series of activities leading to appending RFM codes to your customer database records. This is the main function of RFM™ for Windows®. Be sure that the database to which the codes are to be appended is visible in the File Viewing Area below when you click the RFM button. Sort. This button permits you to sort any database by up to three fields. This is particularly useful when appending external data to your database, since both match keys must be sorted in the exact same order. Append Data. This button permits you to merge data from an external file (such as response results from a promotion) into your database. Both files must have a common match key by which they are sorted. Nth Select. The Nth Select button is used to create a file for a test mailing. If, for example, your database contains 300,000 records, and you want to have a test mailing of 30,000 records, after you have appended RFM codes, you use the Nth Query facility to get a test file which is a statistically valid sample of your database. Be sure that your RFM coded database is visible in the File Viewing Area before you click the Nth Query button. Select by RFM Codes. The Select by RFM codes button is used to select records by their RFM code. In the typical use of this function, you have had a test mailing several weeks ago. You have the results. Some RFM cells were profitable, and many were unprofitable. You are ready for a profitable rollout. You want to select only those cells that are profitable. Use this function to accomplish this. Be sure that your RFM coded customer database is showing on the File Viewing Area when you click this button. Select Records by Field. Using this button you can select records by any value in any field: 25
  26. 26. RFM™ for Windows ® USER’S GUIDE Aggregate Records. The Aggregation Function is used to combine a file of orders with a customer database. Each file must be sorted in customer ID order, which must be present in both records. For new users, a demonstration database is used for this function: Custhead.csv, and Orders.csv. For some customers there are no orders. For some there is one order. For several, there are many orders. This function will work with each customer record, finding all the matching orders and finding the most recent date, appending that date to the customer record, which is called Custhead.agr. In addition it finds the total items purchased, which it uses to create an Aggregation Quantity field. It adds up the total dollar amount for each customer which it puts in an Aggregation Dollar field, and it counts the total number of orders placed by each customer and puts them in an Aggregation Count Field. These four field can be used to create RFM cell codes. Count. This button is used to count any data in your database record. Click the field you want to count. The program will count up to 1,000 different items. For instance, if your customers have purchased items identified by a UPC 26
  27. 27. GETTING STARTED code or some other identification, you can use this button to count how many products of each type were purchased. You can use it to count customers by state, or by city, etc. Graphs and Charts This is one of the most interesting and colorful features of RFM™ for Windows®. Once you have coded your database with RFM codes and have done a promotion to your customers, you will obtain response and purchase data. This data can be appended to the database by means of the append function. When this is done, click the Graphs and Charts button. Tell it where the RFM code and the Sales Amount is located. The program does the rest. It will produce stunning colorful charts showing Response Rates, Sales, ROI and other data by Recency, Frequency, and Monetary amount. Compare. This button is used to determine the relationships between high and low values of recency, frequency and monetary amount in each RFM cell and division. Compare helps a professional marketer to determine how well her marketing program is succeeding. Successful marketing reduces the distance between high and low values in upper cells and divisions. Half Life Computation. See Chapter 12 Copy RFM codes to Clipboard. The Clipboard button copies RFM Cell Code names and quantities to the Windows Clipboard where they can be pasted into Excel or other window spreadsheets. Be sure that your RFM coded database is showing on the File Viewing Area when you click this button. Find. If you are looking for a particular piece of data in your database, you can find it using the Find Button. For instance, suppose you are looking for a record that contains an address with the word Crosswind in it. To find this record in the Demobase, click find and the find window will appear. Enter Crosswind in the box and click the address field in your record to highlight it. Then click forward. The database will jump to the record with the data you seek in it. Add/Change Header Button. This button permits you to create header records where none exist, or to change the headers on existing records. Headers are useful to keep track of the data in your database, particularly when you have a large number of numeric fields. 27
  28. 28. RFM™ for Windows ® USER’S GUIDE Convert Date. RFM for Windows permits you to convert two digit dates to four digit dates. To do this you click the Convert Date Button (with January 1 on it) which will bring up the Date Conversion Screen. This screen asks you to enter the location of the date in your record, and specify the incoming and outgoing date formats, including the delimiter (such as or / or -). When you click the convert key, the program will rewrite your records in the new format. The name of your file being converted will not change. You will note that it will change 12/23/00 to 12/23/2000. This is wonderful if we are dealing with recent dates. Be careful if the field is birth dates. If the birth date is 04/04/01 meaning April 4, 1901, this feature will convert the date to 04/04/2001. Help Button. This button with a question mark is available on every screen. Click it to see help for the screen that you are working with at the time. Even better, click F1 when you are working on a particular part of a screen and you will find topical help for that area. Appending RFM Cell Codes to a Database With your database (or the demo database) showing on the File Viewing Area, click the RFM function button. You will see the following screen: 28
  29. 29. GETTING STARTED Creating an Output File The top bar has a space for the Output File Name. A name already appears here which you can use. You may also type here any unique name (eight characters or less) which you want to use for the output of RFM™ for Windows®. If you have already created an output file in the past which you wish to use again you may use the browse button to find it and click it. RFM™ for Windows® will warn you before you overwrite any existing file name, so the old data will be not be destroyed. Creating a Bad Data File In addition to an output file name, you must create a Bad Data File. RFM™ for Windows® will only accept good data as input. In particular, it looks in three fields for data quality. These are Most Recent Date, Total Number of Transactions, 29
  30. 30. RFM™ for Windows ® USER’S GUIDE and Total Dollar Amount. If it finds bad data in any of these three fields, it will reject the record (see exceptions below in “Determining the RFM Division Numbers”). RFM™ for Windows® separates the records with bad data from the other records in the customer file, and writes them to a separate file. Give this file a unique name with up to eight characters. You may reuse an old bad data file if you wish. RFM™ for Windows® will not process your records without a designated Bad Data File. Rejected Records The Bad Data File contains the records that were rejected during processing. There are only three reasons why a record should be rejected: It has an invalid Recency Date, an invalid Total Number of Transactions or an invalid Total Dollar Amount. If any one of these things occurs, the record will be written to the Bad Data File and not included in the RFM processing. If this happens, the user will get a clue as to the reason for the rejection. In the RFM coding at the end of the rejected record, there will be three digits, such as 00X. The first digit is the status of the Recency, the second the status of the Frequency and the third the status of the Monetary. A zero indicates that RFM™ for Windows® found no errors in this field. An X indicates that an error was found in this field. Note: RFM rejects all records as soon as a bad field is found. It looks first at R, then at F, then at M. If the R is bad, it will reject the record, coding the record as an X00. This does not necessarily mean that the F and the M are correct. It simply means that the R was wrong, and the record was rejected. Look at all three fields when you are correcting records. Bad Data Problems RFM™ for Windows® assumes that your database files contain three pieces of information: Most Recent Date, Number of Transactions, and Total Dollar Amount. These are the data that are used to create the RFM codes. There must be data in each of these fields for the program to work. Before RFM™ for Windows® creates the RFM codes, it will 30
  31. 31. GETTING STARTED first check the validity of the data in these three areas. If the data is blank or incorrect, the record containing this bad data will not be coded. The bad records will be written to a Bad Data File. Examples of bad data: Recency: The first record in your file will determine the record type: Date01, 02, 03, 04, 05). All subsequent records should be of the same type. If any record is not of that type, it will be rejected. Example: Record type is Date01: 1995-09-23. Later a record is encountered that has this form: 95-09-23. This record will be rejected. Example2: a record will have no date at all. This record will be rejected. Example3: a date field that contains a letter (date fields must be all numeric plus spaces, / and -). Records with a letter in the date field will be rejected. Frequency: Frequency requires a number. Examples 0, 12, 23456, 999443. All acceptable. Commas are also acceptable: 23,456 or 223,334,001. RFM™ for Windows® will omit the commas from these fields in doing the sort. 223,334,001 will become 223334001 in the sorting process. Not acceptable: blank records or records containing a letter. These will be rejected. Monetary. Acceptable: 23, $23, 5600, $5,600, $45,234.67, 0.67, $0.33. In other words, you may have dollar signs, commas and periods (to designate cents). Not acceptable: a letter or a blank field. (For Non-US currency symbols, thousands separators and decimal signs RFM for Windows® provides exceptions.) 31
  32. 32. RFM™ for Windows ® USER’S GUIDE Output Sort Specification The output from RFM™ for Windows® may be sorted in one of two ways: RFM order or Input File Order (the default). Before you proceed to the next panel, check the order in which you want your output records sorted. If you later want to append data to your records, you may want to keep them in match-key order. You can always resort them into a different order at any time. Basic vs Classic RFM RFM™for Windows® is designed to sort records by the classic format which results in all files being of the exact same size. For some purposes you may want to sort records by the old fashioned (Basic) technique. If you do you will get this message: 32
  33. 33. GETTING STARTED Include rejects with output. You have an option to have the rejected records included with your output records. This may be useful if you want to update your database from the output of RFM for Windows® directly. The rejected records receive an RFM cell code of 000. If you want this result, check this box on the panel. Then click next. Break Even and Test Size Calculation There are eight data areas to explain here. Cost Per Piece Mailed. This box assumes that you are going to plan a promotion to your customer database. It could be by mail, by phone, or in some other way. Cost per piece mailed includes all the cost of the promotion: creative, printing, data processing, personalization, postage. For telemarketing, it would be the cost per call made. For business to business, this amount could be over one hundred dollars. Your can use the arrows, or enter the data directly yourself. If you are not planning an immediate promotion, fill in the data from your last promotion so as to be able to complete this panel. 33
  34. 34. RFM™ for Windows ® USER’S GUIDE Net Revenue Per Sale. (Order Margin). This box asks for the profit from a successful sale to one person. A couple of examples will suffice. Suppose you are selling women’s outer coats which sell for $200. The coats cost you $100 wholesale, and your costs of fulfillment, overhead, credit, and returns is $30. Your net profit is $70 per coat sold. Second example: you are using this mailing to bank customers to sell a home equity loan. You have figured the lifetime value to the bank of a typical home equity loan customer at $2,280. You calculate that for every thirty applications that are completed, you get one new home equity customer. That means that the lifetime value of a home equity inquiry is ($2,080 / 30 = $69.33) This is the figure you would use for Net Revenue Per Sale. Break Even Response Rate. This is a mathematical calculation that is derived from the first two boxes. If, for example, your home equity promotion costs $0.72 per piece and the lifetime value of an inquiry is $69.33, then the break even rate is 1.04%. Any RFM cell that has a response rate of 1.04% or higher will make money. The others will be losers. Minimum Test Cell Size. This is also mathematically derived from the Break Even Response Rate. It is equal to 4 / BE. In the case above, it is 4 / 1.04% = 385 records. What is the reason for this formula? It is this: One sale in an RFM cell could be mere chance. Two sales could be two accidents. When you make three sales in a single cell, you have a certain assurance that the customers like the product. Four sales confirms it. To get enough candidates for four sales, you divide the break even rate into four, giving you the minimum test cell size. Is there a better way of figuring this number? There probably is. If you have a better way, by all means use it. This way will do until a better one comes along. Experience Adjustment. After you have used RFM™ for Windows® for a while, you will become quite professional at the business of making profits with your database. You will learn that there are two ways to create profits: by increasing sales or by reducing costs. You will become an expert at both. This is where the Experience Adjustment comes in. From the preceding paragraph you will note that the formula for the minimum test size is 4 / break even response rate. After a while, you won’t be satisfied with 4. You will decide 34
  35. 35. GETTING STARTED that, for you, you can get away with 3.5 or 3.2 or some other number, and still have accurate results – accuracy being measured in how close your Test Response Rates come to your Rollout Response rates for each cell. The smaller your test cells, the lower your costs (but the less accurate your predictions). Once you develop some experience you can reduce your experience adjustment from 400 (=4) to 390 (=3.9) etc. Make it as low as you feel you can get away with and still have good predicting ability. RFM Cells Desired. To use this data area, you must have an idea of your test budget. If, for example, you have been allotted a test budget of $20,000, then with that money you can mail only so many letters. At $0.72 per letter, you can mail only 27,777 letters. Click the arrows at the right until the test budget figure matches your budget. You will find that you can have only 72 RFM cells. Test File Size Required. This is another mathematical number which is derived from multiplying the RFM cells desired by the Minimum Test Cell Size. The smaller the test file, the less expensive are the tests. When you have the RFM cells desired, click Next. Prev. Takes you back one screen. Back takes you back to the beginning again. RFM Field Selection This screen asks you to locate Recency, Frequency and Monetary in your database record. You do this as follows: 35
  36. 36. RFM™ for Windows ® USER’S GUIDE Selecting Recency Click the arrow to the right of the Recency Field box. All the fields in your input record will be displayed, each with a field number. They will appear somewhat in this order: 1- Arthur 2- Hughes 3- $2,134 4- 97/04/15 <== This is the Most Recent Date 5- Haymarket...etc. Browse down the list of fields until you find the one that represents the Most Recent Date. In the above example, it is field number 4. Click that field. It will jump up into the Recency Field Name Box. Go to the Frequency Field Name Box. Selecting Frequency. In the same way as Recency, click the arrow beside the Frequency Field Name box. Browse down the fields until you encounter the field containing the Total Number of Transactions. Click it, and it will jump into the Frequency Field Name Box. Move down to the Monetary Field Name Box. Selecting Monetary. The Monetary field is selected in the same way. Browse until you find the Total Dollar Amount field and click it. Move now to detect the date format. Detecting the Date Format. Below the three field entry areas is a Date Format entry. Click the Detect button. RFM™ for Windows® will compare the date field in the Most Recent Date field of your record with the date fields acceptable for the program (there are 20 possibilities). If you have one of the possible formats, it will show in the Date Format window. If you do not, you cannot run RFM™ for Windows®. You must change the format of the dates in your customer database. 36
  37. 37. GETTING STARTED Determining the RFM Division Numbers To the right of the RFM Field Name Boxes are three Division Number boxes. They all show the number “5”, which is the default. You have an opportunity to change them up or down. The divisions you choose depend on the size of your customer database and the data in your database. Basically, these numbers determine the number of RFM cells you will have in your database. As the default numbers are now set, you will have 125 RFM cells (5 X 5 X 5 = 125). This number needs to be adjusted to the desired number of cells from the previous screen. If you have forgotten what it is, click Prev. If you need to achieve a number lower than 125, reduce the divisions of Monetary or Frequency. In most cases, Recency should be kept high (5 or even higher) because it is a very 37
  38. 38. RFM™ for Windows ® USER’S GUIDE powerful discriminator. The rationale for division numbers is covered at length in Chapter 5 - Determining RFM Divisions. What if you lack one of the three RFM fields? If your database record lacks data for either R, F, or M, you may still use RFM for Windows®. Suppose, for example, you lack data on the Total Dollar Amount (Monetary). No problem. Do not specify any field for Monetary, but set the monetary division at zero. Doing this indicates to RFM for Windows® that this field is to be omitted from the coding. You will have only 25 RF cells, instead of 125 RFM cells. In this case, you may wish to set your Recency number to something higher than 5 -- such as 6 or 8. The RFM codes appended to your record will look like this: 550. 540, 530, 520. The 0 in the third position indicates that monetary is not present. What is the advantage of setting Monetary at 0 instead of at 1? Answer: at 1, RFM will reject records with bad data in the monetary field. At 0, no records will be rejected for this reason. Click Create. Creating the RFM Codes RFM Code Construction R 5 F 35 M 4 335 34 334 3 33 333 332 32 2 331 31 Twenty- 1 five sorts Five Database Sorts One Sort 38
  39. 39. GETTING STARTED When you have entered all your field specifications, click the button for Create and RFM™ for Windows® will create your RFM Cell Codes and append them to your database records. This process will take some time, depending on the size of your database. RFM™ for Windows® will handle any database size up to 10 million customer records, depending on the version that you purchased. RFM™ for Windows® goes through a number of sort and division operations. Recency Sort and Coding. First it sorts all records in order of Most Recent Date, from most recent to most ancient. It then divides your file into the number of divisions you have specified. If you left the divisions at “5”, your database will be divided into five parts. The most recent 20% (top quintile) will be given the R code of “5”. The next older quintile will get the code of “4”, the next “3”, etc. Every record in your database (excepting the bad records excluded from the operation and written to the Bad Data File) will emerge with a code of 5, 4, 3, 2, or 1. Frequency Sorts and Coding. Next, RFM™ for Windows® will perform a separate sort for each of the recency groups. Each will be sorted separately by Total Number of Transactions, from highest to lowest. Each of the sorted groups will be divided by the specified division number for Frequency, and given a frequency code. If the frequency division is “5”, each record will have a frequency code of 5, 4, 3, 2, or 1. The same thing will happen to each of the Recency groups. Since Frequency involves much more sorting and dividing operations, it will consume about five times as much time as the first step. Monetary Sorts and Coding. Finally, each of the twenty five (or other number) frequency groups will be sorted by Total Dollar Amount. Each of these sorted fields will be divided by the monetary division, and assigned monetary codes. The sorting and coding process is now complete. What added data will look like. Each record will have ten bytes added at the end of the record. The bytes will consist of “R,F,M,RFM”. What the added data will look like this: “4,1,5,415” This indicates that this record is in the second highest quintile for Recency, the lowest quintile for frequency, 39
  40. 40. RFM™ for Windows ® USER’S GUIDE and the highest quintile for dollar amount. If the divisions are all “5”, there will be 125 different RFM cells created. Sorting and Writing Output Data Your database will now be written to the output file in one of two orders (as you specified in an earlier step): RFM order (the default ) or Input File Order. You may now use your coded customer database to increase your marketing profits. Report on Results of RFM Coding. Your output report will look like the above. The total number of input records is shown, the bad records and the final output records. The number of cells will be calculated and divided into the number of good records, giving you an average number of records per cell. The statistics show the highest and lowest data in each of the three categories (R, F, and M). Check these carefully to be sure that your records do not contain totally erroneous data. For example, if your Recency low is some date like 1926/06/13, you may have trouble if your company was founded in 1985. You could not have a transaction that occurred in 1926. Rule: if there is one bad record like this in a large database, there are probably a hundred or more bad records. Developing a marketing program based on bad data may be just throwing money away. Study the 40
  41. 41. GETTING STARTED bad data. Clean up your records, and run RFM™ for Windows® again before you do any serious marketing. Median. Check the median of each of the three fields to be sure that your data is accurate. Median refers to the record in the middle, not to the average. The average is not calculated. If your database contains 800,000 records, the median record for recency is record number 400,000 when records are sorted by recency. When sorted by frequency, the median record is the middle record in the middle Recency group - or upper middle group if there are an even number. If the divisions are 5-5-5, it will be the middle record in the 3 Recency group. When sorted by Monetary, the median record is the middle record in the middle Frequency group which is in the middle Recency Group. If the divisions are 5-5-5 it will be the middle record in the 3-3 Recency- Frequency group. If the number of groups is even, the median will be selected from the upper middle group. Summary Reports When the RFM codes have been appended, you will see a report screen like this: 41
  42. 42. RFM™ for Windows ® USER’S GUIDE While RFM for Windows is creating and appending RFM codes to your database records, it is also calculating summary information about each RFM cell, and about the major divisions: R, F, and M. The information about RFM cells is organized like this: For each RFM cell in the database, we have the total number of members in the cell, the total dollars, the percent of dollars which this cell represents of the total spending by all customers, the average spending by customers in this cell, the total number of transactions conducted by members of this cell, the percentage of all transactions and the average number of transactions by each cell member. For each division (Recency, Frequency and Monetary) there are similar summary tables. An example of the Recency division is: 42
  43. 43. GETTING STARTED Here is what the Frequency summary looks like: This shows that the top 20% of all customers ranked by number of transactions, did 86% of the spending and 86% of the transactions. Looking at the monetary breakdown: From a monetary standpoint, the top 20% highest dollar spenders accounted for 44% of all dollar spending and 37% of the transactions. How Summary Tables are Accessed Immediately after running RFM and appending RFM codes to a database, the program ends up with the Report on Results of RFM Coding panel. At the bottom of this panel there is a Report Button. Clicking this report button, brings into view the Report Panel that permits printing the results of the RFM coding operation. In the middle of the right hand side of the Report Panel is a Summary Button. Clicking this button opens up the first Summary Panel called Dollars and Transactions by RFM Cell. This data can be viewed from top to bottom. Column 43
  44. 44. RFM™ for Windows ® USER’S GUIDE widths can be altered. Finally, the entire summary table can be copied to the Windows Clipboard for pasting into Excel or other programs. Tabbing from Summary to Summary At the top of each Summary Panel are tabs which permit the user to go from Summary panel to Summary panel, there being four in all: Dollars and Transactions (by cell), Summary by Recency, Summary by Frequency and Summary by Monetary. To shift to another panel, simply click the appropriate tab. 44
  45. 45. GETTING STARTED Saving your report to a file At the bottom of the Report screen, there is a save option. RFM for Windows suggests a name for the saved file (Extension .RPT), and offers a browse and a Save Button. If you click the save button, what is saved is not only the report screen that you are observing at the time, but also all four of the summary panels that follow this Report Panel. They may be recalled later at any time. It is good practice to save all of your reports to disk after you have run RFM for Windows. This provides a permanent record of what you have done, with the date and file names, and all the results of your processing. 45
  46. 46. RFM™ for Windows ® USER’S GUIDE Calling Up Previously Saved Reports If you have previously saved some reports, you can get them back again for viewing or copying into a spread sheet or graphics program. Here is how to do it. From the Main Screen, choose Open. From the Open Panel, click the type of file: until it says “Reports” . Your previously saved report can be clicked and opened. As soon as you have done this, the report will be loaded, and you will be moved immediately to the Report Panel. How you can use Summary Reports Everyone says that 20% of your customers provide you with 80% of your dollar totals, but how can you determine that and demonstrate it? The summary panels provide an easy method. Look, for example, at the Frequency Summary Panel: 46
  47. 47. GETTING STARTED This shows that the top 20% of your customers from the standpoint of frequency of purchase account for 41% of your business. To show this graphically, click the graphs button at the bottom of the chart, and you will see this graph: You can also copy this table to Excel by clicking the copy button, loading Excel, and pasting the Clipboard to Excel. To shift rapidly from RFM for Windows to Excel or other programs, use Alt-Tab. This feature of Windows permits you to see what programs have been loaded. If, for example, you have loaded Excel, and RFM for Windows simultaneously, the process for moving data is this: In RFM for Windows, click Copy. Click Alt-Tab. A series of panels will appear with the names of the loaded programs. When the panel reads Excel, take your hands off the keyboard. Excel will appear. Click Paste. Your RFM for Windows Summary data will be pasted to Excel. Then use the Excel facility to graph the data. If, however, you choose to look at percentage sales by Monetary quintile, a different picture emerges as shown here: Which is correct? Does your top 20% give you 41% or 25% of your business? Or is the answer some other number entirely? This you will have to determine yourself by analysis. You now have the tools in your hand to make that determination. A clue: remember that Recency is very powerful. By looking only at Monetary or Frequency, we may 47
  48. 48. RFM™ for Windows ® USER’S GUIDE be including in our analysis people who have not purchased from us for many years, and who have forgotten about us entirely. Are these our best customers? Should they be in the top 20%, even though they spent a lot of money with us at one time in the past? RFM™ for Windows® is a very powerful analytic tool. Use it carefully, wisely and with a great deal of thought. It can make you a master marketer. But, don’t jump to hasty conclusions. Think everything through, before you publish your results. Viewing the output Once you have created an output file (or the Reject file—see below), you may want to view the output records to see how they look. You do this by using the two buttons at the bottom of the screen: Output and Rejected. Output. This button will return you to the File Viewing Area (the Main Screen) where your RFM coded output file has been automatically opened and is visible. Study this file to be sure that the data has been appended properly. You may return to the Report screen by clicking the Return button. 48
  49. 49. GETTING STARTED This shows the last part of each record where the RFM codes have been appended. The file is sorted in Input file order. You can also have the file sorted in the RFM cell order. Rejected Records. Open the rejected record file, and study the reasons why each record was rejected: Study the data in your output records, particularly the rejected records. You will learn a great deal about your customer records that will make you a better marketer. Looking at these rejected records you can see some of them rejected for blank data, some because of erroneous data. The RFM codes to the right show the reason for rejection in each case. A zero reflects non-rejected data, and an X reflects rejected data. You can correct these records, and return them to the database. In such a case, redo the RFM coding. 49
  50. 50. RFM™ for Windows ® USER’S GUIDE Printing a report on RFM Coding. This is a complete report. It has your name, your company and the date. The files used are shown as well as the number of records in each. The statistics on your test mailing are presented, the location of your RFM cells and the division you selected. This data appears on the screen. It may also be printed on your printer by clicking the print button. Save this report and keep it with your other test file data. Creating an Nth File Once you have created RFM codes in your database, and have the RFM coded records visible on the screen, you can select an Nth from that database as a test. How big should your test file be? You have already computed that number when you created the RFM codes. Study your RFM report. It contains a figure called “Test File Required”. This is what you want to create with your Nth. Clicking the Nth Query button on the main screen, once you have created RFM codes 50
  51. 51. GETTING STARTED An Nth is a smaller file which is a statistical replica of your master database. It is used for test marketing purposes. When you market to the people in the Nth, the response rates of each RFM cell to your promotion should be exactly the same as the response rates of RFM cells remaining in the database. It gives you great power, because you can know, in advance, how people in your master database will respond to your offer. You can avoid marketing to people who are unlikely to respond. You go through the following steps: Create a unique Nth File Name. You may use an existing name (use the Browse Button) or enter a new name of up to eight characters. Choose an Nth Number. Your Nth number is set at 2 (the default). It can be increased as much as desired. What RFM for Windows® does is to divide the Nth number into the number of records in the output file which you have created. You will see the Number of Records reduce as the Nth number is increased. Suppose that you have 400,000 records in your output file. You want to create a test file (using an Nth) which is 40,000 records. Simply increase your Nth number until it is 10. You will observe the number of 51
  52. 52. RFM™ for Windows ® USER’S GUIDE records reduce until it is 40,000. Do this for any sized output file to produce a test file that is closest in number to your desired test size. Chose a starting number. The starting number is set at “1” (the default). You may set it at any number. If, for example, your Nth number is set at 5, and your starting number is 1, your output file will contain records 1, 6, 11, 16, 21, etc. If you set it at “2”, your output file will contain records 2, 7, 12, 17, 22, etc. Why does it matter? Because, for some purposes, you may want to create more than one Nth file. To create two identical Nth files, which do not contain the same customers, run the Nth Query selection first using the starting number “1”. Then set up a different output Nth file, with the same Nth number but a starting number of “2”. You then have two identical test files. You may set up as many such files as you wish. Click Create. Your output Nth file will be created. Copy to Windows Clipboard Your final product will consist of customer records coded by a large number of RFM cell codes. Once you do a promotion, you may want to select only certain cells for promotion, and you certainly will want to record the response rate for each cell mailed. To do this, you can copy the cell numbers and the numbers in each cell to a spread sheet program such as Excel. To do this, you must first copy them to the Windows Clipboard, and then paste them into your spreadsheet. To do this you use the Copy Panel . 52
  53. 53. GETTING STARTED Here, we are seeking the location of the RFM cells in your database record. It is in field 14. When this is clicked, the location moves up to the RFM cell bar. Click the Show button and you will see the codes and quantities in your RFM coded database displayed: If, for example, you had RFM divisions of 5-5-5, and you have an average number of records in each cell of 8224, and you indicate that you want data copied from your output file, 53
  54. 54. RFM™ for Windows ® USER’S GUIDE what would be copied to your windows clipboard would be the following: 555 8224 554 8224 553 8224 552 8224 551 8224 545 8224 543 8224...etc. down to 111 8224 If you want data from an Nth file, which contains 255 records each, then what will be copied is: 555 255 554 255, etc. You will then paste the copied data into a new spreadsheet, and use it to record the responses as they come in. 54
  55. 55. GETTING STARTED Select Records by RFM Cell Code With your RFM coded database opened and visible, click the Select button on the main menu. You will see the following screen: Click the down arrow next to the RFM field box to view your database record. Find the RFM field and click it. The file name will appear in the box: 55
  56. 56. RFM™ for Windows ® USER’S GUIDE Next, click the codes box, and your screen will fill up with the codes of the RFM cells which populate your database: 56
  57. 57. GETTING STARTED You know which RFM cells you want to select for your rollout. These are the cells that broke even or better on the test mailing. Consulting your spread sheet, click all successful cells on this screen. You can do this by holding down the shift or control key while clicking desired cells. To reset your selections, click anywhere on the viewing area without the shift or control key being depressed. Your results should look something like this: 57
  58. 58. RFM™ for Windows ® USER’S GUIDE Your output file name shows in the box below. You may change it if you wish. Omitting Records. If you want to omit records which have some one byte code in a particular field, click the down arrow next to the “Do not omit records” box. You will be shown your input record format. You can hunt for the one byte code to be used to exclude certain records. In this case it is a letter K located in the 15th field: 58
  59. 59. GETTING STARTED Now, with the fields to be selected highlighted in the viewing area, all records which have the correct RFM cell codes, but which lack the special code K, will be selected for your output file. Click Create to create the Nth output file. 59
  60. 60. 3 RFM™ for Windows® Basic Tutorial This basic tutorial takes you step by step through RFM™ for Windows®, using the RFM™ for Windows® Demonstration Database. Follow these steps, and in ten minutes you will learn the basics. The next chapter contains an advanced tutorial illustrating sorting, appending, and graphs and charts. Program Load. Double click the RFM Icon on your Window’s screen to load the program. You will see an opening screen that looks like this: With your mouse, click once on the RFM™ for Windows® logo, and it will disappear. 60
  61. 61. HOW AND WHY RFM WORKS Opening an input file. RFM™ for Windows® works with customer databases in many different formats. Internally, it converts them to comma delimited format. We have a demonstration customer database available to us. With your mouse, click once on the Open button in the upper left corner of your screen. You will see an open window that looks like this: Click once on Demobase.csv to make it jump up into the File Name box. Click OK. You will see furious activity as RFM™ for Windows® loads the demonstration database and displays it on the screen. Viewing the input database. Let’s move around in this database. 61
  62. 62. RFM™ for Windows ® USER’S GUIDE With your mouse, click the down arrow in the lower right to display more records. There are 1,487 records in the database. You can view them all. Click the up arrow to come back to the top. Header Record. As you go up and down, if this option is marked, you will notice that the first record in this database remains on the top of your screen. This is because RFM™ for Windows® assumes that the first record is a header record (which contains field names such as Customer, First name, 62
  63. 63. HOW AND WHY RFM WORKS Last name, etc.). Your database may not have a header record. In that case, if it is on, click the mark in the Header box in the upper right corner of the screen. The shading of the top line disappears. Click it again and the shading comes back. It is important to let RFM for Windows® know if this is a header record, so that it does not try to add RFM codes to it. Numbers. While you are in the upper right corner, click the mark in the Numbers box. You will see the line numbers in the left of your screen disappear. Click the box again and they come back. The numbers are useful. Let’s keep them. Column Width. You can make your columns wider or narrower than they are shown. With your mouse, and the Header option marked, move to the line between Address and City on the Header Record. A double line and two arrows appears. Press the left hand button of your mouse on this line and drag it to the right. You will see that the address column becomes wider. You can vary the size of any column in this way. 63
  64. 64. RFM™ for Windows ® USER’S GUIDE Moving to the Right. Using your mouse, click the right arrow at the bottom of the screen so that you can view the fields at the end of each record. You will see after the zip code there are three fields containing Most Recent Purchase Date, Total Number of Transactions, and Total Dollar Amount. The recency dates are shown as Year and Month. You may have other ways of showing recency (such as 1996-04-23). RFM™ for Windows® accepts a number of different formats as will be shown later. Dollar amounts are shown with dollar signs. This is not necessary, of course. You can use $45 or 45 or 000045, or 45.00 or $45.00, etc. Finding Specific Records You can instantly find any record in your database by means of the FIND button (the button with the hand pointing to the right), Suppose you are looking for a customer who lives at 6801 Cahaba Valley Road. First click the Find button which will bring up the Find window. Second click the address field so the program will know where to look. Then enter the data you seek in the lower box as shown here. When you click Forward, the record you seek will appear at the top of your screen. 64
  65. 65. HOW AND WHY RFM WORKS Starting RFM Coding. To begin RFM coding, click the RFM button in the upper left corner of your screen. A new panel will appear: This panel asks for the name of your output file and your bad data file. Names are already suggested to you by the program, which you may accept. The file coded for RFM has an RFM extension, and the bad data file has an extension of REJ. That will be true when you use your own database as well. If you want some other name, you can click the two browse buttons to see what else is available. Or, you can make up your own names and type them into the boxes. 65
  66. 66. RFM™ for Windows ® USER’S GUIDE Output Sort Order. RFM™ for Windows® suggests producing your output in input file order. If you want, instead, to have your output returned in RFM Cell order (from the most valuable customers down to the least valuable), simply click that button. For our tutorial, we will leave the default where it is. Click the Next button. Break Even and Cell Calculation. What you see now is one of the most interesting panels in RFM for Windows®. It permits you to calculate the break even rate on a promotion, and to determine how many RFM cells are necessary to conduct an economical test. This panel assumes that you are going to use RFM to make a promotion to your customers. Of course, RFM has many other uses. For this Tutorial, however, let us assume that we are planning a test marketing program to our customers. We have designed a mailing piece. As you can see, RFM for Windows® has assumed that the in-the-mail cost per piece is $0.55. You can vary this amount and substitute any other number (other than zero). Net Revenue Per Sale. (Order Margin). The box on the lower left may be a new concept for you. It asks for the net revenue (profit) from the average sale which would result from the promotion that you are planning. It assumes that the profit is $15.50. This amount may be changed to any other number. Let us set it at $40.00. The net revenue is exclusive of the cost of promotion. Suppose you are selling an item for 66
  67. 67. HOW AND WHY RFM WORKS $99.50 The item costs you $50, and it costs $9.50 to process the order and ship it. Your net profit is $40.00. If you are selling a long term item, such as life insurance, the net profit would be the profit that you make from the average successful sale (over a period of years). Break Even Response Rate. These two numbers (Cost per Piece and Net Revenue) together determine your break even response rate – the box to the right of these two. This is the response rate for an RFM cell in which the net revenue just equals the cost of promotion. Any cell with a response rate below the break even rate should not be promoted. Those equal to or above it should be promoted. Change either the net revenue or the cost per piece to see how the break even rate changes. Minimum Test Cell Size. As you were varying the cost per piece and the net revenue, you may have noticed that the Minimum Test Cell Size (the next box over to the right) also changed. This number tells you how many people in an RFM cell must be mailed for the results of a test to be valid. This is a difficult number to understand. Obviously if you only mailed ten people, and your break even rate is 2%, you couldn’t possibly have a valid idea of the response to your promotion. If you mailed ten thousand, you would have a better idea, but you may have mailed more than you needed to in order to be confident of your results. Somewhere between ten and ten thousand is the correct number to mail. This number will be very useful to you. Other chapters in the manual describe this number in some detail. For the tutorial, just accept it, and we will move on. Experience Adjustment. This number, now set at 400, can be varied up and down. Change it now and watch its effect on the Minimum Test Cell Size. For now, we will leave this number at 400. Later, when you get experience using RFM for your particular marketing situation, you may want to move this number up or down to assure the right amount of records in your RFM tests. This adjustment is for experienced users of RFM™ for Windows®. RFM Cells Needed. Moving to the right you see a box for the number of RFM cells needed. If you move these arrows up and down, you will see the numbers in the two boxes to the right also change. Focus on the box on the bottom, the 67
  68. 68. RFM™ for Windows ® USER’S GUIDE test file mail cost. Suppose, for example, that you have been given a budget for your test promotion of $16,000. As you vary the RFM cells needed amount, the test budget goes up and down. You adjust the cells needed so that you stay within your budget. At the same time, the upper box tells you how many pieces, in total, you will mail for your test. Let us assume that you need 100 RFM cells. Press the next button. Field Locator Panel. This next panel asks you to find the RFM data fields in your customer record. Click the arrow next to the Recency box. You will see the fields in your customer database. Use the down arrow to locate the field for Recency (Most Recent Purchase Date). 68
  69. 69. HOW AND WHY RFM WORKS Click it. The field number (9) will jump up into the Recency Box. Do the same thing with Frequency and Monetary, finding the fields in your record where this data is stored. When you get through, this screen will look like this: Detecting the Date Format. There are dozens of date formats. RFM™ for Windows® has to know which format you are using for Most Recent Date. Push the Detect Button so that RFM™ for Windows® is set for your date format. You will see the proper format registered (in this case YYMM). Determining your divisions. As the panel is set up, it assumes that you will have 5 recency, 5 frequency and 5 monetary divisions, for a total of 125 RFM cells in all. In your case, however, you want to have only 100 cells – because your budget is only $16,000. You must change one of the divisions. Which one should you change? Try clicking Recency down from five to four. Your total cells (top middle) goes to 100 – exactly what you need. But this is a trap. Recency is the most powerful measure. You want as much detail in Recency as you can get. Better to make Monetary a four. That is what you should do. You are ready to create RFM cell codes. Click Create. 69
  70. 70. RFM™ for Windows ® USER’S GUIDE Creating the RFM Codes. RFM for Windows® will go through some powerful sorting operations. Depending on the power of your PC, it will take from a few seconds to more than a minute to process all 1,488 records. When completed, you will see the following report screen. Reports on RFM Operations This shows the results of your coding. There were 5 rejected records – rejected because some of the data in one of the three fields was bad. The screen shows that there were an average of 15 records per cell. This is, of course, far too small to use for promotion. This is just a demonstration database. 70
  71. 71. HOW AND WHY RFM WORKS Printing the Report. Click the Print button, and a report on your RFM coding will be visible. Here is a sample. If you click the print button here, this report will be printed on your PC printer. Go back to the report screen by pressing Back. Viewing the Output. Click the Output Button. You will return to your original viewing screen, but there is a change. In the upper left corner you see the file name “Demobase. RFM”. You are viewing the output of your processing. Using the arrows at the bottom of your screen, move to the right in your records. You will see the following: 71
  72. 72. RFM™ for Windows ® USER’S GUIDE In the last column, you see the three digit RFM code. None of them end with 5. Why not? Because you set the division of monetary at 4. Before the RFM three digit number, you see three fields for R, F, and M. You may need these fields later when you want to pick out records by one of these factors, not just be RFM cell alone. Let’s now take an Nth of the RFM file. Selecting an Nth. Click the Nth button on the top of the screen. You will see this panel: The purpose of this panel is to create a test file from the main database using an Nth. As the panel begins, the Nth is set at 2, which means that the main database will be divided in half. 72
  73. 73. HOW AND WHY RFM WORKS The number in the test file is 742. Use the arrows to increase the size of the Nth. You will see the number of records in the test file decrease. For the purpose of our test, set the Nth number at 100 so that the number of records set for the test is 15. Starting Number. The starting number is set at 1. You may set it at any other number. The purpose of the starting number is to permit you to set up more than one test file. If, say, your Nth is 10, you could set up the first test file starting at record 1. The second file could start at record 2. In this way, each test file would have different individuals in it. For our test, set the starting number at 1. Promotion History. At the bottom of the panel you have an opportunity to add a single byte to the end of each database record that has been selected for the test. This is done so that you can keep track in your database of which records were used for the test. We will add such a character. Click the Add option and enter a character. It now shows a C. To make it a K, delete the C (with the delete key) and make it a K. 73
  74. 74. RFM™ for Windows ® USER’S GUIDE Database Output. Below this line is a box for the name of the database output file – the database file that includes the added character. A name has been provided. Accept this name, or create another. Click Create to create the Nth test file. In a minute, your test file is ready. To view the file, click Show. Here are the 15 records which you selected for the test file. Now we are going to carry out two other functions: Clipboard and Select. Copy to Clipboard. RFM works by keeping track of responses to promotions by RFM cell. The idea is to determine the response rate for each test cell, and therefore to know how each cell in the larger database will react to the same offer. To keep track by cell, we need to post the results to a spread sheet. RFM™ for Windows® makes this easy by putting onto the spreadsheet the names of the cells and the numbers of records in each. To do this, let’s return to our RFM coded file. Click Open and find the file named Demobase.RFM. Click it, and click OK. This file now appears in our Viewing Screen. Click the Clipboard button. You will see the following panel: 74
  75. 75. HOW AND WHY RFM WORKS Locating the RFM field. Click the arrow next to the RFM box. You will see the record layout of the demo database with RFM codes. Click 14-554 which is the location of the RFM code. Then click Show. After a minute, the screen will fill up with the codes in the record and the count in each field. They all have 15 records in each, but if you use your down arrow, you will find that there are a few with 14. Click Copy. 75
  76. 76. RFM™ for Windows ® USER’S GUIDE Opening Excel or Lotus. If you have Excel or Lotus on your PC, open one of them, and open a blank worksheet. Click Paste. You will see the data from RFM for Windows® displayed on the spreadsheet. Return now to RFM for Windows®. Click Select. You will see the following panel. . 76
  77. 77. HOW AND WHY RFM WORKS Selecting records by RFM code. This panel is used to choose records from your database by their RFM cell code. It is used after a test is completed and you know which RFM cells responded to your offer in the test with a response rate that exceeded break even. From your Excel spreadsheet, you can read off the successful cell names. You use this screen to select those cells from your customer database. Locating the RFM Cell Field. As in previous panels, we have to let the panel know where the RFM field is located in our record. Press the arrow next to the RFM field box to reveal your database layout. Find the RFM code, and click it. Then click Codes. Your panel will now fill up with the appropriate RFM codes. 77
  78. 78. RFM™ for Windows ® USER’S GUIDE Highlighting Cells. With one hand, hold the Shift Key down. With your other hand move your mouse and with the left button down, drag the mouse over the cells that you want to select. They will be highlighted. You may highlight as many cells as you wish. As you do so, the counters in the upper left hand corner will tabulate your results. When you are finished, you may click Create to select the records. You will note at the bottom of the screen that the output file name is specified. Also, if you want to omit any records from your select (such as those who were mailed in the test) which have an identifying code in their database record, you may do so at this time. 78
  79. 79. HOW AND WHY RFM WORKS Compare – Learning more about RFM Data The final function in this basic tutorial is compare: examining the RFM data. To conduct this function, open the Demobase.rfm that you just created. You do this by clicking the open button and selection Demobase.rfm. Then click the compare button – the one next to the printer button on the middle of the screen. You will see the following panel: This panel asks us to identify where the data exists in our database. The first box asks us to locate the most recent date. The second: the total number of transactions. The third the total dollar amount. The final box asks for the location of the RFM codes. Here is the result of successfully locating these four data areas on the Demobase.RFM: 79
  80. 80. RFM™ for Windows ® USER’S GUIDE The date format was automatically determined when we located the recency field. If we were using foreign currencies we could click the $Format button. Not needed now. Click next. The program will review all the data in the database to produce the compare data. For a large file, this will take a little time. When the processing is completed, you will be able to see the report on the comparison: This view shows the results of compare by RFM Cell. Shown here are the upper and lower values contained in each of the five divisions by Recency, Frequency and Monetary. Clicking the RFM Division Tab above provides similar data for the data in each RFM Division. 80
  81. 81. HOW AND WHY RFM WORKS Completion of this selection brings the basic tutorial to a close. You now know how to use RFM™ for Windows®. We wish you every success with your marketing program. Be sure to use the free 90 day email help with any problems you may encounter. The email address is dbmarkets@aol.com. 81
  82. 82. 4 Advanced Tutorial – Sort, Append, Graphs and Charts In this chapter, we are going to do some advanced marketing work. We will use a new demonstration database: Testmail.dbf. This database is composed of 45,246 records taken from an existing database. The file contains only four fields: Customer Number, Last Date, Orders and Revenue. Open this file: We will be working with this data throughout this chapter. Our first step is to create RFM codes for this file. We do this exactly as described in the previous chapter. Our first selection panel looks like this: 82
  83. 83. HOW AND WHY RFM WORKS You will note that we have selected the option “Input file order” rather than “Sorted by RFM”. We choose this option because in a later step we are going to append response data. For that step, we need to have the file sorted in Customer ID order – the order that the file is already in. The next screen we will set net revenue at $40 and leave the remainder as it is: Click Next to move on. We locate the Most Recent Date, Number of Transactions and Total Dollar Amount exactly as before. Here is the resulting screen: 83
  84. 84. RFM™ for Windows ® USER’S GUIDE The sorting process goes on as before, except that with this larger file, it takes a few seconds longer: The report on the RFM appending process will look like this: You are free now to view and print the report on the RFM code process. Let us go on now, however, and view the RFM output generated in the last step. 84
  85. 85. HOW AND WHY RFM WORKS Appending Response Data Let us assume that you have done a promotion to the people listed in your RFM coded file. Some of these people have responded by buying a product or making a donation. As these people make their purchases, we have kept track of their customer ID numbers and have, therefore, compiled a file of Customer Ids and purchase amounts. (We will probably have other data as well such as the date of the purchase, the product purchased, the quantity purchased, etc. For now we will consider only the minimum data of ID and dollar amount.) This sale data may be captured by our telemarketers, or by point of sale equipment or other methods. We are now going to append this customer response data to this RFM coded file. To do this we click the Append Button (the middle button of the second group of buttons from the left on the top of the panel). Clicking the Append Button brings up the following panel: 85
  86. 86. RFM™ for Windows ® USER’S GUIDE We must now locate the response data. It is found in TESTRESP.dbf. Let’s examine this data by opening the file. Here is what it looks like: As you can see, it consists of customer numbers and amount spent in various transactions resulting from a direct response promotion. It is this response data that we will append to our RFM coded file. To do this, open the file TESTMAIL.RFM again and we will append this response data to it. 86
  87. 87. HOW AND WHY RFM WORKS Click the append button again and insert the TESTRESP.dbf file in the middle box of the panel. Then click next. We see the following panel with several options available to us: The program has already correctly located the match key in both files, which is the Customer ID Number. In these files, it is a six digit number. If the match key had contained letters, we would have clicked the match key type to change it to “String”. The bottom two options occur because there is always the possibility that some customers may have placed two orders with us rather than one. They have responded twice or more times to our most recent offer. We will count each one as more than one response, rather than ignoring them. We are trying to determine the overall response rate. 87
  88. 88. RFM™ for Windows ® USER’S GUIDE Two responses from the same customer are just as good, financially and marketing wise, as one response from two customers. So we choose the top option. We click next. We now see a new panel that asks us to specify the format of the output. The output format we will need will consist of the customer number, the RFM code and the appended sales data. We could, of course, keep all of the data. We could also reformat our records so that the data is in a different arrangement. For now, let’s just click the data we need, and see it arranged in the output box on the right: 88
  89. 89. HOW AND WHY RFM WORKS We are now ready to run the append program which will create a new file consisting of the customer number, RFM code and the sales made to each customer. Click Append. This takes a while: And here is the result: There were 1,804 records in the transaction file that matched records in the master file. You can see how these look when appended to the master file: 89
  90. 90. RFM™ for Windows ® USER’S GUIDE As you can see, several customers made purchases which are appended to their records. We are now ready to do Graphs and Charts to measure the rates of response. Creating Graphs and Charts The graphs and charts function of RFM for Windows® is designed to illustrate the response to a promotion which has been coded by RFM. It eliminates the need for doing graphs in Excel or other programs. To use graphs and charts you must first have done a promotion to an RFM coded file. Some of the customers have responded with a purchase. These purchases have been appended to the database. You are now ready to create graphs and charts. To create graphs and charts, we click the Graphs and Charts Button which is the second button from the left in the third group of buttons from the left of the top of the chart. We see a locator panel that looks like this: 90
  91. 91. HOW AND WHY RFM WORKS This panel calls for us to find the location of the RFM code and the purchases in the input record. Click the right arrow in each box and click the appropriate field. You will see the results as follows: Click Next. We see a break even computation panel: 91

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