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RFM Model Conversion Week
- 1. HELLO! I am Andra Baragan Head of Strategy @ Marketizator You can find me at andra.baragan@marketizator.com
- 2. STEP BY STEP GUIDE ON HOW TO BUILD AN RFM MODEL
- 3. What we’ll talk about 1. Customer Acquisition vs. Customer Retention 2. RFM Model - what does it do? 3. The ways you can use this model to increase profits
- 4. Customer Acquisition The process through which you convert a visitor on your site into a client. Calculate the cost by dividing the total expenses on acquisition to the total number of new customers you obtained in that time period. Expenses include marketing, promotions/discounts, labor, display ads, targeted and non-targeted ads, etc.
- 5. Customer Retention The process through which you convert a one-time buyer into a repeat customer Shows how loyal your customers are An assessment of the product or service quality
- 6. “Attracting a new customer can cost as much as 15 times more than retaining an existing customer.” Winning New Business in Construction By Terry Gillen
- 7. “If we keep doing what we’re doing, We’ll keep getting what we’re getting.” Stephen Covey
- 8. 80% of your business comes from 20% of your customers
- 9. Shift the focus from being oriented on transactions to putting the customer in the first place
- 10. Understanding each phase of the customer journey on your site will constantly grow your business
- 11. Customer Journey Phases Awareness Desire Choice Reduction Buying Returning to buy again Promoting your product They search for what they want Found it. Need more information Need more information Made their choice Appreciated the whole on/off site experience Expect over-delivery
- 12. According to RJMetrics 2015 Ecommerce Growth Benchmark Top Performing Companies create a “renewable resource” of loyal customers - By the end of year three, a majority of their revenue is coming from repeat buyers
- 13. After 24 months, 50% of revenue comes from repeat buyers
- 14. RFM MODEL
- 15. RFM Model Simple form of customer database segmentation Very useful for high value customer programs, database reactivation, increasing loyalty and customer lifetime value Increases sales and productivity Keep track of your customers and build a relationship that can increase sales and productivity
- 16. What are we tracking? Recency Frequency Monetary Value The time when they last placed an order How many orders they have placed in the given period How much money have they spent since their first purchase (CLV/LTV)
- 17. Direct applicability in e-commerce Orders Order Value Visits What you need to track: Client ID - uniquely identify each client Transaction value Transaction Date
- 18. How to identify the loyal customers and how to segment your data base?
- 19. Categorize the data into bins
- 20. After you add your data in the spreadsheet, this is how the base analysis results look like: Free RFM model template you can use - request presentation
- 21. NOW WHAT?
- 22. Define Strategic Goals Depending on your business and the phase it is in, you will identify some converting formations For example, if you have a frequency score of 4 and a monetary value score of 3, you will find out that repeat buyers tend to spend more and generate higher revenue
- 23. Clients with high recency are more willing to buy rather than those who haven’t bought anything in a while Clients that frequently buy are more willing to buy again rather than those who only bought once Clients that usually spend lots of money are more willing to buy again and generate revenues
- 24. Identify the customers with the highest RFM score Start persuading them and make them feel pampered Increase your visibility to them with promotions and special offers on social channels Turn your VIP customers into your promoters
- 25. Who are your heroes
- 26. Start talking to these important clients - communicate with them Use GTM to build these segments Target each segment with personalized content and promotions Address each of the segments according to the phase of the funnel they are in Use your conversion optimization tool to build up your scenarios Build a real-time personalization program
- 28. Find your best customers Gain their loyalty Increase retention on new customers Earn more money Enjoy and keep going