HELLO!I am Andra BaraganHead of Strategy @ MarketizatorYou can find me at andra.baragan@marketizator.com

STEP BY STEP GUIDE ON HOW

TO BUILD AN RFM MODEL

What we’ll talk about1. Customer Acquisition vs. Customer Retention2. RFM Model - what does it do?3. The ways you can use this model to increase

profits

Customer AcquisitionThe 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.

Customer Retention The process through which you convert a one-time buyer into a repeat customerShows how loyal your customers areAn assessment of the product or service quality

“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 

“If we keep doing what we’re doing,We’ll keep getting what we’regetting.”

Stephen Covey

80% of your business comes from 20% of your customers

Shift the focus from being oriented on transactions to putting the customer in the first place

Understanding each phase of the customer journey on your site will constantly grow your business

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

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

After 24 months, 50% of revenue comes from repeat buyers

RFM MODEL

RFM ModelSimple form of customer database segmentationVery useful for high value customer programs, database reactivation, increasing loyalty and customer lifetime valueIncreases sales and productivityKeep track of your customers and build a relationship that can increase sales and productivity

What are we tracking? Recency Frequenc

yMonetary

Value

The time when theylast 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)

Direct applicability in e-commerceOrders Order ValueVisits

What you need to track:

Client ID - uniquely identify each clientTransaction value Transaction Date

How to identify the loyal customers and how to segment your data base? 

Categorize the data into bins

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

NOW WHAT?

Define Strategic GoalsDepending 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

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

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

Who are your heroes?

Start talking to these important clients - communicate with themUse GTM to build these segments Target each segment with personalized content and promotionsAddress each of the segments according to the phase of the funnel they are inUse your conversion optimization tool to build up your scenariosBuild a real-time personalization program

Different heroes

Different messages

Find your best customers

Gain their loyalty

Increase retention on new customersEarn more money

Enjoy and keep going

Thank you!Any questions?