Know Your RFM
Marketing Mantra 101…“80% of your revenue comes from 20% of your customers.” Just a small chunk of your customer base is the source of most of your revenue. So if only a few customers are really giving you most of your profit, most marketers focus much of their efforts on retaining these high ticket customers. Tayloe Gray can help.
Recency, Frequency, Monetary (RFM)
RFM is a method used to quantitatively measure which customers hold the most value. It measures how recently a customer purchased, how frequently they purchase, and how much money they spend.
40 years ago, catalog marketers discovered three things:
- Customers who made a recent purchase were more likely to purchase again than customers who had been inactive for quite some time.
- Customers who purchased more frequently were more likely to buy again than infrequent purchasers.
- Customers who spent more had a higher chance of buying again than someone who spent less on a purchase.
While the days of catalog shopping have been replaced with drone-powered shipping and one-click purchases, these same principles still hold true in today’s e-commerce marketplace. By mining this data, TG can show you the money!
RFM is a valuable marketing strategy because it allows you to identify which customers are generating the most profits and what it takes to keep them coming back. Furthermore, in looking at the behaviors and preferences of these most valuable customers, you will be better equipped to go after these same types of customers when acquiring new ones.
How to Calculate RFM Scores:
You need these 3 things:
- Most recent purchase date
- Number of purchases within a given time period (usually a year)
- Average sale per customer
Your best customers will have the highest scores.
You can now analyze the behavior and preferences of this particular group of customers and what sets them apart from the pack. You have a wealth of data at your disposal. Use RFM to focus your efforts on the most responsive segments of your customer base. Tayloe Gray can help you gather and analyze this data, to make your e-commerce marketing more productive, get rid of the waste, and drive sales higher.
Thanks to the folks at Rejoiner.com for this info, and the helpful optimization advice for your e-commerce website.