WHITE PAPER Leveraging RFM in Email Marketing
Email marketers should be leveraging the use of recency, frequency, monetary (RFM) analysis to uncover optimal segments and untapped opportunities within their email marketing program. Email marketing provides real-time data about shopper behavior, which is ideal for RFM analysis. This powerful tool is succinctly defined by Econsultancy as, the presumption that someone s future actions are best predicted by their past ones. By accurately applying your shopper s engagement, cadence and purchase history to RFM analysis, you will uncover new lifecycle campaigns, affinity segments, re-engagement opportunities, VIP segments and more. It is imperative to utilize each metric to measure the value of your shoppers and their engagement levels. Thus, each metric is defined based on what you are trying to measure. If you are measuring a shopper s value, you define each metric accordingly: Recency should capture and rank the date of the last time a shopper purchased. Frequency should capture and rank the number of purchases by a shopper. Monetary Value should capture and rank the total purchase amount a shopper is spending. If you are measuring a shopper s engagement, you define each metric as follows: Recency - should capture and rank the date a shopper opened or clicked on a message/campaign over a set period of time. Frequency - should capture and rank the number of times a shopper opened or clicked a message/ campaign over a set period of time. Monetary Value - should capture and rank either the total purchase amount per shopper over a set period of time or an estimated value per shopper over a specific time frame. The Power of R In order to utilize each metric fully, we will focus on the undeniable power of recency first. As the Database Marketing Institute states, shoppers who have bought from you recently are much more likely to respond to a new offer than someone who had made a purchase in the distant past. To measure a shopper s value through recency, you simply need to capture the purchase date field in your subscription field data. Then you can rank or score your database accordingly, with a Recency Value Score: 1. Sort on the shopper s purchase date from most recent back. 2. After sorted, assign a score of 5 to the top 20% of recent purchases. 3. Assign a score of 4 to the next 20% of recent purchases. 4. Continue to assign all shoppers in your database with either a 5, 4, 3, 2, or 1 (5 being the highest Recency Value Score and 1 being the lowest). Through these five quintiles, you can easily segment your most recent buyers and your oldest buyers to build robust campaigns focused on these critical customers: 1. Create a version B email promotional template, with a drip survey question within, to be sent to any shoppers with a Recency Value Score of 4 or 5. Send the version B template over the course of a quarter, asking the most recent buyers one pointed question at a time about your checkout, customer service team, shipping rates, overall buying experience, etc. 2. Build multiple dynamic discount levels for an upcoming promotional campaign based on your shopper s Recency Value Score. Thus, garnering a higher conversion ratio across all quintiles while maintaining a strong margin: Offer a 10% off coupon code to your best buyers with a score of 4 or 5 Offer a 15% off coupon code to your older buyers with a score of 3 Offer a 20% off coupon code to your oldest buyers with a score of 1 or 2
3. Integrate a four-touch win-back trigger campaign for any shoppers that have a Recency Value Score of 3 or less. This campaign could include the following calls to action (the cadence between triggers should be determined by your current sending strategy): Touch #1 offers a free ground shipping promotion on any order of X dollars or more. Touch #2 provides a 20% off coupon on any order of X dollars or more. Touch #3 offers a free ground shipping promotion on any order in the next three days only. Touch #4 provides a 20% off coupon on the entire order for the next three days only. You can also easily measure a shopper s engagement value by assigning Recency Engagement Scores. For instance, you can rank your shoppers based on their last click date: First, pull a click through report by shopper. Next, sort on the shopper s last click date from most recent back. Once sorted by click date, assign a score of 5 to the top 20% of recent click throughs. Next, assign a score of 4 to the next 20% of recent click throughs. Continue to assign all shoppers in your database with either a 5, 4, 3, 2, or 1 (5 being the highest Recency Engagement Score and 1 being the lowest). Leveraging these five quintiles will enable you to send timely re-engagement touches at critical points in your shopper s lifecycle. You will find many campaign opportunities utilizing Recency Engagement Scores: 1. Beta a New Arrivals campaign to be sent monthly or bi-weekly to your highest engaged shoppers with a Recency Engagement Score of 4 or 5. The content will tout your new brands, seasonal lines or hot products just added to your site. The campaign could be peppered between your scheduled promotional campaigns for the month. 2. Target those shoppers who are beginning to become disengaged right away. Trigger a brand-building campaign to touch a shopper once they hit a Recency Engagement Score of 3. Focus on what your brand does best and provide various ways to connect and interact with your brand by highlighting your Facebook conversations, Twitter tips, YouTube product reviews, etc. Provide a welcome back re-fresher campaign to remind them why they subscribed originally. 3. Go after the truly disengaged segment of your house file by building a smart re-engagement campaign. Start with any shopper who has a Recency Engagement Score of 1. Next, slice this segment into the four quarters of the year based on either his or her original subscription date (if he or she has never clicked on an email), last click through date (if her or she has never purchased) or last purchase date. Hence, you will be able to target his or her last interaction with your brand based on a seasonal holiday, meaningful personal date like a Birthday or the actual season it was, like Fall. 4. Understanding the seasonality of a customer s engagement provides an additional opportunity to re-engage him or her. The power of R in RFM is undeniable, and by scoring your shoppers with this metric you can quickly harness a robust arsenal of segments that will glean incremental sales and propel your program s overall engagement ratio. Taking the time to score your shoppers on a routine basis and storing these scores in your field data will enable you to send more relevant and timely campaigns, as well as provide new opportunities to touch your email house file.
The Importance of F There are a plethora of opportunities yielded by integrating RFM analysis into your email marketing program in order to lift your pivotal Key Performance Indicators (KPIs). Often a shopper s frequency doesn t carry the same weight as one s recency in an RFM analysis. The Database Marketing Institute states, You will notice right away that frequent buyers respond better than less frequent buyers, but the differences are much less pronounced than those for recency. That is why RFM is RFM instead of FRM or some other combination. However, frequency does weigh heavily on your program s deliverability when calculated by Internet Service Providers (ISPs) for overall engagement. So while frequency is an important metric in any marketing program, the benefits within email are even greater. Scoring your shoppers frequency will provide an important perspective on how active or inactive your subscription file is overall with your email marketing efforts. Such scoring enables you to focus on your nonengaged segments in order to reactivate these contacts or test new cadence strategies that might provide a better fit for their interests. Mapping your sending frequency to the individual shopper s desired frequency, you can strengthen your email program s deliverability through higher engagement ratios. In order to determine a shopper s value based on frequency, you will need to rank the number of conversions across your database utilizing the enclosed process: 1. Follow the steps for building the recency sort. 2. Sort the top performing recency group with a score of 5 into five frequency quintiles based on the number of shopper transactions. 3. The top 20% of converting shoppers will be ranked 55, the next 20% will be ranked 54 and so forth. 4. Continue to sort the remaining recency groups into five frequency quintiles until you have built 25 frequency quintiles in total. Now you can easily access your most recent and frequent buyers through email. Award these vital shoppers by building campaigns that entice them to purchase even more often: Create a VIP Shipping Program for your top performing buyers. Reward these frequent buyers with a very low standard shipping rate and special shipping offers throughout the year. Introduce these critical buyers to this new program via a targeted email campaign highlighting the big wins of membership in this program. Send a monthly trigger thanking your top performing buyers for their continued loyalty and business. Give them an exclusive perk for being a great customer. You can also uncover a shopper s engagement value based on frequency by ranking your most engaged and least engaged shoppers utilizing the enclosed process: 1. Follow the steps for ranking recency. 2. Sort the top performing recency group with a score of 5 into five frequency quintiles based on the number of times a shopper opens or clicks a message in the last six months. 3. The top 20% of engaged shoppers will be ranked 55, the next 20% will be ranked 54 and so forth. 4. Continue to sort the remaining recency groups into five frequency quintiles each. Moving forward, targeting your unengaged shoppers is quite simple. Build a unique touch strategy for these shoppers in an effort to garner a stronger overall engagement ratio: Develop a new cadence for touching your inactive shoppers by sending to these contacts less frequently. Focus on sending targeted messages to your unengaged shoppers rather than sending generic calls to action too often.
By pulling back on your send strategy to your weakest performing shoppers, you will also increase your overall engagement ratio. You will strengthen your sender reputation by simply not including your least engaged shoppers in each and every mailing. Ranking your contacts frequency and targeting accordingly will provide a boost to your program s KPIs and deliverability. Rewarding those who are fully engaged and differently approaching those who are not can reap great rewards. The Opportunity of M Layering RFM analysis into your email marketing program will glean endless marketing opportunities. Having the ability to uncover and chase these smart marketing efforts will enable you to propel your KPIs while lowering costs due to more targeted campaigns. There are multiple email marketing strategies for analyzing a shopper s monetary value. As proven over many years with RFM analysis, marketers know that their highest spending customer segment is statistically more likely to spend again than their lower performing spending segments. Where the opportunity truly lies is in the fact that your most valuable customers will tend to become even more valuable over time Thus, building unique email campaigns or triggers based on a shopper s monetary score is a key component in raising your customer s M factor. Being able to rank the monetary value of each and every shopper within your house file is not complex or difficult it simply requires a little time and effort. Follow the enclosed steps to apply a Monetary Value Score based on a shopper s total purchase power: 1. Build the recency sort. 2. Apply the frequency sort. 3. Sort the top performing frequency group with a score of 55 into five monetary quintiles based on the total shopper purchase amount or purchasing power. 4. The top 20% of purchasing shoppers will be ranked 555, the next 20% will be ranked 554 and so on 5. Continue to sort the remaining frequency groups into five monetary quintiles until you have built a total of 125 monetary quintiles Once you have uncovered your shopper s Monetary Value Score you should consider building the following campaigns: Offer 15% off on his or her next purchase with varying total order thresholds in order to garner a higher margin. For example, your top performing monetary quintiles would have a total order threshold of $150, while the lower performing monetary quintiles would have a total order threshold of $100. Build a special shipping program for pivotal holidays, focused on rewarding your top ranked monetary quintiles. Offer a discounted two-day shipping special for a limited time frame exclusively to your top performing M buyers. The campaign should acknowledge these important shoppers by letting them know this offer is only available to them as a thank you for being one of your best customers. Another option for ranking a shopper s monetary value is tying together one s engagement level with your program as well as his or her purchase power. You simply score a shopper s purchase amount over a set period of time: 1. Create the recency sort. 2. Build the frequency sort. 3. Next sort the top performing frequency group with a score of 55 into five monetary quintiles based on the total shopper purchase amount over the last six months
4. The top 20% of purchasing shoppers in the last six months will be ranked 555, the next 20% will be ranked 554 and so forth 5. Continue to sort the remaining frequency groups into five monetary quintiles until you have created 125 monetary quintiles By factoring in a shopper s engagement when scoring your email house file for monetary value, you can quickly discern who is currently purchasing and who has not purchased in quite some time. Hence these two campaigns may be great wins for your program: 1. Increase your cadence to your top performing monetary segments by adding in one additional campaign. Develop an Exclusive VIP Sneak Peak campaign promoting the latest and greatest products or brands to your best customers only. Message to your best customers that they and they alone get to see your new arrivals before anyone else. 2. Build a three-touch series focused around re-engaging your customers who have purchased in the past but have not purchased in the last six months. Test different offers through this series in an effort to uncover what propels them to buy. Do they want a special coupon code, shipping offer or a personalized message showing their most recently browsed items with a discount on these items only? The opportunities for applying RFM analysis to your email program do not stop here. Through this white paper, our goal has been to ignite your interest in applying an RFM analysis to your email efforts in order to find new strategic campaigns and triggers that will truly impact your bottom line. Start moving the needle today by simply slicing your shoppers into RFM quintiles and segmenting based on their scoring it really is attainable and so worth the effort. About Bronto Bronto Software provides a cloud-based marketing platform for retailers to drive revenue through their email, mobile and social campaigns. The platform is used by over 1000 organizations worldwide, including Armani Exchange, Timex, Samsonite and Gander Mountain. Bronto is the leading self-service email marketing provider to the Internet Retailer Top 1000. The company is headquartered in Durham, NC with an office in London, UK. For more information, visit.