RFM based marketing strategies for customer segments

Guessing who your best customers are and what they want works until it doesn’t. To escape the guessing trap, eCommerce businesses turn to RFM marketing to build better strategies for their customer segments. Think of RFM marketing as the sum of efforts your company builds around the RFM segments and the insights revealed during RFM analysis.

RFM analysis allows you to make sense of all the customer data your store captures as part of interactions with your brand and customer transactions from your store. The three variables that you analyze are recency, frequency, and monetary value.

You have to use a scale to evaluate each variable that suits the size of your customer base: 

• 1 – 3 scale for stores with less than 30k customers;
• 1 – 4 scale for stores with 30-200k customers;
• 1 – 5 scale for stores with more than 200k customers.

Based on their recency, frequency, monetary value, you calculate the total RFM score, allowing you to group customers into different segments that reflect how good or bad they are for your business.

This customer segmentation method is more powerful than you might think. The benefits of RFM are visible right after adoption and generate long-term improvements, like increasing retention rate by 30% in one year by focusing on the right customer segments.

Before even thinking about strategies, you need to understand each customer segment; then, you can use what you’ve learned in email marketing, SMS campaigns, and other channels you want to include in your mix.

Effective marketing strategies for RFM groups

The best way to create effective marketing strategies for RFM groups is to understand the particularities of each RFM segment:

• Who are your best and worst customers;
• What is the future potential of your customers;
• What you should do to keep customers buying from your store

With RFM Segmentation, everything revolves around customer behavior and the type of relationship a customer has with your store. 

Because “relationship” plays such an important role in this segmentation method, our Omniconvert team named the groups inspired by love life, offering a very intuitive way to distinguish and define each customer segment.

Would you like more “Soulmates” or more “Don Juans” for your store? 

The characteristics of each RFM group show you what’s the best way to approach them for effective marketing efforts:

• What’s your goal with each group;
• What research do you need to perform;
• What tactics you should use to achieve your goal.

The best approach for each RFM Segment (source: CVO Academy)

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Soulmates

Soulmates are your best customers, with a perfect score of 555 for recency-frequency-monetary value. You want to keep that perfect score in the long run by delighting them, prevent them from churning, and also nurture more customers into Soulmates. 

You want to learn as much as possible about why they are so loyal and what makes them happy by setting up JTBD interviews with Soulmates and analyzing their demographics. 

The learnings about Soulmates help you generate the same positive change among other customer segments with high potential. One of the most effective uses of Soulmates information is creating lookalike audiences for your paid ads to acquire more new customers like them.

They represent a significant percentage of your total revenue and deserve to be treated like VIPs. You want to treat them better across all channels and keep them active.

Lovers

Lovers is an RFM segment that includes loyal customers who aren’t as excited about your store as your Soulmates. With Lovers, your main goal is to nurture them into Soulmates by overcoming the frictions that make them cautious before buying more from your store. 

Before designing a strategy for this segment, you have to research their behavior and find what would help you win their trust. Once you’ve got your answer, it’s going to be easier to fill the gaps in your customer journey.

New Passions

This RFM group includes new customers who recently made a high-value purchase and might become Lovers or Soulmates if you treat them properly. Cohort analysis benchmark shows that 75-80% of new customers leave after their first order. Your primary focus with this segment is to nail the onboarding process, surprise and delight them, increasing the chance of placing the 2nd/3rd order.

As you don’t know much about this group of customers, you can eliminate guessing by measuring their experience before and after delivery as part of their onboarding. The first impression is always essential, and it dictates the future of your relationship. So make sure you resolve all objections before even thinking about moving forward.

Flirting

Flirting customers are new customers who placed their first order, but it happened a while ago, and monetary value is lower than New Passions. Your goal is to reengage with customers in this segment and keep them happy.

Don’t rush to conclusions because they have potential and could bring more value if they become repeat customers. Use what worked for your best customers and keep their customer experience high. Without proper treatment, customers move from Flirting to “About To Dump You.”

Apprentice

The Apprentice segment includes customers with one or two low-value orders. Your relationship is still fresh, and you have to win their trust if you want to keep them around and willing to spend more. Your goal is to exclude them from targeting and destock low-margin products.

Research on this segment can help you find what motivations are behind these customers’ behavior and use the insights of your qualitative analysis to drive more trust and long-term engagement. What you learn about Apprentices will help you design better acquisition and onboarding strategies for future new customers.

Platonic Friends and Potential Lovers

Platonic Friends and Potential Lovers are the RFM segments where customers from New Passion and Flirting segments end up before leaving you for good. 

You can reactivate these two customer segments if you understand the motivation behind their first order and what prevents them from placing new orders. Get your answers before sending any new transactional messages.

About To Dump You

About To Dump You is one of the RFM segments represented by inactive customers, and based on their RFM score, it has been a while since their last order. Exclude this group from targeting and destock low-margin products.

Reactivating this customer segment might be challenging. What you could do is select only the ones with high monetary value and evaluate if there’s any chance to reengage with them. Try to understand why they stopped buying, what they’ve bought before, what responses they gave you in the satisfaction surveys, and watch out for unsolved support tickets.

Ex-Lovers

The Ex-Lovers segment includes inactive customers that used to have high frequency and monetary values before they decided to leave your store. Your goal is not transactional, but to ​​understand who they are & reactivate them. Find out what made Ex-Lovers go away and use the answers to optimize your customer retention strategy. 

You might be very tempted to win Ex-Lovers back, but, like in real life, you must come to peace with the idea that some customers are lost forever.

Don Juan

The Don Juan segment includes customers that placed one high-value order and then never came back. The main question here is, “Why did Don Juan leave?”. It might have been the product, the support team, or a low overall customer experience. It’s worth looking for an answer and learn from their behavior.

Break-Ups

The Break-Up segment includes customers with low RFM scores that come to your store from time to time and only purchase low-value items or during discount campaigns. This customer represents your store’s natural customer churn rate, and it’s not worth investing resources to win them back. 

Get more details about each customer segment from this RFM segmentation guide.

RFM email segmentation

RFM segmentation helps you escape the one-size-fits-all trap many stores fall into when reaching customers via email. As you can see in the previous section, each customer group has different needs and signals different behaviors. With RFM email segmentation, you advance towards email marketing campaigns triggered by a customer’s migration from one group to another. 

Email marketing is an important channel for engaging with your customer base. Used wisely, it enables you to send personalized campaigns, improve retention and customer lifetime value.

Mix the benefits of RFM modeling with email marketing, and you will get exactly what your store needs to:

• Nurture potential customers and convert them into first-time buyers;
• Onboard first time buyers and create an excellent first-time experience;
• Generate repeat purchases in new and existing customers;
• Facilitate access to the loyalty program and send constant reminders of their benefits;
• Reactivate customers with valuable content and offers and reduce the churn rate.

The great thing about RFM email segmentation is that it increases your chances of getting improved results because it helps you send the right messages to the right audience at the right time:

Soulmates

Emails sent to Soulmates help you maintain that VIP experience with messages around their loyalty program benefits, exclusive content and track their satisfaction via surveys.

Lovers

The email flows and campaigns you create for Lovers help you nurture this segment into Soulmates. Use email to learn more about them and increase trust.

New Passions

Email marketing is vital for managing this segment because you need to offer them the best onboarding experience if you want them to purchase again.

Our team’s experience with eCommerce stores inspired us to write an actionable article about encouraging the second purchase in first-time buyers. Check it!

Flirting and Apprentice

The messages you send via email to these two segments will help you build trust and transform them into repeat buyers.

Platonic Friends and Potential Lovers

You must be careful to keep a balance between transactional and educational emails if you want to buy from you again. Trust is everything.

About To Dump You

You might be tempted to send sales-oriented emails, but you should use a non-transactional approach to win this segment back.

Ex-Lovers and Don Juan

These two segments remind you how important it is to send satisfaction surveys via email. You might not win them back, but you can still reach out to find what went wrong.  

Break-Ups

They are lost customers, but they might respond to your discount or liquidation email campaigns.

If you’re using an automated RFM Segmentation feature like the one within REVEAL, you can easily create highly personalized campaigns, and email flows in your email marketing platform. If you’re using REVEAL’s direct integration with Klaviyo, the RFM segments will be updated dynamically.

Learn more about email marketing based on the RFM model from this article.

SMS marketing campaigns

With an average open rate of 98%, you definitely want SMS marketing campaigns in your marketing mix. SMS messages are great to create micro-moments in your customers’ experience and bring more value to them. You need to get consent from your customers and make sure they can easily manage SMS preferences. 

You can mix SMS campaigns with your other marketing efforts in multiple ways:

Smart content recommendations

You can send customized content recommendations based on the customer’s recent activity and purchase behavior or their recency, frequency, and monetary scores.

Triggered by custom attributes

Using customer attributes to trigger automated SMS campaigns will allow you to celebrate moments like the customer’s birthday or create reminders when the time for a new purchase approaches.

Complementing emails

Texts sent via SMS complement emails that you send to your customer base, keeping them informed, helping you highlight customer benefits, and re-inviting them to take action.

Delivery status and updates

SMS plays an essential role in customer satisfaction and is one of the best channels to keep the customers updated and happy, eliminating any trace of regret or remorse.

Important product announcements

You can increase excitement and interest by sending SMS campaigns announcing new products launch based on customer preferences and RFM segment. 

Limited sales campaigns

SMS can be a great way to inform your audience about a time-sensitive campaign and add a new purchase, increasing frequency values for dormant customers.

Look for an SMS marketing tool that allows you to use RFM segmentation and personalization tags. Once everything is in place, get the most of these short text messages with smart copywriting. 

Discover the most common reasons customers opt-out from SMS messages and four ways to win back customers via SMS.

Ongoing Customer Value Optimization campaigns

Customer Value Optimization (CVO) activities are all about getting the most out of each customer segment, increasing the number of the most valuable customers for your business and the customer lifetime value. The four ongoing CVO campaigns help you cover every stage of the customer journey.

The four types of CVO campaigns (source: CVO Academy)

Customer acquisition campaigns

Every element of your acquisition campaigns can be optimized if you start with the CLV in mind and use all you know about your best customers to replicate tactics that bring repeat customers.

Onboarding campaigns

Onboarding sets the tone of your relationship. The key to a successful onboarding process is finding the best ways to surprise and delight your new customers.

Prevention campaigns

Automation helps with your prevention campaigns by triggering messages on different channels and sending automated messages that stop once the desired action occurs.

Reactivation campaigns

The reactivation campaigns are challenging, so if you want to change dormant customers’ minds, you need to find the motivation or reasons behind their behavior.  Your success depends on the quality of research made on the inactive customers.

Here’s an example of a game plan for CVO activities that you can use to design your own, taking into account the channels at your disposal and the priority for each activity type.

CVO activities game-plan (source: CVO Academy)

Find each activity described in-depth and get more ideas for your RFM groups by joining our Customer Value Optimization Course.

Wrap up

Using RFM based marketing tactics helps you create a meaningful connection between you and your potential and existing customers, which doesn’t feel like sales or marketing speech.

Besides an ethical and strategical use of customer behavior data, the effectiveness of your marketing strategies for RFM groups also depends on the technology you choose to put everything into action. 

An automated RFM tool will change the way you approach segmentation for the better, with more time and more energy to focus on what really matters for your store.

Discover how REVEAL’s automated RFM segmentation and analysis works and how you can boost email marketing efforts using REVEAL’s direct integration with Klaviyo.

Frequently asked questions on RFM marketing