As a marketer, you face the challenge of customer retention every day. You know repeat customers equal more transactions and higher conversion rates. You seek opportunities to leverage high-potential customers, maximize your ROI, and ultimately secure lasting customer relationships. But you can’t determine the best way to encourage repeat business.
Rest assured, you’re not alone…
Just 3% of marketing executives in North America believe their company is realizing the full revenue potential of their customers.
Just 3%! And then there’s the rest of us…unsure of our customer potential and unable to identify the opportunities that exist with our own database.
Ready to join the 3%? Prepare to master the art of retention.
Repeat ecommerce customers spent $2.7 billion in Q4 of 2015—almost double what new customers during that time spent not only are new customers more difficult to acquire, they are more expensive to acquire.
So what’s the key to holding onto your customers once you’ve won them over?
The secret is in the scoring.
1. Recency (R)
This metric is based on how recently a customer has purchased. A recent purchaser is more likely to purchase again, compared to someone who has purchased less recently. Therefore, the more recent the purchase, the higher the customer is scored in this category. Consequently, Recency scoring helps you identify lapsed users who should be re-engaged.
2. Frequency (F)
As you might guess, this metric specifically refers to how frequently a single customer is purchasing, compared to all of the other customers in your database. Customers who purchase frequently are rated higher as, based on purchase-behavior history, they are more likely to purchase again.
3. Monetary Value (M)
The more monetary value a customer has created for your business through the combination of all of their transactions compared to other customers, the higher they are rated. This metric is purely a measure of how much a customer spends.
Each of these categories is easily measurable on a 1-5 scale, 1 being a low-scoring customer, 5, high.
When combined, the ratings form the RFM score, allowing you to more fully understand the actions, on your end, required by an individual customer or groups of customers with similar scores.
A 4-2-5 customer, for example, has made a high-value purchase, fairly recently but does not purchase frequently, and therefore may require increased outreach efforts or additional communication touchpoints. This may come in the form of advertising, emails, social engagement, etc.
A 1-4-5 customer, on the other hand, at one time purchased often, and spent a lot, but has fallen off with recent purchases. This customer may need more relevant promotions or offers, or might require product suggestions based on past purchase history.
Using the RFM scoring framework will guide your marketing efforts, ensuring your dollars are spent wisely. You can identify your highest value, most consistent customers—your “best” customers, if you will. You can also identify your biggest opportunity customers for growth.
In addition, you’ll be able to understand your customer’s needs related to their transaction history. Customers will feel more valued, because they’ll receive more relevant and personalized content.
This in turn, encourages, or effectively creates, more repeat customers, ultimately resulting in increased retention rates (i.e. more of the high value customers you love!).
In order to track this type of customer information, you’ll need a tool for organizing transactional data and other customer details.
A 360-degree customer profiling software, like TouchCR Solutions, provides a place to visualize your customer through extensive profiling categories, bringing together transactional history, buying behavor, demographic data, interests, and more. It then automatically generates customer scores in real-time, allowing you to market with relevance.
The result: improved experiences, customer retention success, and optimized ROI. No, it’s not a dream. The capability to segment, score, and speak to your customers does exist in one tool.
Have questions or need more info about how RFM scoring may benefit your business? Contact us! Click here–complete the form to get in touch.