February 17, 2024
“How to achieve good sales?” A frequent question among traders. and marketers
I must say that in addition to “good products” what is equally important is Products that meet the needs AND there are sufficient incentives for customers to make purchasing decisions.
But of course not all customers have the same life background and social status.
Therefore, each person’s purchasing behavior is definitely not the same.
Therefore “customer segmentation” is necessary. So that brands can choose suitable marketing strategies to attract customers.
One of the tools that helps segment interesting customer groups is the “RFM model”.
So what is the RFM model? How can it be applied?
RFM is a 3-word abbreviation.
– Recency is the most recent purchase.
– Frequency is the frequency of purchases.
– Monetary is the purchase amount per time.
The concept of the RFM model is to try to divide customer groups (Customer Segmentation) based on purchasing behavior. Made up of these 3 words.
The next step is These 3 parts of purchasing behavior will be analyzed and “rated 1-5”.
1 point is the lowest, 5 points is the highest.
To classify the type of customer group that each customer belongs to. And how important is it for the brand?
Let’s take a look at how to assign a score based on the information contained in each item.
– Recency is information about the customer’s last purchase or use of the service.
If the customer recently purchased a product or used a service, they will receive 5 points.
But if the customer last purchased several months ago OR many years ago they will receive reduced points.
– Frequency is information about how often customers purchase products or use services.
In this section, collect information about how often customers purchase products or use services to evaluate them.
For example, if a customer comes to use the service every day. Buy our brand products once a week. will receive a high score of approximately 4-5 points
But if the customer comes to purchase products or uses services only once and then disappears, he will receive only 1 point.
– Money is information about how much a customer buys or uses services.
If customers buy a lot of products or use services, such as buying and paying a lot, they will get a high score.
But if you buy fewer products or use services at low prices, including not purchasing the products or using the services at all, for example by placing the products in the cart but not yet paid they will receive reduced points.
It should be noted that the scoring from 1 to 5 can be flexible. and adapt based on each brand’s perspective
After giving a rating to each customer
The next step is to calculate these scores. Then plot it on the RFM model table, which is a 5×5 grid (as shown in the image accompanying the article).
Represents the recency score value on the X or horizontal axis.
and replace the value (frequency score x monetary score) / 2 on the Y-axis or vertical.
When the plot is completed on the table. We will know What type of customer is each customer?
There are 11 types in total, including:
1. Champions are the brand’s most important customer group.
This is because this group of customers has just purchased a product or used a service. There is also a repeat purchase rate. and a high spending volume
Brands should therefore retain this group of customers as best as possible. Don’t let this customer group go to your competitors.
Importantly, this customer group IS also a group that creates “Word of Mouth” or spreads word of mouth. It also makes our brand better known.
2. Loyal customers are a group of customers who have a high spending rate. and a higher repeat purchase rate than general customers
Even if this group of customers hasn’t simply purchased a product or used a service. But it is considered a customer group with high spending volumes. We must therefore try to retain this group of customers. Don’t let it disappear from the brand.
For example, there is a loyalty platform that divides customers into tiers.
When customers have repeat purchasing behaviors, they will be upgraded to a higher level and receive more privileges.
3. Potential loyalists are a group of customers who do not purchase products or use services often.
But this group of customers just placed an order. and have high spending amounts
This makes this customer group more likely to become loyal customers.
Therefore, if you are marketing to this group of customers, the main strategy is to create an impression quickly.
Make customers believe it The brand cares and values the value of its products and services.
For example, Apple has a strategy to create an impression. Such as free name engraving or printing services on devices like AirPods.
4. New customers are customers who have recently ordered products or used services. But this is the first order. Therefore don’t dare to spend at a high value yet.
For this reason, what brands should do is “Make an impression”
Make this group of customers feel that There is nothing wrong with purchasing our products or using our services. and you want to come and buy or use the service again
For example,
– Beauty clinic that customers often call after receiving the service To inquire about the experience of using the service and schedule the next appointment to follow the symptoms
5. Promising is a group of customers who have recently purchased products or used services for the first time. But the repeat purchase rate and spending value are low.
This means that this group of customers is interested in products and services. But not enough to fit it into life.
Therefore, products or services that are more relevant to customer behavior should be offered.
For example,
– Increase repeat purchase rates with a strategy to bring receipts Come use it as a discount next time.
– Increase the value of your shopping even further with the Up-Selling strategy such as a buffet restaurant with a variety of prices to choose from.
6. Need Attention is a group of customers who have orders and repeat purchase rates. And the timing of the last purchase was exactly average.
If brands don’t try to build relationships with this group of customers, it could cause customers to lose interest in the product or service.
Therefore, strategies that brands should follow include:
– Offer limited-time offers like Flash Sale to encourage repeat purchases or services.
– Show the advantages of previously purchased products in other aspects. To make this group of customers more interested in products or services, such as baking soda, which in addition to being used to prepare desserts can also be used for cleaning
7. About to Sleep is a group of customers who haven’t ordered in a while. Make repeat purchases and it is worth buying below average
But it is still considered a customer base. If the brand doesn’t try to bring customers back This group of customers will permanently disappear.
Therefore, if the brand still wants to retain this group of customers You could try offering special promotions. for this customer group To encourage customers to use the service again
8. Can’t Lose is a group of customers who have been Champions, have purchased products or used services very often and are among the brand’s highest spending customers. but they have not returned to purchase products or use services for a long time
This may mean that these customers switch to competing products. or be dissatisfied due to an error in the product or service
For example, A customer came to purchase a package of beauty courses. This is the most expensive in our clinic.
But that customer is long gone. After finishing that Why course I found another place that offered a similar package. at a more advantageous price
What brands can do with this customer group is Find opportunities to ask individual customers: Where are there problems with our service? Ready to offer more advantageous promotions for customers
9. At risk is a group of customers who have previously spent and repeat purchases are very high but have not returned to purchase products or use services in the past
This group is similar to the previous group. But what’s even more serious is that if the Can’t Lose group last bought our stuff 1 year ago, the At Risk group hasn’t bought our stuff for much longer.
Could it be that In the past there was something that made this group of customers forget our brand..
We therefore need to find out what has changed. So what should I do? To convince this group of customers to return
You could start by asking: What do these customers want? To meet needs in the right way.
10. In hibernation is a group of customers who have previously purchased products or used services. But it’s been a long time. including the low quantity and frequency of purchases
which this customer group There is still a possibility that the brand will repurpose it with advertising to get customers to think about the brand. and encourage them to return to purchase or use the service again
11. Lost is a group of customers who have not returned to purchase products or use services. and the quantity and value of the products ordered are very low
This group is not listed in the table in the photo accompanying the article. Because it is a group that should not be given importance
It is possible that this group of customers has already stopped using the product. or have bad feelings towards the brand
which is considered difficult To change the mind of this group of customers to come back again..
Therefore promotions could be foreseen for these last two groups. Or run various campaigns to bring this group of customers back. But they may not consider spending a lot of marketing budget on this group.
Because if the customer doesn’t come back they have to let go Because this customer group has a low volume and number of product purchases.
With all these steps the brands can be classified accordingly. What kind of customer groups exist? And what marketing strategies should be used to satisfy each type of customer?
That said, brands don’t actually need to target all 11 types of customers.
But you can choose to market to specific customer groups according to the “Pareto 80/20” principle of “do less and get more”.
That is, choosing to spend a marketing budget. Only 20% of major customers
Like champions, loyal customers, loyal potential customers.
This can result in a response of up to 80%, i.e. customers come to buy a lot, pay a lot and buy again.
Meanwhile, other customer groups such as New Customers, Promising, Need Attention, About to Sleep and Can’t Miss have gradually lost importance. Or choose to market your product to specific customer groups that the brand is interested in
For customer segments such as At Risk, Hibernation and Lost, brands may be given the least importance. Because they are almost a group of customers who have nothing to do with the brand.
This way the brand does not have to waste its budget. Don’t waste your investment.
But it can be marketed to the point. and more effective..
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