Use Your Marketing Database to Act on Recency, Frequency & Monetary Data

Author: Jeff Barela-Dovetail

Do you know you already have the most powerful, inexpensive data available to support your direct marketing initiatives? It’s true! Recency, Frequency and Monetary (RFM) data is the single most predictive customer behavior indicator. It will tell you the last time your best customer purchased a product or service from you or how many times that individual has purchased items from you over the past 30 days, 90 days, 6 months or even a year. It can even help you identify customers who bring the most revenue to your organization.

RFM data is often underutilized by marketers. However, collecting and analyzing RFM data is the simplest and best way direct marketers can learn about their customer’s purchase behavior—organizations typically have this information, it’s really a matter of how they use and apply it. For example, organizations collect information on how many and what products or services customers purchase, how the purchase was made, the total purchase amount and the date of the transaction. After collecting this valuable data, it needs to be integrated into your marketing database. Using your marketing database, you can analyze your RFM data to learn more about your customers and their purchase behavior—you may be surprised what you learn. For example, you may notice that if a specific product or service is purchased, the customer returns the next day to make additional purchases or you may see that customers buying one product or service often buy complementary items at the time of purchase.

Armed with this valuable purchase behavior knowledge, direct marketers can determine their marketing goals and define direct marketing campaigns that they know will be beneficial—RFM data helps take the guess work out of your job. Using your marketing database, create lists and segments that target a specific audience for each marketing campaign based on your RFM data. RFM data can be broken out and used in various combinations. The following lists some examples of how you might break out your RFM data. Use any of these combinations, or others that you develop, to create various lists and segments.

Recency(Last Purchase Made)
• Purchase in the last 30 days
• Purchase in the last 31-60 days
• Purchase in the last 61-90 days
• Purchase in the last 3-6 months
• Purchase in the last 7-12 months
• Purchase in the last 12 or more months

Frequency(Purchases How Often)

• 1 purchase in last 12 months
• 2-3 purchases in last 12 months
• 4-5 purchases in last 12 months
• 6 or more purchases in last 12 months

Monetary (Total Money Spent)

• Under $50
• $51-$100
• $101-$150
• $151-$200
• Over $200

To make defining your segments and lists even easier, you can apply business rules to your marketing database to create selectable data elements similar to the items above. This will make your list and segment selection clean and easy. You may even decide that in order to better select your target market you should have selectable data elements based on medians or means for your RFM data—use your marketing database to put this information at your fingertips.

Uses for your RFM data and your marketing database do not stop there! Use your marketing database to analyze the customers you have identified as your top customers in terms of RFM to identify their common characteristics (e.g., gender, age, marital status, income, etc.). Then you can use these characteristics as criteria to pull prospect lists for direct marketing campaigns. In addition, use your RFM data and your marketing database to easily determine which marketing campaign was most effective by calculating the ROI on your past campaigns. Learn more about utilizing your marketing database. (link to The Dovetail Application fact sheet)
One more item of note: Marketers often turn to demographic & lifestyle data appending or modeling instead of or before utilizing RFM data, but using your marketing database to leverage your RFM data is a very powerful marketing tool—a must for all direct marketers. If you do nothing else, collect and integrate your RFM data into your marketing database so you can act on it and implement effective direct marketing campaigns that will increase sales and profits.

The bottom line is use your marketing database to make your RFM data actionable and empower you to create and execute successful direct marketing campaigns.

Technorati Tags:direct marketing, database marketing, marketing database, data integration
Generated By Technorati Tag Generator