We recently dropped a huge update to the homepage in Peel, which centers around RFM analysis. If you’re not already familiar with RFM, you can get the rundown here.
But to quickly catch you up, RFM stands for Recency, Frequency, and Monetary value. RFM analysis ranks your customers based on those 3 values and automatically places them in 10 behavioral segments. This shows you your most loyal, high value customers (brand “Champions”) as well as your “Hibernating” customers (those who made a purchase or 2 but haven’t returned) along with everyone in between.
Segmenting by different stages of the purchasing journey and different loyalty status is a huge priority for so many of our customers! We added RFM analysis to alleviate the burden of having to manually perform that segmentation; now you can see exactly who your best customers are, who’s on the cusp of becoming a brand loyalist, who’s a high value customer that you’re in danger of losing and so much more.
From there, it’s all about reengaging, reactivating, and delivering value to your RFM segments that matches up with their stage of the customer journey.
Here in Part 1, we’re going over the first 5 of your RFM segments, what they mean, and some tips on how to engage them:
- Loyal Customers
- Potential Loyalist
- New Customers
*If you're interested in tips on how to engage the lower-loyalty groups who may be slipping down the ranks in your sales cycle, check out Part 2 of the guide here!
1. Reward Your Brand Champions
RFM Segment name: Champions
Who they are: Highest value loyal customers who score a 5 in recency value and a 4-5 in frequency + monetary value. These are repeat purchasers who are getting serious value from your product, they’re coming back all the time to spend a lot, and they’re likely brand evangelists at this point.
What to do with them: Despite your gut instinct to leave this group on autopilot since they’re frequent purchasers who spend a lot, you should definitely do more to reward them for their loyalty.
The business - customer relationship is a two-way street! If they’re bringing a lot of value to your business, you want to return the favor with special treatment. Consider:
- Giving them exclusive offers
- Implementing loyalty rewards or increasing their loyalty rewards
- Providing them with early access to new products
- Inviting them to leave you a review
Shows of goodwill go a long way in enhancing the brand experience for your top customers. Make your appreciation known and deliver them value for their continued loyalty.
Example email to brand Champions:
2. Delight Your Loyal Customers
RFM Segment name: Loyal Customers
Who they are: As the name suggests, this group is certainly loyal. They are your 2nd highest value group, just below your brand Champions. They have tons of potential. Scoring a 3-4 on recency (meaning they’ve purchased fairly recently) and 4-5 on frequency + monetary value, means they’re big fans of your brand. Time to treat them like it to convert them into brand Champions!
What to do with them: This is another group you can’t ignore because they’re hooked on your products. Their frequency and monetary scores are among your highest, but their recency isn’t quite there – it’s been a little while since they purchased. Consider these to incentivise them to come back:
- Pitch your top-tier loyalty rewards
- Invite them to subscriber (if you offer subscriptions)
- Tell them about new product releases
- Invite them to follow on social media to enhance the brand experience
Moving the needle into the Champions zone is about delivering personalized messaging and timely valuable offers to your Loyal Customers. Pro tip: use purchasing journey data if you have it to identify what’s going to be the most relevant to show them based on previous purchases.
Example email to Loyal Customers:
3. Tip the Scale for Potential Loyalists
RFM Segment name: Potential Loyalist
Who they are: There’s SO much potential in this group (hence the name)! Your Potential Loyalists have purchased recently (scoring a 4-5) and are in the 2-3 range for frequency and monetary value. Your products and brand are fresh in mind because they just made a purchase, but historically, they’re not buying a super high quantity or spending at the highest level. It’s time to draw them in to become more affiliated with your brand.
What to do with them: It’s probably not the right time to jam a bunch of upsells or cross-sells via email to your Potential Loyalists. They’re into your product but they haven’t achieved the level of affinity or loyalty for your brand that you’d like. Offering discounts may or may not do the trick here.
The best route at this stage is getting them to engage with your brand in a different way. This is where you might leverage your online community or social media presence. Here are some ideas:
- Invite them to follow you on social media and to take action
- It can be a fun, engaging way for them to understand that you're not just selling products but also enhancing their experience in that lifestyle, sport, hobby, activity, etc.
- Create an incentive that they can unlock by participating with your community.
Example email to Potential Loyalists:
4. Welcome Your New Customers
RFM Segment name: New Customers
Who they are: Your New Customers are a crucial segment for you to impress! They’re fresh off their first purchase with your brand; you made enough of an impression for them to try out your products, now it’s time to set expectations and make them feel welcome to your brand experience. Their potential is limitless if you can hook them with great content and products.
What to do with them: They say first impressions are everything. But this customer already bought your product based on first impression. Your 2nd impression here is what counts and that should start as early as your purchase confirmation email!
You’re going to want to follow up with your New Customers shortly after their initial purchase to deliver them a great brand experience. It’s all about setting the tone for the relationship, inviting them to engage with more content, and making sure that they know there’s more to come.
- Hit them with a confirmation email that doubles as a welcome email
- Invite them to learn more about your brand through your blog or other content
- Ask them to join your newsletter if you have one
Example email to New Customers:
Company Spotlight: Aura Bora. They REALLY know how to do a welcome email. Granted, this example is for an initial sign up for their newsletter (so potentially even before you’ve made an order with them).
They welcome you with a solid discount off your first order and then they engage you with content. They give you several opportunities to read more about their brand story, how their drinks are crafted with real herbal extracts, and the positive impact they have with donations to conservation and climate action NPOs. You get a REAL sense of who Aura Bora is and what they’re trying to do.
Then they go on to introduce you to their fan-favorite flavors and bundles, giving you the opportunity to check out more at each step of the way. And they wrap it up with their socials at the bottom (if you’re not following them, you’re missing out on a ton of fun).
Check out the masterclass in welcome emails:
5. Find Out More About Your Promising Customers
RFM Segment name: Promising
Who they are: Your Promising group has aged out of being new customers and you don’t want them to slip further down the ranks. They purchased fairly recently with a score of 4, but their frequency and monetary value are a 1. Despite that, you don’t want to settle for them being one-and-done customers, which aligns with one of the biggest reasons to use Peel: getting more of those crucial 2nd and 3rd purchases. This can be a challenging group to win over if they’ve only tried out your product once, but we have some ideas to improve their experience.
What to do with them: You need more info from your Promising customers. You might try product recommendations or a discount to lure them back in, but it’s probably a hit-or-miss situation. You likely only have 1 purchase to work off of, so you don’t have a ton of data on them (other than maybe what marketing channel they came from, product they purchased, and maybe a discount code - if used). We can do better.
Here’s what we suggest for your Promising customers:
- Invite them to take a survey to unlock a reward
- Make it a simple process
- Deliver product recommendations based on their survey and give them an offer that they are sure to use
- If the survey is too tall of an order, ask them for a review in exchange for a reward; this brings your brand back to mind and incentivizes them to make another purchase
Example email to Promising customers:
Company Spotlight: Café Leather. They know what it means to deliver value to their customers. In this email, not only do they have a note from their founder, explaining that they’d like you to take a survey in order for them to deliver a better experience to their customers, but they also incentivize you with an opportunity to win a massive gift card to their online store.
It’s always nice to strive for exceptional customer service and Cafe certainly knows how to ask customers to participate in their improvement efforts.
Check out how they sweeten the deal for taking a survey while connecting with their customers with a note from their founder:
Get started with RFM Analysis
If you’re already using Peel, we hope you found our suggestions helpful. Hop in your Peel account and you can get going with RFM segments and Audiences right away.
If you’re new to Peel, you can try us free for 7 days and experience all the benefits of RFM analysis and test out some of these outreach ideas!
That wraps up Part 1 of our RFM strategy guide. If you found our tips helpful, check out Part 2 of the guide where we talk about how to bring back some of the less engaged and lower loyalty groups who haven’t purchased as frequently or spent as much as the groups in this post. Winning them back should be a crucial part of your retention game!