Automatic segmentation: Build experiences based on real behavior with RFM
Go to Modyo.com and see how we’re creating better digital experiences

Automatic segmentation: Build experiences based on real behavior with RFM

Behavioral analysis based on the RFM model offers relevance, context and is immediately actionable.

Share this Insight:

Think for a moment about the people who are important to you, such as your family, friends, or co-workers. You probably don't interact with them in the same way. The expectations we have for each group are also usually different.

The same goes for our customers. Maintaining a successful relationship with the different people that interact with our brand requires a deep understanding of their needs and preferences. This helps us to communicate effectively and meet their expectations.

84% of customers say it is very important for them to be treated as a person and not as just another number.

Let's start by defining our context. We live in an age of instant gratification. We are users who are always connected and seek information whenever we need it. 

This produces a large number of challenges, such as trying to build relationships with millions of users when 84% of customers say it is very important for them to be treated as a person and not as just another number.

However, each of these challenges is a potential opportunity and, in the midst of this, we have to make sure that we communicate our solutions in the right language for the stage each client is in. 

Customer lifecycle management focuses on just that. We must talk to users according to the stage they are in their lifecycle. Good lifecycle management has a direct impact on the expected lifetime value of each customer and, therefore, on the utility of the company. 

people of different ages standing on top of each ones of the bars in a chart

This is where many of us get stuck. It can be confusing to choose between psychographic, geographic, social, demographic and behavioral segmentation, to name a few. Additional to this, achieving a 360 vision of customers is often a slow, costly and culturally resistant process. 

We recommend starting where we can make the greatest impact quickly. Data has taught us that intention says much more than identity. Our actions tend to speak louder than our words. Everything we do, any search, visit to a page or video we watch says something about what we want to achieve.

Modyo

Always get good stories

Register here and get new experiences by Modyo

That's why analyzing people's intentions through their actions is a good place to start. Intention offers relevance, context and is actionable. 

A very effective method we recommend to do just that is the RFM statistical model:

  • Recency: How recent was your customer's last purchase or action? 

  • Frequency: How often does your client visit or buy from you?

  • Monetary: How much did a customer spend?

The power of this model is that it is very actionable. The segments it produces are transparent and allow us to estimate how much we should spend on each contact point or segment. 

Very few initiatives can compare to being able to identify your champions, your best users, and discover what they love. Strategically everything changes.

We at Modyo have worked hard on making this extremely easy from the box. We want the marketing and sales teams to be able to easily select the business event on which to make their RFM calculation. Be it transactions, ticket purchases, insurance quotes or bank transfers, and then automatically generate the actionable segments.

illustration of a boxer with the champion belt

Although there are companies that have used it for decades, what is new is the almost instantaneous access we can offer marketing teams without the need for a data scientist or data engineer. 

In addition to the tactical benefits, we want them to be able to invest more of their time in achieving strategic objectives. Very few initiatives can compare to being able to identify your champions, your best users, and discover what they love. Strategically everything changes.

Interested in learning more about RFM? Check out our white paper here.

Cover photo by Edgar Chaparro on Unsplash

Learn how to build better digital experiences with Modyo Talk to us