Using customer segmentation as part of your e-commerce marketing strategy is a sure-fire-way to create and increase customer loyalty.
Because who doesn’t want loyal customers?
Loyal customers are those who keep coming back, who can boost your revenues by 25% or more, AND who become brand ambassadors and referrers for your business.
But customer segmentation isn’t something you can do in a jiffy. It’s an advanced tactic. In addition, there are different ways you can segment customers.
One of those customer segmentation methods is known as RFM segmentation. And it’s our latest addition to the Gameball customer engagement and retention dashboard. But more on that later.
In this article, we’ll explain what RFM segmentation is and why you should use it in your e-commerce store. Then, we’ll explore Gameball’s newly-added RFM customer segments and the differences between those and Gameball’s dynamic segmentation.
Finally, we’ll show you how to effectively use RFM customer segmentation to increase customer loyalty and retention.
What is RFM customer segmentation?
RFM stands for Recency, Frequency, and Monetary Value. This means that RFM customer segmentation relies on these 3 factors, and their combinations, to segment customers.
Let’s break it down further:
- Recency looks at when the customer last made a purchase from your store.
- Frequency explores how often the customer buys from you.
- Monetary Value looks at the value of purchases made by your customer.
Why use RFM for customer segmentation
RFM is an important type of segmentation because it allows you to look at your customer from a different perspective.
Think about it. As an e-commerce business, it’s easier to engage customers who made recent purchases than those who made purchases 6 months ago.
Re-engaging inactive customers is tricky. BUT it’s also a benefit RFM segmentation helps you with.
Let’s clarify with an example. Recency allows you to see which customers bought from you recently. You define what ‘recently’ means for you. It could be in the past week or two or in the past month.
You can also use the ‘recency’ metric to see which customers haven’t made a purchase in your online or physical store in the past 6 months.
Based on that information, you can create a re-engagement campaign to entice those inactive customers back into your store. (Keep reading to find out how!)
Meanwhile, frequency looks at how often customers buy from you. You decide what ‘frequency’ means for you. Does it mean customers who buy from you twice a week or 4 to 6 times per month?
Using the frequency measure, you can see who your frequent buyers are and use customer engagement tactics to give them more reasons to return to your store and to stay top-of-mind.
RFM customer segments in Gameball
In Gameball, we’ve divided the simple ‘recency, frequency, and monetary value’ segments into 7 segments. To spare you the hard work in deciding when to use which customer segments, we’ve gone a step further.
Here are the 7 RFM customer segments you can use in Gameball.
- Lost customers
- About to lose customers
- Best buyers
- Loyal customers
- Promising customers
- New customers
- Can’t lose customers
If you hover over any segment, you’ll see a pop-up explaining who this segment is for and what it does.
Let’s take an example. Here are 3 campaign ideas you can use with ‘New Customers.’
- You can engage customers
- You can reward first-time buyers
- You can encourage new customers to visit your store daily or regularly to see what’s new.
When you click ‘Create Template’ or ‘Create Campaign,’ you can use the newly-introduced Gameball AI to generate content for the campaign or template.
Each of the above 7 campaigns comes with 3 recommended campaigns. That’s 21 RFM campaign ideas you can create and use to build customer retention and loyalty for your brand.
RFM segmentation vs dynamic segmentation in Gameball
If you’ve been using Gameball, you may be wondering:
What’s the difference between these RFM segments and Gameball’s ‘other’ segments? Are those segments going away?
Gameball’s ‘other’ segments are what we call dynamic segments. And no, they’re not going away any time soon.
These RFM segments were created to complement the dynamic segments and give you more opportunities to segment customers to improve your marketing efforts.
Put simply, dynamic segments allow you to create your own segments. They are criteria you add. At the same time, when customers take certain actions, they’re added to those segments automatically.
For example, if you have a segment for ‘customers who buy toothpaste,’ any customer who buys toothpaste from you will be automatically added to that segment.
Similarly, if you want to segment customers based on a certain date or period, or even a certain occasion, you’ll need the dynamic segments to do so.
For example, you can segment customers based on who purchased from you during March 2023 or during Valentine’s Day week (7 to 15 February 2023).
Meanwhile, the new RFM segments focus on the three pillars: recency, frequency, and monetary value. They’re an addition to the dynamic segments.
You can combine RFM segments with dynamic segments for added personalization.
In the next section, we’ll show you how to use Gameball’s RFM segments to increase customer acquisition and loyalty.
Use cases: How to use RFM segmentation to drive customer loyalty with Gameball
Gameball has divided the standard 3 RFM segments into 7 so you know how and when to use them. Some segments will help you acquire customers, while others help you retain them, increase loyalty, or reactivate lost customers.
In other words, Gameball’s 7 RFM segments focus on the different stages of the customer journey.
You can speed up the campaign creation process with the Gameball AI.
You can create campaign templates to use in later campaigns. You can also schedule campaigns to speed up your loyalty-building strategy.
Now, let’s look at an example of how to work with each of the 7 RFM segments.
Use RFM segmentation to re-attract lost customers
As an e-commerce business, you lose customers. That’s a fact. But can you get them back? Can you at least try? How?
RFM customer segmentation helps you re-target customers you’ve lost. These are customers who stopped visiting your online and physical stores or who may have deleted your mobile app.
Here are a few examples or ways to re-attract lost customers:
It’s important to know ‘why’ your customers stopped coming to you. You can reach out with a quick one-or-two-question-survey.
But to see if they’ll really come back, it’s best to start with an offer they can’t refuse. Create a personalized offering and make your customers feel special with a limited-time 20% discount or a 30% cashback reward.
You can also try to stay top-of-mind by sending your lost and about-to-lose customers special-occasion offers. These can include offers during Black Friday, New Year, Christmas…etc.
Start with the can’t-refuse offer and if they don’t bite, you can reach out with the survey.
Use RFM segmentation to engage your about-to-lose customers
There are customers you’ve lost and there are those you’re about to lose. It’s important to get ahead of the situation and engage those customers before they leave you for good.
Use Gameball’s RFM segments to see which customers haven’t shopped in your store recently or who make infrequent purchases. Like one purchase every 2-to-3 months or more.
It’s worth mentioning that your about-to-lose customers may be discount-loyal or price-loyal customers. That’s a type of semi-loyal customer that only cares about paying the lowest price or benefiting from attractive discounts.
It’s often not a good idea to retain this type of customer because they’ll wear out your marketing efforts. However, you should see why your customers haven’t shopped with you recently.
Reasons may vary as to why these customers have erratic buying behavior. They may have moved to another state or country. Or you may have increased prices and they can no longer afford your brand. Among other reasons.
Getting to know why customers leave or are about to leave will
- Help you stay ahead of future problems.
- Show you which customers you no longer need to spend money to re-engage or re-target.
Use RFM segmentation to acquire new and promising customers
New customers are those who purchased from your store but haven’t signed up to your rewards program. Or who are still on the fence about buying from you.
Meanwhile, your promising customers are those who make occasional purchases, usually responding to discounts. Though they’ve made some purchases, they can’t be described as loyal just yet.
You can use RFM customer segmentation to increase your customer acquisition and get those customers to complete their first order. Offer them a special first order discount when they sign up to your loyalty program.
For this type of campaign, we recommend creating a template that’s automatically sent out to
- Customers who have just joined your rewards program
- Customers who just signed up for your newsletter
We also recommend using a web message to notify browsing customers of their first order discount.
Use RFM segmentation to reward your top buyers
Your best buyers are loyal and repeat customers. They’ve tried–and are constantly trying–out your products.
Here are a few ideas of how to reward your top buyers:
Ask them to leave reviews that you can use as social proof in your email marketing campaigns. Reward them for their reviews. You can reward them per review or per set of reviews.
The best way to do so is to use the Challenges feature in Gameball. Create a special challenge or series of challenges for this segment and email them or use in-app messaging.
Use RFM segmentation to reward your loyal customers
Your loyal customers are those who buy from you regularly. However, they may or may not be your top buyers. That said, having loyal customers can increase your revenues by more than 25%.
A business’s ultimate desire is to have loyal customers, that’s why we highly encourage you to reward this segment.
You can give your loyal customers a heads up about new products, services, or discounts before everyone else. You can use the outbound messages feature to run these campaigns.
Create a template to reward customers upon completing their 10th order with your brand. You can email them once they’ve completed 7, 8, or 9 orders to let them know about an upcoming special reward for their 10th order.
You can use email, web messages, or mobile push messages to do so. We recommend using email at the 9th order specifically to make sure they don’t skip it.
The reward can be in the form of many points or, better yet, a special gift voucher. We recommend putting a time-limit on redeeming this voucher of a month or up to 3 months.
Global retailer Amazon does this with its Prime members. It gives them a 1-day head-start for its Black Friday and Mothers’ Day discounts.
You can give them 2 days if you wish. This gives them the opportunity to buy your new products before everyone else. It also makes them feel special and rewarded.
RFM segmentation helps you target customers across the different stages of the buyer’s journey. RFM also helps you see changing buying behavior and act on it to increase customer loyalty, satisfaction, and retention.
Today’s market is becoming saturated in almost every industry. E-commerce is at the top of the list. But that shouldn’t mean you can give up.
It only means you need to build better loyalty marketing strategies and understand your customers and their needs better. Because by understanding your customers, you can create better personalized experiences and retain them for longer.
Want to use Gameball’s RFM segments? Visit the Help Center to learn how to create your first campaign.