Do you sometimes ask yourself one of the following questions: which of my customers spend the most? Which customers are the most loyal and keep coming back? Which customers are my newest customers and do they come back? Are there any customers I risk losing? Have I already lost many customers?
Then it may be useful to consider some of the following statistics. It is 5 to 25 times more expensive to acquire a new customer than to retain an existing customer. According to the Harvard Business Review, a 5% growth in customer retention can contribute 25% more profit2. It is therefore very important to look specifically at the customer retention within your organization. The RFM model is a proven marketing model for this. The Special Interest Group (SIG) of tritonX has decided to use the RFM marketing model as a basis to visualize customer retention and to create groups for marketing purposes.
RFM stands for Recency, Frequency, and Monetary. In this marketing model, every customer with a purchase history is assigned a marketing score that consists of 3 values. First of all, there is the Recency assessment, which indicates how recently the customer has made a purchase with your organization. This can be the recentness of purchases or visits, such as the time since the last order or the last contact with the product. The second value is the Frequency, which indicates how often the customer purchases something from your organization or the number of visits. The final value is the Monetary rating, which indicates how much the customer spends on purchases from your organization. This can also be seen as the customer’s intention to spend or the customer’s purchasing power, which is measured by the total or average transaction value.
In het RFM model kan er dan vervolgens gescoord worden op een schaal van 1-3 of 1-5 voor R, F en M. Een hogere waarde geeft dan een ‘betere’ score aan. De scores kunnen ook worden samengevoegd tot een totaal score voor een klant in plaats van drie individuele waardes. Daarnaast kun je een weging geven aan R, F of M door eerst te vermenigvuldigen met een factor voor de totaalscore berekend wordt. De RFM score wordt in tritonX beschikbaar binnen rapportage en segmenten.
In the RFM model it is then possible to score on a scale of 1-3 or 1-5 for R, F and M. A higher value indicates a “better” score. The scores can also be aggregated into a total score for a customer instead of three individual values. In addition, you can weight R, F or M by first multiplying by a factor before the total score is calculated. The RFM score will be available in tritonX within reporting and segments.
With this group division you get a good picture of the customer retention. In addition, it has been shown that it is important to be able to make a clear distinction between new customers and existing or regular customers. This is because the moment between the first and second purchase is extremely crucial and therefore deserves appropriate focus.
Curious how you can get more value out of big data with the RFM module from tritonX? Then do not hesitate to contact us!
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