The commercial Internet is now over 10 years old, and I’m amazed how many email marketers still send generic email to everyone on their lists. For prospecting it’s almost understandable, but not to your existing customer base.
Plenty of tools and techniques are available to harness email’s power in terms of:
- Getting one-time customers to become multi-time buyers
- Increasing a customer’s average sale
- Enhancing a customer’s long-term value
- Increasing a customer’s purchase frequency
We’ve talked about segmentation by gender, age, interests, and so forth. Now, let’s borrow a tried-and-true process from the postal world. It’s a relatively simple premise that works.
Segment your database into 15 different cells, five each for three different variables:
Using this simple matrix, a 5 for recency means the cell represents the best 20 percent of your database in terms of when they last purchased. A 1 for recency means those consumers haven’t purchased recently. A 1 under monetary means they spend the least, a 5 means they spend the most.
To create this quintile, extract a distribution of observations for the reach, frequency, and monetary (RFM) grouping. Then, sort in descending or ascending order and apply rank.
If you had 1,000 customer observations, sort the monetary grouping in descending order. The first 200 observations get a 5; the next 200 get a 4; the next get a 3; and so on. Repeat the same distribution process for recency and frequency.
From 15 cells, we can produce 125 separate groups, such as:
Your best customers are 5-5-5, because they’re in the top 20 percent of each category. A 1-1-1 is your worst customer.
Each permutation represents an opportunity to send a different message; this is where you can make hay with your database. The message you’d send to a 5-5-5 would be much different than one to a 2-2-2 or a 5-1-1.
It’s not just the message. You can develop different offers based on the group you’re targeting.
Though this approach takes plenty of time and effort to design and execute, it typically pays off in spades in the long run. You develop more relevant offers and learn what segments of your database respond to different marketing communications.
Technology makes it easy to create one-to-one, personalized, customized email — by the thousands. A wealth of tools from companies such as Digital Impact, Responsys, CheetahMail, and ExactTarget make it easy to personalize and customize email based on a wide range of variables. Start with our RFM model, then enhance it with messaging and offers based on gender, age, Zip Code, and more.
Next: designing offers and messages for all these groups.
Want more email marketing information? ClickZ E-Mail Reference is an archive of all our email columns, organized by topic.