Parts one and two of this series discussed a proven way to segment a database based on the time-tested recency, frequency, and monetary (RFM) approach long used by direct marketers. Today, we’ll talk about crafting offers and messages for the 125 permutations the chart below represents.
Using this simple matrix, a “5” under recency means the cell represents the best 20 percent of your database in terms of when the last purchase was made. Similarly, a “1” under recency means those customers haven’t purchased recently. A “1” under monetary means they’re in the bottom 20 percent in terms of amount spent, while a “5” means they’re top spenders. A 5-5-5 represents your best customer, while a 1-1-1 represents your worst.
Today we’ll discuss offers and messaging for the groups that emerge from this exercise. Offers and messages to 5-5-5 customers should be very different from those to 1-1-1 customers. On the other hand, offers and messages for 5-5-5 consumers may be the same or very similar to 5-5-4 consumers.
The offer is at the heart of email designed to:
- Retain and nurture good customers
- Reactivate customers who haven’t recently purchased
- Turn inquirers into buyers
- Increase the average sale
- Get consumers to buy more often
Let’s look at three groups from the matrix and the type of offers you might construct for each:
- 5-5-5 customers are your best. They’re just one segment of 125, but they most likely represent 5 percent of total sales. These are repeat customers you must coddle and provide with a personalized experience to keep them loyal. The most intelligent marketing strategies for customers like these are cross-sell email, special previews, and reminder email. These buyers seek service and a personal touch, so a one-size-fits-all message only puts you at risk of losing them. Additionally, it’s likely a customer segment you can mail to more frequently, but you must personalize that experience if you’re going to step up contact frequency.
- A 5-1-3 is a brand-new customer who showed on her first purchase a propensity to spend an average amount with your company. Your goal with every subsequent email should be to get this person to the next level and build a path to the loyalty of a 5-5-5 group member. The focus should be heavy cross-sells and aggressive monetary offer messages to get a second response.
- A 1-3-5 consumer is someone who hasn’t purchased recently, but formerly bought fairly often, spending a good amount of money. This group should fall into a customer reactivation strategy. Compared to other inactive customers, this group is most likely to respond. Your offer must be very aggressive, most likely a significant discount on the next order. Your marketing message should remind these consumers of previous purchase experiences they’ve had with you and encourage them to want to shop with you again. Consider this group for reduced email frequency to keep them subscribed. There’s no sense in overloading inactive customers with less intention to buy with email messages.
I don’t expect you to develop 125 offers unless you have a gigantic database containing large numbers of consumers in every cell. Target the top three to six permutations first. If the results prove the method, do the next 10, and so on.
Messaging is straightforward once offers are in place. Your email formula or template should consist of:
- An opening paragraph as to why you’re writing. Example: “As one of our best customers, I’m writing to thank you for your continued business and to give you a very special reward.”
- A succinct presentation of the offer. Example: “Redeem the e-coupon below to get free shipping on your next order… good until 6/30/05.”
- Offer-related graphics.
- Call-to-action graphic. Example: “Your $20 reward is just a click away.”
A consideration here is having two-three messages for each of the above bullet points that deliver the most relevant message based on the RFM group.
A Really, Really, Really Important Warning
A catalog company recently went out of business due primarily to the fact catalogs were sent to the company’s worst customers.
Before you send a single email, make sure you have a fail-safe testing process in place, one that requires multiple confirmations the messages are sent to the correct groups. Though the financial costs of making the mistake of sending a 1-1-1 offer and message to a 5-5-5 customer aren’t as great as they would be for a catalog, return on advertising spend (ROAS) and top-line sales will meet with even greater effect. Consumers expect a higher level of personalization from email marketing. Negative response to irrelevant email is much greater than to print marketing communications.
Make sure that never happens, and keep reading…
Want more email marketing information? ClickZ E-Mail Reference is an archive of all our email columns, organized by topic.
There are so many ways in which email continues to develop and progress, but in one way email still lives in the last decade.
Email marketing may not be new, but it’s still effective, so now is the time to dive into the best ways of mastering it to improve marketing success.
As the United States makes way for a new resident in the White House, I've been thinking about the election that led up to it. Others have pontificated about the impact email had on the presidential campaigns, but I'm not buying any of it.
With Halloween, the US presidential election and Thanksgiving in the rear-view mirror, we're now headlong into the all-holiday-all-the-time stream. And, we all know what's coming.