Wiring for segmentation
RFM helps sift your customers into useful segments
There are dozens (hundreds?) of ways to know your customer (KYC). Some brands love personas. Others will get to know shoppers IRL in stores. For marketers, there’s one foundational KYC tenet: RFM.
RFM – Recency, Frequency, and Monetary – is everyday segmentation.
In the old days of direct marketing, there was a real cost constraint. Postage and printing carried a real cost, and your budget would allow you to ship only so many books (catalogs) and cards (postcards).
Carefully selecting an audience for a mailing was a battle. RFM was your ally.
Typical RFM schemes saw quintiles by part (R, F, and M), with the most audience allocated at the intersection of the top few Rs, Fs and some remnant Ms. The top cells earned the full glossy catalog.
The 4 segments put forth from Signifyd (this particular graphic for electronics) is a good starting point for segmentation and contact strategy: knowing how much revenue shopper groups contribute - and grouping those along recency and frequency means.
RFM is a marketing standard. However, it has been largely retired across DTC.
As economic pressures mount on DTC brands, though, activating your known shoppers is moving to the spotlight, and those brands that can successfully re-appropriate segmentation into their programs will be positioned to thrive (or, simply to survive).