by Tim Roe
How engaged with your brand are the majority of your database contacts? This fundamental question should determine how your entire emarketing communications strategy is structured.
Until recently, retailers have been under huge commercial pressure to continue doing the same 'load and blast' mass email marketing they've always done. And with good reason. Up to this point it's been so effective, generating serious ongoing revenue and linking to their ecommerce sites, brands have found email has provided the best push emarketing channel bar none.
However, response rates are waning as consumers become fussier about the marketing messages they consume. With each inbox soon to be receiving 25 opt-in marketing emails each day (or 9,000 a year), according to a recent Forrester Research report, something needs to be done to reduce clutter. ISP’s are helping recipients to prioritise their inboxes, helping them to de-prioritise or block email that they no longer want. Google priority inbox, for example, prioritises your email automatically based on what you respond to – so encouraging response is critical to your ongoing relationship with customers. Without proper targeting, your emails can be seen as spam, becoming de-prioritised or blocked by the recipients, forcing customer disengagement.
So, for the pioneering brands, the move is firmly away from sending an increasing frequency of email campaigns to the same dataset, and towards segmenting and profiling individuals by their behaviour and engagement level to identify their intent to purchase. The end result is proven to deliver significantly higher return on investment.
Engagement-RFM - why do we need it?
Combining behavioural data and RFM (Recency, Frequency, Monetary value) creates Engagement-RFM (eRFM). Using this methodology can improve the accuracy of segmentation, strengthen influence and engagement, and lead to an increased ROI. RFM uses transactional behaviour to predict future purchases. eRFM adds the extra dimension of online behaviour to predict future actions. eRFM identifies a person’s intention to act using web behaviour, email engagement and RFM. Each individual element is powerful but incomplete, combining them creates the full story.
The best time to communicate with customers is when they are in a position to buy. Identifying this intent to purchase means your communications will be most relevant, more likely to go into the inbox and customers are much more likely to respond. Monitor the competition - if your competitors are focusing on engagement, it could be their email that makes it into the customers’ inbox and not yours.
e-RFM and the customer lifecycle
e-RFM is used to define the stages within the customer lifecycle and can help predict movement from one stage to another. Look at the intent to purchase on the chart below. Each person can then be positioned somewhere on the lifecycle.
Traditional RFM is based on straightforward transactional segmentation – if someone has bought recently, it follows they are more likely to buy in the future, and the bigger the gap after the first purchase, the less likely they are to buy again. Also RFM helps to focus expensive channels, such as direct marketing, on the most responsive customers. With online there is more data to add (beyond transactional), such as response to email, and how often they visit your website: this moves you up to a whole new engagement level.
As the most relevant communications are based on user activity, plan to build automated rules so a particular segment will receive a specific type of campaign or automated process. Once set up these can run for months, if appropriate.
The number/complexity of segments is governed simply by the financial viability of each – if it doesn’t produce ROI, don’t do it. Start at the most valuable stage, people who abandon baskets - their potential has the highest value of anyone who hasn’t bought from you. Further up the conversion process – identify some key pages/actions that highlight people with key intent who they have looked at multiple web pages, have a high RFM, but have not bought.
When people start showing defection, it is important to keep sending emails as they are still influenced. Traditional RFM techniques says you should reduce marketing activity, however eRFM may show they are still reading your emails and looking at your website – therefore they have a huge potential and they will still be engaged when they are in a position to purchase.
Some people don’t mind hearing from you more often, and would buy more if they did. They are fully engaged with you, they love your brand. These are super-engagers. It’s well worth sending more email to those who want to buy- they are in the buying window and are ready to be influenced.
These behaviourally targeted campaigns evolve to take over from regular campaign activity - sending less email to people who don’t want them and more to people who do. So you talk most frequently with the people with the highest revenue potential (maybe three emails a week, against once a month).
Engagement and touch points
The holy grail for every company in terms of data capture is effectively using engagement marketing that encapsulates all touch points including online, mobile, contact centre, branch, social. It’s important to use channels appropriately and in an integrated way. So utilise online data (eRFM) to target high value people who are engaged and identify subsequent action required:
• With high RFM customers, who have visited your site, are loyal, but may not have purchased for a while - their potential value is so high it may be worth a phone call via your company call centre
• For loyal customers, who are buying, but may not be engaged with email (so there’s a danger you may lose influence) it’s a good idea to take it offline. Call them, send direct marketing or an incentive to complete their new email address
With the advent of social media, it has raised awareness of engagement and organisations now consider it important. When online, engagement is evident everywhere and way beyond just blasting out mass communications. Also with the mobile web, its huge growth means using segmentation is even more important. If a customer is showing intent online, use all the relevant channels to engage with them. Web is central to the mobile channel, and warrants a whole article in itself.
One database or a satellite database?
Keeping a single customer view is vital to modern direct marketing (especially for MI and strategy reporting), but whether it all needs to be stored in the same location is up for debate.
Modern offline/online segmentation is dynamic and real time, with offline data being updated with epos and offline channel data feeds, and online response data from web activity coming in real time. A traditional CRM system would struggle to use this data to build real time segments, that could immediately send an email or initiate a call centre contact via data feed.
e-RFM provides a solid framework for combining online and oﬄine data in a way that eﬀectively describes the customer. It makes sense to the marketing department and will easily dovetail into existing and proven segmentation systems. It’s a segmentation method that can be started at the most basic level, but oﬀers the opportunity to develop in the future and help beleaguered marketers to return good ROI.
For example, gift company Getting Personal used e-RFM to improve their year-on-year revenue by 51%. Matt Dawson, email marketing manager, explains: “By segmenting our data based on RFM and email engagement, we have been able to focus on our most valuable customers, and use a re-engagement programme to target non engaging customers. Not only has this greatly improved our deliverability and open rates, but we have also seen a great improvement in online revenue.”
Ultimately, using e-RFM, the goal of sending emails to people who want them, making them happy (rather than upsetting them) and inﬂuencing them to buy more, becomes a little closer to reality.
e-RFM gives the marketer the ability to:
• Determine the correct frequency of communication for each customer.
• Select who to talk to and when.
• Deﬁne the customers’ stage in the customer lifecycle.
• Inﬂuence behaviour.
• Increase customer engagement.
• Increase Lifetime Value by reducing attrition and increase overall ROI.