In brief: RFM segmentation divides customers by the time since their most recent purchase, purchase frequency and monetary value. It helps distinguish communication situations, but does not itself explain a customer’s motivation.
How I use RFM segmentation in practice
With RFM segmentation, I first determine which decision it should make more precise. I write down the current state, intended customer, available alternatives and company constraints. Then I look for one change that can be made and verified. Theory is useful only when it helps choose a priority, owner and something we will consciously not do now.
What to watch out for
Beware of trying to encompass all customers and all channels. RFM segmentation should help select something and reject something. Without boundaries, generic communication arises that anyone could use. Another mistake is changing direction after every weaker week instead of checking the original hypothesis.
Questions for decision-making
- Which specific decision should the term make more precise?
- What is our assertion based on, and what is still only a hypothesis?
- What will we do differently because of this decision?
- Who owns the change, and when will we evaluate its impact?