How should I segment my lists to increase response?

Clients regularly ask us how they should segment their lists to achieve better response from their email marketing. Segmentation doesn’t have to complex, and a few simple segments could make all the difference.

One of the most commonly used forms of segmentation is RFM (recency, frequency and monetary value). RFM is a good way to define and understand customer value. It can help to define acquisition data, as well as helping you to shape your customer retention programme.

Why segment?

Segmentation is the best way to make your marketing relevant to the recipient. You can tailor your message based on the segments you decide upon their interests and what you want to achieve from that segment. Segmentation also could save you money, as you will only be targeting those who meet your segmentation criteria, rather than a blanket technique. The most important benefit, is that you will be sending material that is of interest to your recipient, therefore they will engage with you and will increase the likelihood of a response.

Using the RFM model in practice

The most powerful factor that determines whether your customer will buy again is how recently (R – weighted 35%) they made their previous purchase. They are engaged with you at the point of purchase and response rates decline as time goes on.

Frequency (F – weighted 50%) is the second most powerful indicator of response. These customers are engaged with you and are most likely to purchase from you and engage from you again. Keep them happy and nuture them as they are the most difficult to get back.

Those who have made large purchases (M – weighted 15%) are more likely to continue to spend at higher levels, but may buy less often.

A simple way to segment your customer base is using a matrix like this.

Now, also think about the Lifetime value of that customer. If you can move those who have just purchased from you, to purchasing from you more frequently their Lifetime Value will increase.

If you would like some advice or consultancy on how to segment your data,  please do contact us by emailing strategy@adestra.com

Reena Mistry
Group Account Director