Scoring models for retail marketing
Every marketeer working in retail knows about the RFM model, one of the pillars of marketing in retail. It has been used for many years and is still very relevant in the digital world we live in today and therefor often used in Marketing Automation. We at Intracto have added another.
What does RFM stand for?
- R stands for Recency: how long ago did the customer buy from you.
- F stands for Frequency: how often does the customer buy from you.
- M stands for Monetary value: how much does the customer spend with each purchase
Scoring based on proven behaviour.
Ranges, based on the typical behaviour of your business, are defined for all 3 criteria and every range is allocated a number of points.
For example: R(ecency): customers who bought your brand the past month get 3 points, those who bought in the last 2 months (but not in the last month) get 2 points, those who bought in the last 3 months (but not in the last 2 months) get 1 point. The same applies for F(requency) and M(onetary value).
Based on the scoring (points), customers are qualified as being gold, silver or bronze.
Adding an E
Like many, who have added an extra P to the traditional 4P concept from Kotler, DMI added an E to the RFM model.
E stands for engagement. In this digital world it is easy for marketeers to track the engagement behaviour of consumers:
– clicks in e-mails, on advertising on websites, on social media, etc.
– what pages did my customer visit on my website
– what products did he put in his webshop basket.
Intensive visits for one product group on your website or webshop are a clear indication of intention to buy. That is why adding the E to the traditional scoring system is essential.
How do we apply (E)RFM in retail marketing?
Based on the scoring model, DMI builds programs in a Marketing Automation software, to build brand loyalty, predict and prevent CHURN, etc. Thus building a solid and stable customer audience for retailers.