How can you use RFM analysis to score your leads?

1 What is RFM analysis?

RFM analysis is a method of dividing your customers into different groups based on three factors: recency, frequency, and monetary value. Recency refers to how long ago a customer made a purchase or engaged with your brand. Frequency measures how often a customer buys from you or interacts with your content. Monetary value indicates how much a customer spends with you or contributes to your revenue. By assigning a score to each factor, you can rank your customers from the most valuable to the least valuable and tailor your marketing efforts accordingly.

2 How to calculate RFM scores?

To calculate RFM scores, you need to have data on your customers' transactions or interactions with your business. You can use tools like Google Analytics, CRM software, or spreadsheets to collect and analyze this data. Then, you need to decide on a scale for each factor, such as 1 to 5, and assign a score to each customer based on their performance. For example, a customer who bought from you yesterday might get a 5 for recency, while a customer who bought from you a year ago might get a 1. You can use different criteria or formulas to determine the scores, depending on your business goals and industry standards.

3 How to segment your customers based on RFM scores?

Once you have calculated the RFM scores for each customer, you can segment them into different groups based on their combined scores. For example, Champions would be customers who have high scores for all three factors and are likely to respond to offers and referrals. Loyal customers are those with high frequency scores, and Potential Loyalists are recent and high-spending customers who may become loyal if their engagement and satisfaction is increased. New customers have high recency scores but low frequency and monetary value, while At-Risk customers have high frequency and monetary value but low recency. Finally, Lost Customers are inactive, infrequent, and low-spending customers who are unlikely to return or respond to marketing efforts.

4 How to use RFM segments to score your leads?

RFM segments can help you score your leads based on their value and potential for your business. Champions should be given the highest score, as they are ready to buy from you or refer others to you, and should be prioritized in lead generation and nurturing campaigns. Loyal customers should receive a high score, as they are loyal to your brand and buy frequently, and should be rewarded with incentives, discounts, or loyalty programs. Potential loyalists should receive a medium-high score, as they are recent and high-spending customers but need more engagement and frequency. New customers should receive a medium-low score, as they are new to your business but have low frequency and monetary value; they should be nurtured with educational and informative content, free trials, or demos. At-risk customers should receive a low score; try to re-engage them with win-back or reactivation campaigns, surveys, or incentives. Lastly, lost customers should be given the lowest score and excluded from lead generation and nurturing campaigns; remove them from your database or email list or mark them as cold leads.