Jim answers questions from fellow Drillers
(More questions with answers here, Work Overview here, Index of concepts here)

Topic Overview

Hi again folks, Jim Novo here.

This Driller knows his stuff, using advanced database marketing techniques on the customer acquisition side. But in a business where the bill gets paid every month and it’s about the same (electric utility), how do you get to the R and F (Recency and Frequency) to model potential customer defections? Great question, and a pithy answer.

Remember, you can use RF profiling on any behavior not just payment related activity! If you don’t know what we’re talking about with this RF stuff, see explanation here.

Q. Jim, Ordered and read your book AFTER reading EVERY page in your website. Your newsletter is outstanding and you seem to be one of the few with real life experience in database marketing with the skills to simply explain with pragmatic examples of how RFM and LTV should be used.

We are a technology based Call Center company with over 70 clients – we do a lot of the “operational” CRM stuff you refer to – Siebel, Onyx, Kana, Webline, as well as a lot of custom developed SFA solutions and data warehousing solutions we developed – mostly the premise of investing to collect enough information to do the 360 view of the customer across communication medium (email, chat, phone, fax) and reason for calling (campaign, sales, orders, info, customer service).

We have a good mix of B-B as well as B-C. We already do a lot of the demographic modeling for list acquisition (SIC codes, size, number of computers, Geo …). One thing I noticed is that we do a lot of lead generation based upon list acquisitions along with inbound marketing campaigns that seem to address one shot Sales, not recurring sales.

For example, we sell and service de-regulated energy for one client – this is sell once, then service. Since they pay every month for the service, how do you suggest the RFM model be used for service based sales since there is not really an R or an F??? We still have acquisition and retention problems, but we mainly focus on operational efficiency through technology, not strategic use of CRM data. I would really like to be able to add real value based upon the data collected.

I know this is not your forte, but I was just curious if you had any opinions using CRM data in an RFM model when the product is basically recurring service.

A: Thanks for the compliments on the site, book, and newsletter. I hope they will be helpful to you as we try to get a firmer grasp on these subjects this year!

It’s a little tough to provide you a direct answer to such a broad question without more details, but in general, R and F are highly predictive of any action-oriented behavior. In a “billing / service” business like a utility, you sometimes have to hunt a bit harder for the action you want to model as predictive.

For example, at Home Shopping Network, use of the automated ordering process (touch-tone interface to the ordering system circa 1990) was very highly correlated with Future Intent to Purchase. Not exactly a traditional RF action, to be sure, but a falling RF score on use of the interface was very highly predictive of a defecting customer.