Category Archives: Newsletters

Hacking the RFM Model

Customer Experience, DataBase Marketing, Driller Q & A, Measuring Engagement, Newsletters, Web Analytics

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

Q: First of all thank you for your help.  I have some questions I would be pleased if you answer them for me.

A: No problem!

Q: 1. RFM analysis – is it possible to use some other ranking technique rather than quintiles Using quintiles for bigger databases will cause many tied values, isn’t it a problem?

A: Sure, you can use it any way it works best for you. There is no “magic” behind quintiles, you can use deciles or whatever works best. It’s the idea of ranking by Recency, Frequency, and Value that is the key concept in the model.

I’ve seen dozens and perhaps hundreds of variations on the core RFM model, depending on how you classify a “variation”. One change that’s common is changing the scaling, as you mention above, to accommodate the size of the database. Smaller databases use quartiles or even tertiles. Larger databases, choose the ordered distribution that meets the need.

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Measuring Social Media Value

Customer Experience, Driller Q & A, Newsletters, Web Analytics

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

Q: I’m a social media consultant, facing the interesting challenges of measuring success, and wondered, what are your thoughts on social media measurement and life time value? The two seem to go together, but if anyone has thought about it, you would have. Would love to know your thoughts.

A: Just to be clear, the following is specifically about social for use as a Marketing platform, not as a utility or a way to keep in touch with people. Interacting with other people can create a lot of value – emotional value for the participants. There are obviously lots of great uses for social platforms and I’m sure there is more to come in that area.  The question is: does any of this make sense as “media”?

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Use Discounts for Customer Retention? (Incremental Sales / Subsidy Costs)

Brand Management, DataBase Marketing, Driller Q & A, Measuring Engagement, Newsletters

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

Q: Most CRM experts agree that discount is a terrible way to attract new customers. They seem to all agree that these “transaction buyers” are money-losing customers and have no loyalty.

A: I think using discounts profitably for customer acquisition depends a lot on your “Brand Personality” and your business model. That said, often people screw this up and attract the wrong kind of customer.

Q: But, I have seen a lot of different opinions on the use of discounts to increase loyalty and retention among current customers. I have seen experts contradicting themselves on this subject saying that discount is a terrible way to reward gold customers or to move up customers to a “better segment”and after some time they contradict themselves mentioning a successful discount case study (points are a common method used). Jim, what is your opinion about using discounts as a weapon in a retention program?

A: First, we have to define “discount”. Price discounts have the effect of reducing margins, but so do “better service” ideas like “VIP phone lines” and loyalty programs. So you can take your discount on the top line or the operational line, the fact is it costs money to provide good service to best customers in hopes of keeping them. I mean, what’s the $10 million you spent on a CRM system? Choose your poison, it costs money to retain customers.

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