Geoff Wolf, EVP Client Strategy
Adding Human Behavior to Traditional RFM Models
Direct marketers are shoppers, too. We can learn a lot just from observing ourselves as we make purchasing decisions. Let’s take that all too familiar call – the call to pick up something at a grocery store on the way home.
This call, and the purchasing behavior that goes with it, has all the usual direct marketing elements present within classic “RFM” segmentation:
Recency – since they called yesterday needing something else
Frequency – as this phone call happens too often
Monetary Value – the caller knows we have cash in our pocket
So, if all we need is milk, we will pick a grocery store that is on our way home. That is raw, simple human behavior. We won’t drive too far out of our way for one item. In this example, we have appended RFM with a behavior, namely convenience.
We also need to consider behavior on the direct marketing side and go beyond the transactional RFM backbone that’s supported us for decades. The key word here is behavior – it is time to venture into the unconscious elements of human behavior and append RFM segmentation.
Every brand should have at least one behavioral metric appended to all of its customer records that allows segmentation by basic, raw human behavior. One new paradigm might be “RFM+B.”
Let’s look at a few examples:
Direct-to-Consumer Brands
Special occasion purchasing is a common behavioral metric for a consumer gift catalog. When I reflect on my own behavior as a shopper, there are certain brands I will only engage with during the holidays. My brain is wired through past experience to only think about these brands at certain times. I can’t help myself!
So based on my behavior, these brands should add the behavioral metric “historical occasion transaction” within my buyer data file. Then, add it to their house file modeling to use for future prospecting efforts. Make a marketing investment with this type of person only if they have a purchased during a previous occasion of some type.
The actionable takeaway here is to look for behavioral patterns when investing marketing dollars aimed at buyers and prospects. People tend to be stuck in purchasing patterns, and your marketing investment may not be enough to change age-old buying behavior. Therapy works, but that may go a bit beyond our expertise as marketers!
Another actionable metric for consumer gift brands is appending records for “self” versus “gift” purchasers. There is a very different perception involved when I purchase for myself and how “I” will feel about receiving a product versus how someone else will react and perceive me when they receive a product. The actionable opportunity here is to use targeted content and avoid sending the same “story” to both “self” and “gift” purchasers. These behaviors are distinct, and should be treated as such.
Direct-To-Business Brands
A common behavior for businesses is purchasing only when they have an immediate need. These are the folks who come to work in the morning, notice something is out of stock or broken and decide to buy today! This metric is all about top-of-mind brand awareness … a “buy spur of the moment from first brand that comes across the radar” metric. It even supersedes RFM in some cases. Identify all customers that conform to this behavior, then tag their records accordingly and market them with this knowledge.
A second purchasing metric that may be at work for some brands in the B2B arena is the need for a phone call to instigate a purchase. It is not unusual for a phone call rather than an actual purchase to be the most important result of certain marketing investments. In this case a metric around the presence of phone numbers may be critical as well as combining telemarketing and other marketing efforts into a single campaign.
At their most basic level, direct marketers are shoppers. Like you. Like me. We can all learn a lot by observing our own behavior. How we make a decision to turn into this grocery store versus that grocery store reveals a glimpse into what simple, raw behavioral metrics may be relevant to managing our own customers, and in turn, the direct marketing campaigns we send to them.
And whatever you do, don’t forget to pick up that milk.
Need some help applying human behavior to RFM segmentation? Call 913-236-2401 or email GeoffW@jschmid.com.
Tags: behavioral metrics, direct marketing, purchasing behavior, RFM segmentation