I recently asked a doctor who is not a true believer in taking nutritional supplements this question:
Is there ONE vitamin or supplement that you could recommend to your patients that you feel has no downside but also has clear upside for most people?
He replied, like many others have (including skeptics), that the ONE he would recommend to almost everyone is fish oil…the best source of Omega 3’s…and a supplement with more scientific data than most to back up many of the claims regarding how it makes us healthier.
Of course he excluded people who are allergic to fish or soy…and I am not going to give you all the exceptions…we will leave that to the folks who sell the stuff…
But this idea of the “one thing above all” got me thinking about direct marketing…as most things do…and how we can all be super healthy with all of our marketing efforts.
I asked this question out loud:
What is the ONE fundamental every marketer needs to know, regardless of the medium they work in, that is “the fish oil of direct response?”
That is, what is that one thing that everyone can apply to everything they do when selling or marketing any product or service that will steer them most powerfully to their best customers, now and in the future?
And it came down to three simple letters:
I wanted to talk about RFM today to make sure everyone in my online family understands that this “vitamin” is the one everyone needs to take…digest…and unlike fish oil, there is no chance of an aftertaste and there is no chance that you will ever be allergic to it.
If you know all about RFM already, you can stick around for a refresher on the most important principle in direct marketing (in addition to its kissing cousin “Lifetime Value” which we can talk about another day).
I’ve been shocked how many people practicing direct response marketing today are not even aware of the term–or that analyzing RFM on their customer list might be the most critical and basic thing to do over all else.
While at its most sophisticated level on multi-million name databases you may need a statistician figuring out RFM formulas and models for you, it’s actually a pretty simple concept accessible to anyone–and much of it can be done by observation and “tallying” (or tagging) your prospects and customers this way.
Let’s break it down:
1) “R” is for Recency:
What this says is that a suspect/prospect/customer who interacted with you more recently is far more responsive (and immediately more valuable) than someone who responded less recently.
I remember when I entered the direct marketing industry in 1981 how much this didn’t make sense to me logically…thinking that if someone just bought from me, they now had less money to buy something else from me right away.
I even remember an old-time legacy publisher who did not rent their mailing list of book buyers to other mailers offering books because they foolishly thought that, “every person has a set budget to spend on books per year and we only want them to spend with us.”
I guess it’s no surprise that this company is no longer in business, failing to understand that no one has unique names, only unique lists…and also failing to understand that all boats rise when we keep the folks on our list active and happy with all kinds of relevant offerings.
Thank goodness I discovered how naïve I was within days of entering the world of direct response and that I didn’t fall into the trap that many others did at the time.
It still astounds me when I think about the companies who considered themselves direct marketers back then didn’t understand the power of recency.
Fortunately, most marketers today know the importance and value of recency…when have you NOT received a pop up or immediate cross-sell (or up-sell) offer immediately after buying (or even inquiring) about something online?
In direct mail, the names of more recent buyers are called “hotlines”–and list owners still charge a premium for those names.
I have been lucky that I have been able to see firsthand–over decades of mailing millions of names and almost always selecting hotlines on lists–that is more often than not the make-or-break whether a list pays out.
The importance of recency should never be lost.
And this is as true today as it was in the past.
2) “F” is for Frequency:
Man cannot live on recency alone…
Frequency pushes us to combine the most recent buyers (or inquiries) with the most frequent buyers or inquiries (what we called “multibuyers” in the direct mail list business).
Recency and frequency give you a one-two punch that will enable you to segment any list, no matter what the size, in order to focus on the people who will be your best customers for subsequent products or offerings.
Again, for many of you, I know this sounds basic.
Of course someone who bought from you multiple times is a better customer than someone who bought from you once…or never…right?
But let me add creative and copy into the mix here:
Are you communicating with a “multibuyer” with different language based on their relationship with you as opposed to communicating with them as a one-time buyer or inquiry (for example)?
Or are you sending the same message to the “3 time buyer who bought their third product from you today” that you are also sending to the “one time buyer from 6 months ago?”
The first group is “family”…the second group are invited “guests.”
And there are even cases where frequency trumps recency…based on the direct marketing rule of thumb that your “expires” (or previous customers or buyers) are usually your “best list.”
Example: If you had a subscriber to a publication who renewed multiple times and then stopped subscribing 6 months ago, mailing them again with messaging that speaks to them like “family” (e.g. “We want you back!”) rather than messaging that speaks to them as a “guest” (i.e. like any other new prospect), you are clearly missing a huge opportunity. And this would apply if they stopped subscribing a year ago…or more.
While recency of when they expired is still important to know and select by, I have had experiences in my career where I was able to mail expires who have not been active for 3 or more years and we could still revive them–and make them active again–by knowing their real value as previous, frequent customers.
I know most of you know this instinctively…however, I have consulted with too many marketers and heard too many horror stories from folks who use “one-size-fits-all copy” to all segments of their audience; and even something as simple as “we want you back” to a segment of frequent, former customers (who may not even be recent) can double your response rate…or even more. I’ve seen that happen.
They know you know them already…you know them much better than you might be acknowledging…and you also (I hope) once loved them.
Why would you want to hide that?
3) “M” is for monetary value:
Now round out this RFM formula by making sure you know the total amount of money every person on your list has spent with you…and create “tiers” that make the most sense based on the price point(s) of your products.
The amount of money spent by each customer, in isolation, can be deceiving however…but combine it with recency and frequency and you will see the power of segmenting your list in this very basic way.
And making sure you don’t have “one size fits all promotion” as I mentioned before (emails, letters, anything)… and that you talk to your customers based on their relationship with you…all “calculated” through RFM…can be a game changer.
I want to share a quick story to bring this home:
I have a friend/client who has 18 different products…and she does an incredible job cross-selling and up-selling to her existing customers the products they have not bought previously.
But when I saw a breakout of her buyer list, something like 80% or more of the folks had only bought one product while most of the others had bought 2 or 3 at most…and it seemed that with some “RFM segmenting tweaks” there was huge potential to get more of those “1 to 3 time buyers” to buy much more given all of the related offerings available.
We got religion on this when I noted that there was ONE person on the list who bought ALL 18 products (and no, it was not a relative!)…and I asked the question:
“When did you invite this 18 time buyer to dinner?”
Of course I was being a little sarcastic…but I was also trying to make an important point.
Yes…”lists are people too!”
From that question we started surveying the most recent, frequent and high dollar spending customers, finding out why they bought multiple products and also in what order they bought them to look for trends in buying behavior.
That led to what I call a logical (and much more successful) “contact strategy” where we started offering products to previous buyers in a sequence that made more sense than simply making random offerings.
This strategy was rooted in addressing the needs and buying patterns of existing customers…and of course with copy and creative that spoke to why their recent purchase leads perfectly to the next purchase…with customized copy to different segments.
I am only scratching the surface how something as basic and fundamental as RFM can change your entire marketing strategy in terms of which offers to offer when–and how to speak to different segments of your family when making those more targeted offers.
I admit that talking about RFM in a little less than 2,000 words doesn’t do it justice…but I needed to get this out there just in case there is even one person in my online family who doesn’t look at RFM as the most important, basic segmenting tool at their disposal.
It’s the one thing that always needs to be in play when doing any kind of direct response marketing.
However, that doesn’t mean you should forget to take your fish oil either.