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Predictive Segments Using RFM Modeling For Marketing

It goes without saying that serious marketers understand the importance of “know thy customer.” Instead of simply focusing on generating more views or clicks, marketers must follow the paradigm shift from increased marketing to the masses and generating views, opens, and clicks to retention, loyalty, and building customer relationships.

As a marketer, instead of analyzing your entire customer base as a whole, it’s better to segment them into homogeneous groups, understand the traits of each group, and engage each one of them with relevant campaigns rather than segmenting on just customer age or geography.

In other words, in order to deliver relevant, personalized, and timely content to your customers you need to look beyond demographics into behavior across different channels and more importantly you need to be able to do that in real time and of course without having to be a certified IT engineer, after all you are in marketing and not coding.

One of the most popular, easy-to-use, and effective segmentation methods to enable marketers to analyze customer behavior is the RFM analysis.

What Is RFM Analysis?

RFM stands for Recency, Frequency, and Monetary value, each corresponding to some key customer trait. These RFM metrics are important indicators of a customer’s behavior because frequency and monetary value affects a customer’s lifetime value, and recency affects retention, a measure of engagement.

The goal is to predict which clients are more likely to buy again in the future. RFM model is a proven marketing strategy based on customer behavior segmentation. It groups customers based on their purchase history – how recently, with what frequency and of what value did they buy.

RFM analysis helps marketers find answers to the following questions and more:

  • Who are my best customers?
  • Which customer has the potential to buy more?
  • Which customer has been churned out/has lapsed?
  • Which customer can the business afford to ignore to effectively utilize budgets?
  • Which customer can be converted by creating value through promotions?
  • Which of your customers are most likely to respond to engagement campaigns?
  • Who are the customers who buy only discounted items?

Through RFM, businesses can recognize and focus on converting critical customer segments like customers on the verge lapsing or dropping to becoming engaged and active customers. Through effective targeting, RFM helps businesses utilize their marketing budgets wisely and effectively, while also increasing the overall impact of marketing on the business.

How does RFM Work?

Historically, setting up an RFM model required some technical configuration based on some metrics defined by the business.

For example, a business would put the highest value (score) on a customer who shopped recently (say within a month), visited frequently (more than 10 visits per year), and spent a certain amount of money ($10,000 in the past 12 months). Then any customer who falls within that bracket will get the highest score and the business would then label that “segment” of customers (usually the name would be Champions).

The business can define different segments and give them scores so customers would be grouped according to their RFM score. The RFM combination is important because as a business you don’t want to focus only on high spenders who might be casual customers who don’t visit much or did not visit recently. Also you don’t want to ignore small spenders because they might be very regular.

However, as the name implies, the RFM model is about spend and visits but the customer universe is much more complicated than that. A business that is both online and offline needs to setup different criteria for online customers, offline customers, and both. Furthermore, customer demographics and engagement needs to also be included to optimize the marketing spend to target those who are engaged versus those who never respond to campaigns. You add to that product categories and NPS rating (customer feedback) and you get an idea about the different scenarios that a business would be looking at.

Sounds Complicated?

On paper (or on screen), yes all that might sound too much for a marketing team to handle. However, through AI powered segmentation along with simplified UI that is designed mainly for marketing teams, businesses are now able to easily and visually define the different customer groups that is relevant to their business then engage those groups in a personalized, relevant, and timely manner.

Technology should be an enabler not a hindrance. The UrbanBuz team had that in mind when they built the Audience product, which was designed to give the marketers full control over their data without the complexity and the overhead.

With UrbanBuz Audience, which is a standard feature of our CDP, you can create any customer segment you want based on the RFM model and beyond to really optimize your customer engagement and create exceptional customer experiences.

You can visually define your customer segments by easily combining all the different elements to fine tune each segment. You can combine demographics, with RFM, with browsing behavior, abandoned carts and more to create optimized segments.

Once created, the system would automatically keep each segment up to date and in real time so you can engage with the right audience in real time whether through our omni-channel Automated Journey product (where you can create full flows based on each segment), or through our omni-channel Campaign Management product.

You can also use the segments across different dashboards to have a deeper analysis of each segment’s data.

No certification required, all you have to do is click and define you segment and let our system do the rest.

 

 

You want see our platform in action? Book your next demo HERE.

 

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CAPI

The Death Of Browser Cookies & What That Means For Online Ads

For 25 years, third-party cookie technology was the main source of DATA that forms the basis of advertising. However, due to growing privacy concerns and regulations, technology companies and more specifically “Internet Browser” companies like Apple (Safari), Google (Chrome), Microsoft (Explorer), and Firefox and others have started to implement stricter privacy policies when it comes to tracking people who are using those browsers through what is known as the third-party cookies. Some browsers—Safari and Mozilla Firefox—already no longer support third-party cookies. The announcement by Google that it too will block these cookies in Chrome by end of 2021 has provided the impetus for a range of responses from martech, adtech, advertisers and publishers.

To be clear, there is no threat to first-party cookies, the cookies used by websites to collect information about users who have chosen to interact with them. On the other hand, Thirdparty cookies are created by domains that are not the website (or domain) that you are visiting. These are usually used for online-advertising purposes and placed on a website through adding scripts or tags. A thirdparty cookie is accessible on any website that loads the thirdparty server’s code.

Take for example the Facebook Pixel ID, which is simply a snippet of code that is embedded within the web site that automatically tracks users’ activities like browsing products, and shopping carts (even abandoned ones) that feeds into the Facebook advertising algorithm that enables businesses to target users on Facebook more efficiently. It is through the Pixel ID that Facebook is able to display an ad showing the product that you left in your cart a few minutes ago.

With browsers blocking that kind of code to be used on web sites, this leaves online platforms like Facebook (along with businesses and online advertising agencies) somehow in the dark and the overall efficiency of online advertising goes down drastically. This poses a big challenge for businesses as they need the data to optimize their online ads but they can no longer rely on third-party cookies to do that.

How To Overcome The Challenge Of No Third-Party Cookies

No longer able to rely on third-party code to collect user data that is essential for optimizing online ads, businesses are now faced with the challenge of collecting that data themselves directly on their sites and then send that data to online platforms like Facebook where that data is used to help them optimize their online ads targeting.

That does not mean that businesses now need to start hiring developers and build software development team as there are other companies that can do that for them. However, this is something that businesses now need to plan and and, more importantly, budget for.

One of the most efficient solutions to help businesses tackle that challenge is the Customer Data Platform, CDP; a solution that collects, unifies, and centralizes the customer data of a business across the different channels, offline and online. That data can then be used by the business to efficiently engage their customers and to also optimize their online ads by sharing that data with the likes of Facebook and Google.

One of the many advantages of a CDP is that it enables the business to easily control which data to share with the online ads platforms as opposed to having third-party cookies blindly sending all information out. This means that business can still be able to optimize their online ads while adhering to the privacy regulations.

The UrbanBuz CDP Platform With Online Ads Integration

With the UrbanBuz Customer Journey Management (CJM) platform, a business can quickly centralize all their customer touch points, online and offline, and with the very user-friendly and intuitive design along with seamless integration with online ads platforms like Facebook and Google, they can easily connect their data to their online ads accounts, control what data to use to optimize their online ads, and measure the ROI of those online ads offline and online.

Customer data is critical to the success of a business now more than ever as privacy regulations are locking down on random and blind data gathering without the knowledge and consent of customers. However, businesses now can take control of their relationships with their customers and gather data they desperately need for their growth in a safe and efficient manner.

To learn more how UrbanBuz can help you optimize your online marketing, click HERE.

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CDP

Notes On Digital Transformation: Customer Data Hub

In “Notes On Digital Transformation: The Customer”, I discussed why customer data is important for business growth and the importance of the data system to be agnostic of any technology that connects to it and to be flexible and scalable to meet the future needs of the business.

So what does it mean to have the proper structure to store and organize customer data?

It is important for the business to structure and collect data based on objectives they want to achieve. A good number of businesses make the mistake of deciding to capture everything about the customer whether that data is relevant to their business or not and whether they will act on it or not.

Also it is important that the structure, a business designs today, is flexible enough to add more data types in the future. For example, WhatsApp communication was not a standard piece of the business communication channels a year ago but now it is, which means that businesses now need to efficiently store those conversations as part of the customer’s record.

The basic customer data structure should help the business answer the following questions (because remember the whole purpose of this is to empower your marketing team with the data they need to engage with those customers):

1- Who is my customer? This is basically the identity of the customer (name, birthday, gender, nationality, etc.)

2- What is the shopping behavior of my customer? This is related to transactions (online and offline).

3- What is the engagement behavior of my customer? (Open emails, clicks, and any other campaigns related data)

4- How does my customer feel about my brand? This is related to feedback (surveys, customer service, and Social Media) and referrals

Those are the fundamental questions that every business should be able to answer and they cannot do so without properly storing and organizing their customer data.

Now a lot of businesses would say that they already have a system to store the customer data and by that they mean a CRM system. That’s great but if we take a closer look, Customer Relationship Management (CRM), according to Salesforce, is a strategy for managing an organization’s relationships and interactions with customers and potential customers. CRM system helps companies stay connected to customers, streamline processes, and improve profitability. It can be used by different verticals in the organizations and also helps them to focus on the relationship with individual customers.

In other words, CRM give businesses visibility of customer contact information and sales opportunities. Some new generations of CRM even have some capabilities to automate marketing campaigns to those customers either directly or through additional execution tools. They help with lead nurturing, customer retention, and up-selling to existing accounts.

The Primary users of the CRM system is Sales and Customer Service representatives and NOT marketing teams. Case in point, one of the leading CRM companies in the world is Salesforce, so they have literally the word Sales in their name to emphasize the role of their system regarding sales teams.

However, if you remember from “Notes On Digital Transformation: An Introduction”, I mentioned that the main purpose of creating a centralized customer data structure, that collects and organize customer data from different kinds of sources, is to enable “Marketing” teams to engage with customers, pure and simple.


Ok so if CRM is only a “piece” of the puzzle, then what can a business do to create that Customer Data Hub that would serve “Marketing” teams?

In recent years, we have seen the rise of what is known as the Customer Data Platform (CDP), and according to the CDP institute, a CDP must have the following capabilities:

●     Ingest data from any source

●     Capture full detail of ingested data

●     Store ingested data indefinitely (subject to privacy constraints)

●     Create unified profiles of identified individuals

●     Share data with any system that needs it

Gartner defines a CDP as a “marketing system that unifies a company’s customer data from marketing and other channels to enable customer modeling and optimize the timing and targeting of messages and offers.

A few years ago, Salesforce started a CDP initiative to make it part of their products suite and they are acquiring companies to expand their capabilities in that area.

Whether you call it CDP or something else is not the point, what matter is for the business to setup a system that captures all different kinds of customer data to create one universal customer profile and then plug that data back into any tool that can use it for marketing purposes.

In other words, the CDP enables “marketers” to bring in huge amounts of online and offline data from a multitude of sources, then match, merge and remove duplicates to produce a Single Customer View, without the requirement of help from a team of engineers or IT specialists. Each unified customer record can then be segmented, analyzed and used to make recommendations to help create a personalized customer journey.

So, the aims of the CDP are to empower the marketing team to use clean, trustworthy and compliant data across all their marketing channels, and to act as a single source of truth about their customers to enable analysis, intelligence gathering and the automation of targeted, personalized marketing campaigns.

Another key aspect of CDP is simplicity and ease of use. Since the CRM database is highly complex, they require an IT team for setup and management, while CDP was created to be simple and manageable by marketing professionals.

So the key thing to emphasize here is that rather than working with a database (or databases) owned and controlled by IT. This means marketers do not have to go back and forth to IT and make requests to access data and get that data back. Marketers can manipulate and control data themselves, a simple but a very new concept.

A CDP (or CDP like systems) lets marketing teams leverage their data by putting the power in their own hands. This can be used for analysis and research, to make segments, to build and execute campaigns and get reports.

That all sounds good on paper (or screen) but the reality is that most businesses already have legacy systems, or they just spent millions installing a mammoth of a CRM system that was supposed to solve all their problems, or they already have several proper systems in place that do their jobs separately but are not connected, and the list goes on about the barriers that stand in the way of a business to even start thinking about centralizing their customer data and kicking off their digital transformation.


So what are the challenges to setting up a proper customer data hub?

Here businesses are presented with two options:

1- Replace existing system(s) with a modern one that is designed to propel the business into the future.

2- Gradually revamp their technology ecosystem by creating something that sits on top of the legacy systems and that has the ability to connect with modern day tools and systems, which gives the business the flexibility to get started fairly quickly without disrupting the existing infrastructure and some of the existing processes (which also means less cost).

It is important to highlight that until a few years ago, the first option was pretty much the only option available because that was how technology was structured and built. One mammoth system to rule them all. Then a few years ago technology evolved, like it always does, into open platforms and cloud technology, in other words technology now allows us to build different “specialized” systems (or products) that can easily connect to each other to do a lot of different things. What is interesting about those systems is that a lot of them follow the plug-and-play model, where no installation is required, no expensive hardware to buy, no costly support, and more importantly no expensive upgrades, so in theory those systems never get outdated.

Now you might be thinking, that is great and businesses are naturally gradually revamping their systems to move quickly without disrupting the business a lot and without spending tons of money. Unfortunately, that is not case for many reasons, one of them is old habits die hard.

Remember in “Notes On Digital Transformation: An Introduction”, I mentioned that part of the digital transformation journey is people and changing the mindset of those people. Some of those people are in IT where the mindset is still one system to rule them all and one big initiative to change the world. So we still see businesses (especially big ones) that go the route of changing everything and moving from one big system to another big system with very unrealistic expectations about time, benefits, and cost. This mindset gets even more challenging by the simple fact that this new concept, of centralizing customer data that easily plugs into different marketing systems, shifts the control and decision making power from IT to Marketing. A lot of organizations are still struggling with that shift.

This is why it is important that businesses start adopting the approach of building a solid data foundation on top of which multiple, connected, solutions can be plugged into to serve the different needs of the different divisions. As long as the data foundation is solid then implementing and changing systems on top of that foundation should be cost efficient and quick.

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