From Noise to Niche: The Magic of Segmentation in Personalizing Your Message


Ibby Syed

Finding new customers can be infuriatingly difficult, expensive, and time-consuming. While it’s always good to be on the lookout for potential ICP candidates, it’s also crucial to drill down on your current customers. After all, if you fail to cater towards your current customers, you might just lose them.

So what’s the best way to make use of your existing customer base? How do you get your customers to keep coming back to you and making repeat (and potentially more profitable) purchases?

The answer is RFM, the superior segmentation strategy.

  1. The R and F.

Not only should you segment your market, but you should also segment your customer base. Using RFM, you can identify the value each customer segment brings to your business.

But, hold on… What the heck is RFM?!

Let’s wait on the M for a bit, and focus more on the R and F.

  • Recency. When was the last time a customer bought from you?
  • Frequency. How many times has a customer bought from you?

These three components determine how reliable a customer is.

Take a step back. Remember, marketing isn’t just a step of the sales process. Marketing is a continuous cycle, one where you want to maximize the effectiveness of your strategies.

From your RF data, you can identify your champions, the casual shoppers, and the flaky commitment-phobes (and other categories as you see fit), which is crucial to optimizing your marketing tactics. Personalization is key (if you want to learn more about what this looks like, read here) not only because it can make your customers feel heard, but it can also help you maximize your profits as a result.

Before moving onto the next step of this money-making magic formula, let’s first define some customer segments you might consider using:

  • Champion - Your top customer. They will literally buy anything and everything you sell. They rave about you to their families and friends (and even pets).
  • Casual Shopper - Your average shopper. You have a transactional relationship with them (ouch!). If they see something they like, they will consider buying from you but not without hesitation. They, unfortunately, do not stay a long while but may pop back in every so often.
  • Commitment-phobes - One hit wonders. They check you out once, maybe buy one or two things, but are never to be seen again. They might not even sign up for email or SMS notifications. They forget about you completely.

Like any relationship, you need to decide which groups of your larger customer base you are willing to put effort into. In this case, we are looking specifically at your casual shoppers and commitment-phobes. If you are able to determine the right ways to romance either or both of these two groups, you are well on your way to converting these folks into becoming champions of your brand and more susceptible to your upsell flow.

  1. M for More personalization. And no, emails aren’t enough.

Email marketing is one of the leading forms of marketing for businesses. 64% of small businesses use it, and several marketing campaigns already take into consideration customer segmentation, personalization, and automation.

If you’re already doing some of this stuff, good news, you’re on the right track. Bad news, though, your automated emails are probably still not personalized enough.

That’s why you have to do these 2 things:

  • Send the right email ads to the right customer segments.
  • Diversify your marketing strategies.

On sending the right emails, let’s run through a basic example. Several brands offer promotions and discounts through email subscriptions. Imagine you run a company that sells clothes and jewelry. Your products aren’t the cheapest, but you’re not a luxury brand either – let’s say around a $25-120 price range.

Let’s say you’ve already done Step 1 and discovered your existing customer segments:

  • Champions - average $55-70 every purchase.
  • Casual Shoppers - $35-40
  • Commitment-phobes - $20-25

The list above is a very rough version of the M in RFM. M is the amount of money a customer spends on your business per purchase.

So clearly every group has their own estimated range. Obviously, the next step is to try to convert your casual shoppers to loyal champions or commitment-phobes to more committed shoppers. Hm, one idea is to send out an email with a coupon!

But hold on. You shouldn’t send the same coupon to all your customers.

Had you sent everyone a coupon along the lines of “Spend $50, Get $10 Off!”, this ad would be less compelling for your champions and commitment-phobes. Your champions already spend at least $55, so only they get to benefit from the discount (their AOV actually decreases!) On the other hand, your commitment-phobes only spend $25 at most, and spending another $25 might just be too big of a stretch. The only customer group that you will be maximizing revenue from is your casual shoppers because the new minimum ($40) was your casual shoppers’ original maximum. That way, when you’re upselling, your shoppers are more likely to splurge.

This isn’t right – you’re missing out on two whole segments!

Make sure you’re not only collecting data on your segments but also reacting appropriately. A “Spend $90, Get $15 Off!” is better suited for your champions, and a “Spend $35, Get $5 Off!” for your flaky customers. The easiest thing to do is to automate your emails so that the right deal is sent to the right customer.

Furthermore, it’s not just the content of the emails that needs to be changed. It's equally as important to take into account how often you send your emails

Don’t overload your champions because, trust me, they already scroll through your website in their free time. On the other hand, send emails to your casual shoppers and commitment-phobes on a routine basis, especially when a customer has not purchased in a while.

As for diversifying marketing strategies, here are a few ideas:

  • Generating smart recommendations for your customers. Suggest products that align with their interests and predict what they may be looking for next. (This may require you to incorporate AI and ML into your marketing plan, which we can help you out with)
  • Establish a strong social media presence! Keep people excited about your brand and what you have in store – literally.
  • Reduce friction and excessive touch points between your customer and purchasing process. Especially for a lot of e-commerce and consumer retail brands, you want to move your customers seamlessly through their shopping experiences.

Email marketing shouldn’t be the only way you’re interacting with your customers. Engage with them in different ways through different means! Conversion is the secret sauce. Once you establish a relationship, you need to learn how to maintain and level it up over time.

Through RFM, conversion becomes an active process of interacting and guiding your customers to understand and love your brand. Before you can upsell, you need to establish a WTP for each customer group and leverage it. Your goal should be to increase the number of champions your brand has because they have the highest WTP.

Think of conversion as an agreement of a more committed, long-term relationship between your business and customers. And as for Cotera, we're your cupid - ready to help you identify your R, F, and M to bring your relationship with your customers to the next level.

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