Recency, Frequency, & Monetary Value (RFM)

By Theresa Coleson, Eileen Park & Brandon Jones

American Board Certified Hair Colorist and Sebastian Professional trained stylist Joy Greene owns Glamour & Grunge,

a boutique salon at Sola Salon Studios in Tysons Corner.

GLAMOUR & GRUNGE SALON

A goal is customer retention - to identify and win back previous big

spenders that aren’t coming as frequently.

• Increase revenue• Reactivate customers to make more

frequent visits

GOALS & OBJECTIVES

S OStrengths•Trendy and highly trained stylist. •Offers high quality services and professional guidance.•Not just an independent “niche” salon, but caters to a wide audience of people and tastes.

Strengths•Creates amazing connections and relationships with all customers.•Customer loyalty shows strong relationship skills. •No big overhead costs.

Strengths•Plenty of free parking in garage just steps away from the salon. •Website and mobile app provides easy price quotes, appointment booking and confirmation.

Opportunities

•Located in the growing area of Tysons Corner.•Use database information to segment customers to maximize their potential.

Opportunities

•People will travel. How to bring them in more often? How to engage them more?•Hold or sponsor events.

Opportunities

•Increase male market (FB Insight says 20% of fans are male). •Promote trendy hair color and techniques.

Positive factorsSWOT ANALYSIS

W TWeaknesses•G&G is a new business AND a different “type” of hair salon –lacks brand recognition. •No outside signage/banners etc.

Weaknesses•First time customer confusion on location.•The social media presence mand engagement could be stronger.

Weaknesses

•Salon has very little square footage. There are only 2 seats plus salon chair.

Threats•Existing chains like Hair Cuttery, Zoe Salon and Ulta.

Threats•Existing large scale hair salons can have a large marketing and database management team.

Threats•New salons and stylists coming to the area as Tysons continues to grow.•Out-of-home stylists with low pricing.

Negative factorsSWOT ANALYSIS

TECHNOLOGY RESOURCES

DATABASE

Glamour & Grunge currently has an impressive client list of 500 customers.

DATA WAREHOUSE

o Big businesses collect all kinds of data on their customers, inventory, business activities, protocols and more.

o Data warehouse is housed on an enterprise mainframe server or in the cloud.o Data warehouse services:o Informicao Vertica Data Warehouseo Teradatao BlueNET Technologieso Genpact

ETL METHODOLOGY

o ETL stands for Extract, Transform, Load.

o An ETL tool takes these three database functions and combine them into one tool 

o ETL services:o Informatica- Power Centero IBM- Datastageo SAP- Data Integratoro IBM- Cognos Data Managero Microsoft- SQL Server

Integration Serviceso Oracle- Data Integratoro Oracle- Warehouse Buildero Intricity

VAGARO

o Vagaro is an application/website specifically designed for spas and hair salons.

o They are a one stop shop to securely manage multi-location businesses as well as a single chair.

o They offer free mobile apps to download and is user friendly for the customers as well as for the stylists.

• Scheduler• Customer manager• Product inventory

manager• Website Builder• Marketing

Tool/CRM• POS & Credit card

Processing

VAGARO SERVICES

COST

o Automated emails & texts for appointment, cancelations and thank you notes makes Vagaro a very personable tool for CRM.

o They charge by the number of stylists and additional service charge for the SMS reminders are minimal.

o 1 stylist: $25/montho $25/month unlimited SMS

messagingo Total: $50/month

RECENCY, FREQUENCY & MONETARY VALUE

RFM

RECENCY, FREQUENCY & MONETARY VALUE (RFM)

• What is RFM?• Recency - How recently did the customer

purchase?• Frequency - How often do they

purchase?• Monetary Value - How much do they

spend?• Why use RFM at Glamour & Grunge? • Low cost, high return• Customer segmentation• Email Marketing• Social Media• Improves response and profits

RFM MODEL

RecencyR• 4: January 2016 – May 2016• 3: August 2015 – December 2015• 2: March 2015 – July 2015• 1: October 2014 – February 2015

FrequencyF• 4: 16+ visits• 3: 11-15 visits• 2: 6-10 visits• 1: 1-5 visits

Monetary ValueM• 4: $2301+• 3: $1801-$2300• 2: $1301-$1800• 1: $1-$1300

• Nth selection process to select test groups.

• For example, for 500 people, select a test group of 50.

• That would mean our control group is 10 people.

• Identify 10 customers that fall into the RFM codes we are testing, but will get just the normal marketing communications.

• Compare response to those that did get the "Win Back“ communications. 

• Compare the test groups to all customers that fall into the RFM codes but do not receive "Win Back" marketing.

TESTING

o The RFM test groups that we would email are: o 2-3-4: March 2015 –

July 2015, 11-15 visits, $2301+

o 2-2-4: March 2015 – July 2015, 6-10 visits, $2301+

o 2-2-3: March 2015 – July 2015, 6-10 visits, $1801-$2300

EMARKETING CAMPAIGN“Win Back” Email Campaign

EMAIL CAMPAIGN

o “Win Back” program is an e-mail campaign targeted at reactivating previous devout customers that have started to purchase less frequently.

o Email Strategies:o Substantial discounto Personalized message o Memories of good hair timeso Low email frequency

TARGET AUDIENCE

• 2-3-4: March 2015 – July 2015, 11-15 visits, $2301+• This group definitely formerly bought fairly

often, spending a good amount of money. • 2-2-4: March 2015 – July 2015, 6-10

visits, $2301+• This is for testing purposes to see which

group will respond best. • 2-2-3: March 2015 – July 2015, 6-10

visits, $1801-$2300• Though this group typically didn’t spend

quite as much money as the others, but they could also prove profitable.

E-MAIL CAMPAIGN

o Subjects: o Where Have You Been [First Name]? Get 25%

Off Next $150+ Purchase!o Glamour & Grunge Has Missed You [First

Name]! Visit Soon & Get 25% Off!o Email Content:

o Use A-I-D-A format o Personalize heavily by including their name

and how long its been since their last appointment.

o Include pictures on file of past hair that client loved.

MEASURING THE SUCCESS

o Email Activity Reporto Deliverabilityo Email openso Unsubscribe rateo Click-through rate to

book online o “Checkouts”

o ROIo Appointments,

discounts, and revenue.

o How many continue to increase in Recency? 

• Glamour & Grunge will be able to identify clients who haven’t been as active recently, but who previously were big and frequent spenders.

• Low maintenance, low cost, high return analysis and campaign.

• After the initial testing phases are complete, G&G can then reevaluate and optimize their results for a full roll out.

SUMMARY

REFERENCES

o Hughes, A. (2012). Strategic Database Marketing 4e: The Masterplan for Starting and Managing a Profitable, Customer-Based Marketing Program. McGraw-Hill.

o Investopedia. (2011). Recency, Frequency, Monetary Value (RFM) Definition | Investopedia. Retrieved from http://www.investopedia.com/terms/r/rfm-recency-frequency- monetary-value.asp

o Soltoff, P. (2005, May 02). One Size Does Not Fit All: Offers and Messaging. Retrieved from https://www.clickz.com/clickz/column/2138277/one-size-does- not-fit-all-offers-messaging

o Vagaro. (n.d.). Retrieved April 4, 2016, from https://www.vagaro.com/