Circulation: RFM Optimization Still a Successful Segmentation Tool

Although it’s one of cataloging’s oldest circulation planning practices, recency/frequency/monetary value (RFM) segmentation is under-used by many smaller catalogers, pointed out John Lenser, president of circulation planning consulting firm Lenser during his session, “Circulation and Merge Strategies in a Multichannel World,” at last week’s ACCM.

“RFM’s been the buzzword of direct marketing for as long as I can remember,” Lenser said. “The reality is, you want to segment by RFM even if you have two names in a cell.” He offered several RFM segmentation tips:

*Create appropriate segments irrespective of segment size.
*There’s no need for statistical significance in segment size.
*Don’t be afraid to segment house files to hundreds of cells.
*Tracking channel migration will be the key for future and profitable growth.

About the use of merge/purge, Lenser noted the importance of isolating and differentiating good list segments from the bad. He suggested the folllowing:
*Create meaningful multi-groups.
*Evaluate multi-groups, not just lists.
*Use co-op databases to optimize unique names.
*Mail great names repeatedly.
*Pitch the losers. “The only thing that makes your list better,” he noted about under-performing names, “is isolating the names you don’t mail.”

During the same session, Tim Burns, product manager for the Edmund Scientific catalog, reeled off several buyer file enhancement pointers:
*Regarding buyer file enhancement: For ever RFM segment, create both a unique and multi-buyer key code.
*Mailing the multi-buyer cells among older, lower frequency, lower average order buyers is an excellent reactivation tactic. “It’s a good technique to find additional names to mail and reactivate,” he said.
*Multi-buyer names perform, on average, 15 percent to 35 percent better than unique names.
*Depending on your niche, you may consider mailing old address and non-zip-plus-four addresses.
*Outside of merge, Burns recommended the following: proprietary list hygiene products, such those that identify seasonal residents; co-op database reactivation and optimization models; and zip modeling.