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Segmentation Strategy: The RFM Model & Beyond

Stop emailing your entire list. How to use Recency, Frequency, and Monetary value to segment your audience, predict churn, and print money. The Guide to CRM.

CD
Chloé D.
Segmentation Strategy: The RFM Model & Beyond

“Batch and Blast.” This is the default email strategy for lazy brands. You have a list of 100,000 people. You send the same email (“New Arrivals!”) to all of them at 9:00 AM on Tuesday. To the grandmother who bought a scarf 3 years ago, this is noise. To the hypebeast who just dropped $5,000 on sneakers, this is noise. Irrelevance is the root cause of churn. If you treat everyone the same, you are treating everyone poorly. Luxury is Personal. Personalization requires Segmentation. The most robust, mathematical, and profitable way to segment is RFM (Recency, Frequency, Monetary).

Why Maison Code Discusses This

Creative Directors often hate “Data”. They think it kills the magic. We disagree. Data enables the magic. If you know a customer loves Red Silk, and you send them a beautiful photo of a Red Silk dress… that is magic. If you send them a photo of Blue Denim (which they hate), that is spam. Data is the “Listening” half of the conversation. We build Data Pipelines so Creatives can speak to the right person.

1. The RFM Matrix: The DNA of your Customer Base

RFM assigns a score from 1 to 5 for three dimensions.

  • Recency (R): How recent was the last purchase? (5 = Yesterday, 1 = > 1 year).
  • Frequency (F): How often do they buy? (5 = Weekly, 1 = One-time).
  • Monetary (M): How much do they spend? (5 = Top 1%, 1 = Bottom 20%).

The “555” (The Whale)

  • Profile: Bought yesterday. Buys every week. Spends thousands.
  • Psychology: They love the brand. Price is irrelevant. Access is everything.
  • Strategy:
    • Do NOT: Send discount codes. You are literally burning margin. They would have bought full price.
    • DO: Send “Early Access”. Send “Founder’s Notes”. Send “Secret Drops”. Invite them to dinner.
    • Channel: SMS or Personal Concierge (WhatsApp).

The “155” (The At-Risk Whale)

  • Profile: Used to buy constantly and spend big. Hasn’t been seen in 6 months.
  • Psychology: They found a competitor. Or they had a bad support experience.
  • Strategy:
    • The “Hail Mary”: This is where you spend your budget. Send a heartfelt email from the CEO. Send a $50 gift card.
    • Goal: Win them back. If you lose them, you lose $10k/year in LTV.
    • Automation: Trigger this flow exactly at “Day 90” of inactivity.

The “311” (The One-Time Wonder)

  • Profile: Bought once during Black Friday. Spent little.
  • Psychology: Bargain hunter. No brand affinity.
  • Strategy:
    • Cross-Sell: “You bought the Shampoo. Here is why you need the Conditioner.”
    • Education: Tell the brand story. Move them from Transactional to Emotional.
    • Channel: Email (Cheap). Do not waste Retargeting Ads (Expensive) on them yet.

2. Predictive Analytics: Seeing the Future

RFM looks backwards. Predictive CLV (Customer Lifetime Value) looks forwards. Tools like Klaviyo and Shopify now use AI to predict: “When will Chloé buy next?”

  • The Churn Risk Model: “Chloé usually buys every 30 days. It is Day 35. She is High Risk.”
    • Action: Trigger an automated “Replenishment Flow”. (“Running low?”).
  • The High Value Prospect: “This new user just browsed the ‘Diamond Category’ 5 times but hasn’t bought.”
    • Action: Trigger a Pop-Up with a “Concierge Service” offer, not a discount.

3. Implementation: The Tech Stack

You don’t need a Data Scientist to do this.

  1. Shopify: Captures the raw transactional data.
  2. Klaviyo: Calculates the RFM score automatically (Built-in Feature).
  3. Meta Ads: Sync your “555” segment to Facebook as a Custom Audience.
    • Create a “Lookalike 1%” based on the 555s.
    • Stop targeting Lookalikes of “All Visitors”.
    • Result: You acquire more Whales, fewer tourists.

4. The Case for Exclusion (Negative Marketing)

Segmentation is mostly about who you do NOT email. During a Flash Sale:

  • Exclude: Anyone who bought in the last 48 hours.
  • Why: If they see the item they just bought is now 20% off, they will email support and ask for a refund.
  • Result: You save Support Costs and Brand Equity.
  • Exclude: Anyone who returned > 50% of orders. (See Returns Automation). Exclusion is the mark of a sophisticated marketer.

5. Zero-Party Data (Ask Them)

(See Zero Party Data). Don’t guess. Ask. “What are you interested in?”

  • Menswear
  • Womenswear
  • Kids
  • Home Capture this in the Welcome Pop-up. Then, Segment accordingly. If I select “Menswear”, never show me a dress. Respect my choice.

6. Channel Segmentation (SMS vs Email)

SMS is a sacred channel. It is for “Urgent” or “VIP” news only. Email is for “Newsletter” and “Education”. Rule: Never send the same content to both channels at the same time.

  • SMS: “Drop is live. 5 units left.” (Transactional).
  • Email: “The story behind the fabric.” (Editorial). If you spam via SMS, the opt-out rate is 10x higher than email.

7. Lifecycle Phases (The Customer Journey)

Segmentation matches the Lifecycle.

  1. New Lead: 0 Purchases. Goal: Conversion. (Welcome Series).
  2. Active Customer: 1-3 Purchases. Goal: Retention. (Post-Purchase Flow).
  3. VIP: 3+ Purchases. Goal: Advocacy. (Referral Program).
  4. Lapsed: 0 Purchases in 6 months. Goal: Reactivation. (Win-Back). Map your content to the stage. Don’t ask a New Lead for a Referral. They don’t trust you yet.

8. Geo-Segmentation (Local Relevance)

“Winter Coats” marketing works in Paris in December. It fails in Sydney in December (Summer). If you sell globally, you must segment by Geography.

  • North Hemisphere: “Cozy up for Winter.”
  • South Hemisphere: “Get ready for the Beach.” Dynamic content blocks in emails make this easy. One email template, two different hero images based on IP address.

9. Testing Segments (Control Groups)

How do you know if Segmentation works? A/B Test:

  • Group A: Segmented (Personalized).
  • Group B: Batch and Blast (Generic). Measure Revenue Per Recipient (RPR). Consistently, Group A yields 30-50% higher RPR. Prove it with data.

11. Psychographic Segmentation (Values)

Demographics (Age, Location) are boring. Psychographics (Values, Lifestyle) are powerful.

  • The Eco-Warrior: Clicks on “Sustainability” page. Buys “Recycled Collection”.
  • The Hedonist: Clicks on “Party Wear”. Buys “Silk”. Segment by Motivation. Send the Eco-Warrior an email about your Carbon Footprint. Send the Hedonist an email about your Champagne Party. Same brand, different story.

12. The Birthday Flow (Personal Celebration)

The highest open rate email is the Birthday Email. But don’t just send “Happy Birthday”. Send a gift. “It’s your day. Here is $50 on us.” Timing: Send it 7 days before the birthday. “Treat yourself for your upcoming birthday.” Most people buy before the party, to have the outfit ready. Capture the birth date in the checkout or pop-up.

13. The Anti-Segment (Blacklisting)

Who do you not want?

  • The Serial Returner: Returns 90% of items.
  • The Discount Hunter: Only buys at -70%.
  • The Complainer: Opens 10 support tickets per order. Identify them. Tag them: User:Persona:Toxic. Action: Exclude them from all ads. Stop spending money to acquire headaches. Firing 10% of your customers can increase profit by 20%.

14. Conclusion

If you have 10,000 customers, you have 10,000 individual relationships. You cannot maintain them manually. You must use Math and Automation. When you treat a Whale like a Whale, they stay. When you treat a Stranger like a Friend, they buy. When you treat everyone like a number, they leave.

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