RFM Segmentation with Pushwoosh

You surely want to communicate differently with your most loyal customers and those who are about to churn. Now you can easily make sense of your audience and launch better-targeted campaigns, using the RFM Segmentation recently added to Pushwoosh. This is particularly good news for e-commerce and gaming — the industries where RFM segmentation is so needed and appreciated. (Spoiler: other types of apps can benefit from RFM segmentation too!).

In this article, we’ll share practical tips on how to tailor your marketing strategy and mobile communications to each of the RFM segments. As a result, you’ll learn how to use RFM segmentation and get higher conversions and incremental sales.

If you are new to RFM segmentation, see the FAQ section at the bottom of the page.

• RFM segmentation tool is now available in Pushwoosh

• Implement RFM model marketing to drive your app growth

• RFM segmentation: use cases and examples

• • “Hibernating”

• • “About to sleep” and “At risk”

• • “Loyal customers”

• • “Potential loyalists”

• • “Champions”

• • “Can't lose them”

• • “New users” and “Promising”

• FAQ

• Put RFM segmentation into practice with Pushwoosh

RFM segmentation tool is now available in Pushwoosh

When starting a new campaign in Pushwoosh, it’s quite rare that you’d want to target the whole user base. You’d segment your audience by attributes or triggered events to receive the best response to your message.

With the new Pushwoosh RFM Segmentation feature, you can now apply more informative parameters to user segmentation. RFM analysis reflects the very core of your relationships with customers — their purchase behavior, or simply how much and how often they buy from you.

How RFM segments are calculated

RFM segmentation in Pushwoosh is based on two metrics:

• Recency — how recently a user made a purchase;
• Frequency — how many purchases they made during a given time period.

The key idea is that customers that rank highly in the above characteristics are more likely to be repeat buyers and are more open to promotions.

To apply RFM segmentation, Pushwoosh assigns a recency and frequency value to each of your users based on their purchase/event history and categorizes them into groups based on the scores.

The result is displayed in a grid of 10 sections with the number of users in each segment. Additionally, the Average Monetary Value of each segment is calculated:

With the RFM grid, you can set better-targeted campaigns and create personalized messages for each segment to design meaningful customer experiences.

Implement RFM model marketing to drive your app growth

According to McKinsey & Company’s report, brands that prioritize personalization in their marketing activities gain 40% more revenue than other players. Such numbers can inspire marketing managers to take personalization seriously, can’t they?

As personalization constitutes the core of RFM model marketing, RFM segmentation can become a real game-changer for your app’s growth. Creating unique marketing campaigns for each RFM segment can increase your marketing ROI, as well as drive your app’s core metrics:

E-commerce and gaming apps: AOV, CLV, CTR;

Subscription-based/hybrid apps: conversion rate, DAU/MAU, churn rate.

Defining RFM segments can help you pinpoint the user data which is vital for app growth strategies:

• Who are your high-value customers?
• Which users can be converted into the most loyal customers with little effort?
• Which of your customers can be cross-selled to/upselled?
• How big is your pre-churn segment (and, thus, your potential loss)?
• Which users need to get re-engaged or re-activated as soon as possible?

Building your communication campaigns on these questions is paramount for allocating your marketing efforts more wisely. So let’s dive deeper into the possible strategies you can apply to communicate with each of your RFM segments.

RFM segmentation: use cases and examples

Here is how you can tailor your mobile messaging strategy to each RFM segment to increase their response and overall satisfaction:

“Hibernating”

This segment includes customers whose purchases were long back and rare. As the value of this segment is low, we don’t recommend spending a lot of resources on communication campaigns, as you won’t get a good ROI. Still, if you want to win back these users at minimal cost, you can bring them together with the “About to sleep” and “At risk” segments and apply the same strategies.

“About to sleep” and “At risk”

These customers may slip away if not re-engaged with or re-activated. In e-commerce and gaming, your strategy for these segments is to spike interest with special discounts and personal promo codes.

Check out two examples of push notifications from the game apps published by Beach Bum:

With this kind of automated messaging, the company tripled its engaged audience. We know it for sure as they've been using Pushwoosh.

Here is your strategy for working with “About to sleep” and “At risk” segments:

1. Set up a Customer Journey for those segments;
2. Send re-engaging or re-activating messages (push notifications and/or emails);
3. Recalculate the segments after a while and see if they’ve changed in numbers.

Your aim is to transform your inactive users into “Loyal customers” or “Potential loyalists” (read more about them below).

Consider creating a loyalty program that will imply a personal discount on each purchase. It may be growing steadily or depend on the number of items purchased, the total of the order, and the like:

For subscription-based or hybrid apps, try reconnecting with users by educating them about the app. You can highlight a particular feature and re-activate a user through it.

For example, Flo, a female health app, re-activates users by suggesting them to log their symptoms and get recommendations based on the provided data:

“Loyal customers”

These are customers with frequent and high-value spending. They are responsive to promotions and relevant recommendations, especially in the form of personalized messaging.

Here is your strategy for working with loyal customers:

1. Analyze their purchase history, personal preferences, and user data;
2. Figure out possible recommendations;
3. Run a personalized messaging campaign.

For example, you can analyze a user’s favorite brands and send push notifications to alert this user of a special offer:

Also, one of the most effective forms of personalization is geo-targeted messaging. Here is an example of a location-triggered push notification from a mobility app:

Here is an example of a geo-targeted message from a gaming app suggesting users from a particular country complete a relevant daily task:

Another strategy to move your loyal segment up the ladder is making an exclusive offer you only send to your active customers. Try teasing your audience with a discount in exchange for a review about the brand or a particular purchase:

As your “Loyal customers” have regular interactions with your app, they will appreciate a flawless shopping experience backed up by service messaging:

• Transactional messages;
• Order and delivery status updates;
• Returns process notifications.

All in all, service messaging can increase your loyal customers’ satisfaction if you keep it simple, clear, and, of course, personalized.

“Potential loyalists”

These users can become your loyal customers if you motivate them to purchase more often. This can be done through relevant event-based communication. Your efforts will definitely pay off: according to a Pushwoosh internal study, event-based personalization can result in 25× higher conversions.

When applying event-based communication in Pushwoosh, use Dynamic Сontent with automatically entered information that’s specific to a particular event and a particular user. For example, a gaming app may congratulate a user on a recent achievement they’ve unlocked.

In this example, the gaming app SongPop offers the users who have completed a free game to try one month of VIP games for free:

“Champions”

This segment includes customers with a higher willingness to pay, so there is no need to use discount pricing to generate incremental sales. Instead, the key strategy here is to focus on loyalty programs and new product introductions.

“Can’t lose them”

These customers used to be your high-spenders but haven’t interacted with the brand lately. They have a good potential to boost your revenue if you manage to re-engage them.

You've probably already earned high margins from this segment which should give you confidence about investing resources into a new promotional offer. For example, you can prepare a holiday offer and expect these retained clients to bring you an extra 25% in the average order value. For holiday campaigns, you may want to additionally segment your audience based on their location, as holidays differ from one region to another.

To make your segmentation more granular, tag those who made purchases during a holiday season as "Purchased during the holiday season". Then, during the following year, compare this segment with less active buyers in your RFM segmentation and track those who shop only for holidays (or during the discount season). You can craft special offers for this particular group.

“New users” and “Promising”

These are customers who have recently made their first purchase inside your app. Starting a campaign to encourage new orders from these segments may be a quick-win strategy. Adobe’s Digital Economy Index report shows that conversion to repeat purchase is 9 times higher than conversion to first-time purchase.

Moreover, one repeat customer brings the revenue equivalent to that generated by five new customers.

Reach out to your customers with follow-ups after they have completed their first purchase and entice them with new offerings. Engage new app users with a welcome promo code or free delivery:

You might want to increase your average order value (AOV) by cross-selling relevant products typically bought together. Here is an example from the La Redoute app:

A good strategy for “New users” and “Promising” segments is to target those who have shown interest in a particular product. In Pushwoosh Customer Journey Builder, you can segment out users who have added something to their cart and check if they’ve actually bought the product within the defined waiting period. Then, you can send a push notification reminder to those who haven’t completed their purchase:

Add a promo code to your message, notify users of a seasonal price change or create a sense of urgency. Here is an example of a push notification nudging a user to make a purchase before the item sells out:

The sense of urgency technique works well in gaming apps too. You can motivate hesitating players to seize the opportunity — while they still can:

If you have a subscription-based app, your strategy for “New users” and “Promising” segments is to provide a  smooth onboarding experience and free trials.

Check out a series of onboarding in-app messages in the meditation app Mo. The app not only offers a free trial but also inquires about a user’s preferences and goals, preparing the way for long-term retention and higher LTV:

FAQ

Put RFM segmentation into practice with Pushwoosh

RFM analysis is a powerful segmentation method that helps to drive a positive customer response to an app marketing campaign. Can’t wait to improve your audience interaction and grow your profit through better-targeted communications? Discover Pushwoosh’s RFM Segmentation and many ways to use it in your communications.