Segmenting Your Customer Base on RFM Analysis in HubSpot CRM - Myanmar's Leading Marketing Consulting Firm

Segmenting Your Customer Base on RFM Analysis in HubSpot CRM

RFM segmentation is a framework for segmenting your customers based on their buying behavior. A customer’s value can be calculated using the RFM method, which is based on three data points: 

  • Recency (How recently was the customer’s purchase made?)
  • Frequency (How frequently do they buy things?)
  • Monetary value (how much do they spend?)
RFM-Analysis
RFM Analysis

An RFM analysis determines which customers are of the highest and lowest value to a company based on their purchase recency, frequency, and monetary value, in order to fairly predict which customers are more likely to make future purchases.

It is simply a tool for determining how much of your revenue comes from repeat customers versus new customers and you can bring it to try to make customers satisfied so they become repeat purchasers.

How to Segment Your Customer Using RFM

To perform an RFM segmentation analysis, we need the following data in HubSpot:

  • Customer or Company name
  • Deal stage
  • Recent Deal closed date
  • Number of associated deals
  • Total revenue

Assign a RFM Score for Each Customer using HubSpot Workflow

The first step in building an RFM model is to define a Recency, Frequency and Monetary (RFM) score to each customer. Scoring will vary depending on the degree you want to segment your customers.  For this example, we will divide customer data into five groupings by RFM. 

By RFM segment, a customer base dataset could be scored as follows:

Sample RFM Scores by Segment

Recency Score

  • Recency Score = 5 (deal won and closed date in the last 30 days)
  • Recency Score = 4 (deal won and closed date  in the last 31 to 60 days)
  • Recency Score = 3 (deal won and closed date in the last 61 to 180 days)
  • Recency Score = 2 (deal won and closed date in the last 121 to 270 days)
  • Recency Score = 1 (deal won and closed date in the last 360 days ago)

Frequency Score

  • Frequency Score = 5 (numbers of associated deals is greater than or equal to 7)
  • Frequency Score = 4 (numbers of associated deals is greater than or equal to 5)
  • Frequency Score = 3 (numbers of associated deals is greater than or equal to 3)
  • Frequency Score = 2 (numbers of associated deals is greater than or equal to 2)
  • Frequency Score = 1 (numbers of associated deals is less than 1)

Monetary Score

  • Monetary Score = 5 (total revenue is greater than or equal to $5000)
  • Monetary Score = 4 (total revenue is greater than or equal to $3000)
  • Monetary Score = 3 (total revenue is greater than or equal to $2000)
  • Monetary Score = 2 (total revenue is greater than or equal to $1000)
  • Monetary Score = 1 (total revenue is less than $1000)

Once your scoring baseline has been established, you can assign an RFM score to each customer using HubSpot Workflow.  Trigger the workflow based on the scores segment you have determined in above by using If/then branch for 1 to 5 scores. 

RFM-workflow
RFM workflow

How to leverage RFM Segmentation

It is helpful to assign names to segments and place them in groups. Here are just a few examples: 

RFM Group Examples Pro Tip

VIP group consists of those customers with high monetary scores of 5 or 4.

  • To learn why this group purchases and remains loyal, call or do a poll. Utilize this data to serve them better in the future and use this group’s profile to target new clients.
  • Offer them “exclusive deals.”
  • Include special gifts and services in their purchases.
  • Enroll these clients in a loyalty program that rewards them for their loyalty.

New Big Spenders group consists of recent customers who ordered once and bought a lot with scores such as: 5-1-5 and 5-1-4.

  • Make them feel welcome and appreciated. For example, you could send a personalized welcome email with a discount code to encourage repeat purchases.
  • Enroll these clients in a loyalty program that rewards regular order frequency
VIP-customers-RFM-reports
VIP customers RFM reports

Lower Spending Loyal Customers group consists of those customers in segments 5-5-3 and 5-5-4 (they transacted recently and do so often but spend the least).

  • Create packages that offer incentives according to previous purchases.
  • Provide free shipping on greater order amounts.
  • Offer cross-sell and upsell options considering previous transactions. Customers in this segment, known as disengaged customers, can be found in groups R-1 and have not placed an order in a while.

Disengaged Customers – This segment customers are found in groups R-1 and have not ordered in a long time.

  • Create marketing initiatives to re-engage with customers
Disengaged-Customers
Disengaged Customers