What is the difference between RFM Segments & Enhencer Segments?

The Subtle Differences

What is RFM Segment?

RFM segments stand for recency, frequency, and monetary segments. In other words customer segments based on their behavior. RFM segmentation is a great way to identify and segment the customers into groups for special treatment. As a result, it allows marketers to target a specific group of customers with communication and approaches that are much more relevant for their particular behavior.

How is it calculated?

Every marketing team has access to the data on their existing customers, such as purchase history, browsing history, prior campaign responses demographics, and etc. The primary behaviors that are considered while making RFM segments are:

• Recency: How much time has passed since a customer’s last activity or transaction with the brand? This activity can be anything, starting from purchases, last website or mobile app activity to email responses, etc. The intuition is that the more recently a customer has interacted with the brand the more likely it that the customer will respond to a communication from the brand.
• Frequency: How often does the customer interact with the brand in any form in a particular period of the time window? Simply put, customers with frequent interaction are more engaged, probably more loyal, and therefore they are more likely to respond to your campaigns and offers.
• Monetary: This is very straightforward. This factor represents how much a customer has spent with the brand in the past. Big spenders should be treated differently than the customers who spent very little.

These factors cover the most important behaviors of the customers. Moreover, this really is the industry standard for customer segmentation and is very widely used. Proper implementation of this can result in improved Conversion Rate, better ROI values, better Customer Lifetime Values (LTV), increased revenue, and successful marketing campaigns. However, it's not without its fault. The question remains how can we improve this even further?

The Shortcomings

A customer is not bound to fall under a segment of the only very frequent category, or high spending category, or anything that simple. There are many other mix-match possibilities. RFM segments fail to address more than one behavior at a time, but in reality, a customer can have many defining behaviors. You are missing out on behaviors like:

• How long have they been on your website?
• How long did the visitor been viewing what products from what category?
• What device is the visitor using?
• The location of the visitor?
• Did the visitor click on the special offers, discount coupons, comment section, product descriptions, etc.?
• When was the last time they visited your website and the particular products?

And many more like this. The point I am trying to make is that the segmentation can be further improved using behaviors like this. So, how do we do that?

Enhencer’s Segments

Enhencer is an online platform that collects website visitors' data and analyzes their behavior and segments the visitors and customers. Here is how:

• Enhencer will automatically collect all the visitors’ data for few days.
• Automatically create the feature like the ones I listed above from the data.
• Automatically Apply AI-Algorithms and model the visitors’ behavior.
• Predict which visitors have a higher probability to buy what products.
• Segment all these visitors based on their behavior and the propensity to buy something. The RFM Elements are also included in these behaviors.

Well, this is how it works; Enhencer has an AI ALgorithm designed to do just that. Automation is the real attraction here, all thanks to the AI Algorithm that automates this whole process. Here is a screenshot of how the results are portrayed. The top segments are based on the Likelihood to purchase something from the website, in other words, the Conversion Model based on the website behavior. The bottom segments are based on the amount of money spent by the visitors and customers, in other words in a revenue model based on monetary behavior.

The Added Benefits

Why choose Enhencer’s Segments over the more widely used RFM Segments? There are few reasons that have to be considered here;

• Enhencer’s segments take into more behavioral aspects of both the customers and website visitors. Whereas RFM segments are based on simplistic behavior, therefore, throwing all the other behaviors out in the water. As a result, Enhencer not only takes RFM into account but also takes a whole lot of other behaviors as well.
• Enhencer has an AI Algorithm that can automate and simplify your workload to the point where you only have to check the segments' behaviors and go straight to organizing marketing campaigns. On the other hand, you have to consider the manual labor required to create the RFM segments even so be it on simplistic behaviors.
• If RFM Segments with the simplistic behavior analysis can increase the Conversion Rates, ROI, Revenues then think of the effects of such a sophisticated segmentation where the behavioral analysis is much deeper.

On top of that Enhencer automatically sends the segments to the online ad platforms like Facebook Ads, Google Ads and etc. Therefore, your workload decreases significantly, not to mention the ease of access to the segmentation process. All that is left for you to do is organize a proper and effective marketing campaign based on the segments and their behaviors. This is the more data-driven method to increase your ROI, Conversion Rate, and making all your marketing campaigns more successful.