Engagement RFM, or eRFM (Recency, Frequency, Monetary Value), combines online behavioral and transactional data to improve the accuracy and segmentation of email marketing campaigns. According to some observers, it represents the future of email marketing.

eRFM Combats ‘Waning’ Email Response Rates

In a recent posting on the Econsultancy blog, Redeye International Director of Data and Deliverability Tim Roe says response rates to traditional email marketing campaigns are “waning” as a result of ISPs providing consumers with “intelligent inboxes” and general consumer “fussiness.” This means an increasing percentage of marketing emails are getting filtered as spam, leading to customer disengagement.

eRFM identifies a consumer’s likely future actions based on factors including web behavior, email engagement and RFM. It defines five stages in the customer lifecycle: acquire, convert, develop, retain, reactivate. Consumers are then positioned within one of the five stages and their movement from one stage to another is predicted. Automated rules can send users in a particular segment a specific type of campaign or process.

eRFM shows whether customers are reading emails and looking at a company’s website, helping users determine if it is worth continuing to send them promotional emails. Roe further advises eRFM users to segment customers by their potential ROI, starting with those who have just abandoned a shopping cart.

Getting the eRFM Score

Roe is not the only digital marketing expert advocating for the broader use of eRFM. In an April 2012 post on the Marketing Land blog, Cara Olson, Director of Digital Direct/eCRM at Digital Evolution Group, advised email marketers to add email engagement to RFM scoring. Olson explained RFM scoring as a method of analyzing customers’ purchase history, including recency of the last purchase, frequency of purchases, and the monetary value of those purchases. Marketers can then segment consumers into groups and tailor messages for each group.

As an example, Olson said by adding email engagement to RFM scoring, marketers can split customers who have opted into promotional emails and made a purchase into “engaged” and “unengaged” groups, depending on whether they have ever actually opened a promotional email. These groups can then be further segmented by the recency, frequency and monetary value of purchases, allowing much greater targeting of promotional email messages.

Going back a little further, in April 2010, a white paper from email marketing solutions provider Listrak promoted the use of RFM analysis to increase the ROI of promotional email campaigns by segmenting out inactive subscribers and then scoring the value of active subscribers in a manner similar to that more recently suggested by Olson. In addition, the Listrak recommends creating targeted messages specifically aimed at re-engaging inactive subscribers.

RFM itself is nothing new -- direct mail marketers have been using this methodology to segment mailing campaigns for many years. And of course segmenting customers by their engagement levels is as old as email marketing. The concept of combining the two methodologies has been around for a few years, as well, but it seems that eRFM is finally attracting widespread industry attention.

Anyone involved in email marketing knows that simple email blasts, even those including basic segmentation, do not produce great results anymore. eRFM may well represent the future of email marketing – it is certainly worth trying out and certainly will not make promotional emails any more likely to wind up in the dreaded spam folder.