05 May 2013

RFM Analysis & the Triangular Theory Of Love

The simple RFM analysis has been the backbone of many a successful CRM program. Predictive CRM models, and predictive technologies in general, are getting sophisticated, but few brands and companies have access to the kind of data, tools, skills or budgets yet to make the best use of them.

The easiest way to develop a Recency, Frequency, Monetary (RFM) CRM model is to map the spread of date from purchase, # of times purchased over a time period and total money spent during the time period - to bucket the individuals relative RFM value into either a High (3), Medium (2) or Low (1). For example an individual with a High Recency, High Frequency & Medium Monetary Value would be classified as a 332.

This results in a snapshot of loyalty expressed through spends, 8 clear segments and broad recommendations on next actions to work relationships - including which ones to nurture, woo or ignore.

Suffice to say the RFM model operates on a rather limited & rational viewpoint of marketers and purchase behaviour to define loyalty, expressed via a single dimension, when true loyalty should involve hearts as much as spends.

Reality is that not all people care, or are interested in relationships with brands - at least not the kind of relationships they have with people they care about. As Rob Campbell & Charles Wigley spoke a year ago "Loving Brands and loving a brand are very different."

Agree, not all brands will have fanboys. Nor will all active users profess love for their brands. Within this limitation, the Triangular Theory of Love may just be a nice complement to RFM - to peg expectations, measure and nurture emotional loyalty.

  1. Both RFM & the Triangular Theory are based on 3 identifiable & trackable Parameters - Recency, Frequency, Monetary vs. Intimacy, Passion & Commitment
  2. Both give you a snapshot of the state of affairs and output 8 clear actionable segments - RFM as above and these 8 based on Intimacy, Passion & Commitment
  3. Both can be assigned at an individual level to come up with a plan to nurture, woo or ignore relationships.
As I write we are are on the cusp of rolling out a massive CRM program in Infant Nutrition. Will share learning in a few months from now.

Credits & thanks to Rob Campbell and Charles Wigley for the above 2 slides. Taken from their joint talk at the Asian Marketing Effectiveness Awards, Shanghai 2012.