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Why RFV Is An Essential Customer Profile For Every Marketer

by Simon Spyer on Apr 16, 2015 3:51:03 PM

A critical customer insight to extract from your marketing dataCustomer Segmentation: Why RFV Is An Essential Customer Profile

There are many ways that a marketer can profile and segment their customer base, from demographics to product mix to customer value.

But one provides the most strategic, simple and focussed solution: RFV.

Why Segment?

Segmentation is a key marketing technique.

Not all customers are equal and segmentation helps you to group customers or prospects by similar traits. Once you have these groups and understand their customer profile you can start to plan your marketing objectives, understand who your best and 'next best' customers are and 

There are 2 applications of customer segmentation:

  • Strategic - to track, report and plan marketing activities
  • Tactical - to personalise content for your customers

What is RFV?

RFV stands for Recency, Frequency and Value and is a way of segmenting your customer base.

Commonly shown as a cube or scatterplot, RFV can be a great way to show the change in your customer base (if you compare year on year, month on month etc), deciding where you want to invest your budget and setting marketing objectives for each segment.

RFV is also sometimes referred to as RFM. The 'M' is for margin so it just uses margin as the measure of value rather than, say, sales.

Why RFV?

It’s commercial

It's a value-based and focused on drivers of business - the volume of customers split by how much they spend, how often and how recently.

It’s strategic

RFV will give you a complete view of your customer base.

Once you have defined your rules and named your segments you can start to understand how customers move between segments over time - for example, were your lapsed customers once loyal or have they lapsed shortly after being acquired?

The answer will have profound implications for your strategic marketing plan.

It works for every business

Every business, B2B and B2C, with more than a handful of customers can build a RFV segmentation.

The data should be readily available. If it's not, then consider building a data strategy.

It’s simple and practical

It's important that all areas of your business, not just the marketing department, understand who your customers are and why you have set specific marketing objectives.

RFV should be easy for all parts of the business to understand.

And targets can be set and forecasts/scenarios run using the key levers.

It’s utterly customer focussed

Many segmentations focus on business priorities (e.g. product purchase) rather than customers.

RFV is a behavioural segmentation so looks at what customers actually do. Based on this understanding you can determine how best to serve different types of customers and deliver better customer experience.

Other segmentations can easily - and should - be overlaid for tactical actives, for personalisation, for targeting.

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This post was written by Simon Spyer

Co-founder & Insight Partner at Conduit, professional insight-monger, dad, lover of all sport and Spurs.

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