[MUSIC PLAYING] In the last lesson, you learned about the customer lifecycle. If you want to increase customer lifetime value, one way is to target the right message, to the right customer, at the right time. Remember how different the offer is to the newbie versus the veteran. In this lesson, we get into the how and where to start with this kind of segmentation and targeting. I want to give you the top 5 bucket that define key segments in the customer lifecycle, and then I'll explain how to market to each.
But first, let's talk about RFM. Not REM the band, RFM the database marketing term. Infinitely less cool. RFM is how you're going to segment your email list, it's how you're going to define your customer buckets. RFM stands for recency R, frequency F, and monetary value M. These are 3 data points you have on each and every email subscriber in your database, your ESP and in Shopify.
Recency is the number of days since a subscriber, or customer's last purchase. An hour 0 purchase today, in our 365 purchased one year ago. Frequency is the total number of times subscriber, or customer has purchased. An F 0 has never ordered, an F 10 has ordered 10 times. And monetary value, is just the total spend from a customer.
It's the sum of all his or her orders ever. With these 3 metrics, we can describe almost any stage in the customer lifecycle. Quick, what's in R0, F0? Well it's someone who has never ordered, but just joined your email list. It's the newbie, what about an R7, F10, M1,000? That's probably a loyal buyer, 10 orders totaling $1,000 in the most recent one was a week ago.
And R400, F10, M1,000 whoops that's the former loyal buyer are defecting veteran, where to the right on the customer lifecycle curve? She's defecting, or defected as she hasn't bought in over a year 400 days. So RFM makes the customer lifecycle more actionable for you as a marketer. Now keeping in mind that every business is different, here are some core segments I think most e-commerce retailers should carve out and target via email.
While thinking about each, you might review the chart we have the customer lifecycle included in this lesson. Segment 1, your new email subscribers, or newbies your F0, M0s. Segment 2, your one time buyers. These are your F1s. Segment 3, your whales, or VIPs who buy from you a ton this year F5, 6, 7, or whatever, it really depends on your business.
You could also use an M definition here, like M5,000 meaning anyone who spends over $5,000 at your business. Segment 4, is your defecting customers. Your veterans. These are probably are 180 F anythings, meaning they last bought from you over six months ago. Segment 5, is your cart abandoners. We've talked about these a bit, but they are usually R0, F0s. In other words, I like to think about the segment of card abandoners, who have never purchased from me before.
Now do you target that each of these 5 segments with the same messaging, and offers? Of course not. Let's look at each. We already discussed what to do with new subscribers segment 1, your goal there is to build up trust, introduce a product, and get them to make their first purchase. To turn them from an F0 into an F1. What about the next group? Your one time buyers in segment 2.
What do you think your goal is there? To get them to buy a second time. This seems obvious, but has serious implications for your business. You see due to high customer acquisition costs, most retailers break even on the first purchase the F1. It's only on repeat purchases that they generate profits. And yet if you were to look at all your customers today my guess is you have 80% to 90% F1s, 80% to 90% one and done marginally profitable customers.
So you can see that it's critical to turn an F1 into an F2. Focusing here literally prints cash for your business, an ideal campaign to target segment 2 might be a bounceback email campaign. It's a very simple campaign that delivers an offer on a product related to the product that was purchased initially, you buy a pillow I send you an offer on the sheets. I explore bounce back campaign.
I used a Karmaloop in a future lesson in this module. Segment 3 consists of your whale buyers, your VIPs. Hey, celebrate these customers love you. They buy a lot and they have bought recently. How do you think you target them? Most retailers just blindly email out discounts to everybody, including their whales, but this segment does not require discounts. I mean, they're literally buying everything you are selling.
So for them I would employ VIP email campaigns that really court them and keep them buying. Tell them you love them. Give them their own 800 number to call. Ask them what you should sell, and then sell it to them at full margin. Our fourth segment is our defecting customers. They might have been a VIPs at one point, but they aren't now. We've talked about them before, this defecting segment, the veterans.
We want to win them back. This is where we might want to get promotional. Here is where we discount. The perfect email campaign here is called a win-back. It's typically a killer offer with a deep discount that goes out only to this defecting segment in an effort to bring them back and start them buying again. Finally, the fifth group are cart abandoners. We laid out a simple cart abandonment campaign in an earlier lesson.
If you have that in place, you might want to go advanced with it. Instead of one email turn it into a series of emails that go out over two weeks, for example. Start with gentle reminders first. And if they don't work, move on to greater incentives like discounts. You'll find that many of your recovered carts return before the discounts are even required. This will save you margin. So five simple segments.
And if you think about it they plaster the customer lifecycle from start to finish. Are there more segments than this? Of course, there are literally an infinite number, especially if you start layering on data and segment also by initial product purchased or how you acquired that customer. But for now, these five will put you in the top 1% of all retailers and greatly increase your overall customer lifetime value.
So start today, use R, F, and M to define these segments in your own ESP, then build out and automate campaigns targeting each. If you want examples on how this is done, I go deep on a couple of these campaigns I've used at various companies in a future lesson. I also have a summary of my top lifecycle segments and campaigns at nerdmarketing.com/shopify, of course.
In the next lesson, I'll give you an advanced database marketing technique you can use throughout your email sequences to drive user behavior while preserving margin. [MUSIC PLAYING]