I recently gave a talk to a business group and described recency, frequency, and monetary (RFM) models. One of the questions I got at the end was to distinguish between the frequency of RFM and the frequency of business contacts and to say which was more important. I explained that there are two equally important dimensions to direct marketing frequency. There is one definition based on data of historical transactions and another depending on the amount of communications a business creates and sends out.
I have seen research that suggests that recency accounts for half to two-thirds of the likelihood of a future purchase in an RFM model. Frequency is the second strongest predictor with many small purchases counting more than one big order placed long ago. Some clients have dropped the FM part altogether and just used recency in determining to whom to mail their catalogs. But then they have stuck to a fixed schedule of mailing every month or six weeks. They have considered the first aspect and completely discounted frequency as a predictor and also not considered the second aspect, assuming that their printing and mailing cycle was all that mattered in communicating with their prospects and customers.
I was able to conduct a b-to-b communications test several years ago, and found that the second aspect of frequency can be significant in influencing the likelihood to purchase. In the test businesses were categorized as general purchasers and also into several categories of specific merchandise class purchasers. Some businesses qualified to receive the main catalog and every specialized mailing as well. In a commissioned sales environment it was hard to keep a potentially profitable control group completely out of the mail stream or restricted to just the base catalog mailings. But the results showed that the more the business buyers were mailed the more they bought compared to the control group. They received up to 72 catalogs and flyers in a year that had different covers, titles, and types of merchandise.
No more than the usual proportion complained about receiving mailings and asked to not be mailed. That led me to conclude that business people can manage their mailboxes perfectly well and do not need the mailer to restrict communications as long as the offers are not repetitive.
The F in RFM is only part of the mailer’s modeling equation. The frequency of communications that you have with your customers can motivate them to consider you more often. It can also expose them to specialized categories of merchandise and services that you would have difficulty showing them if you only mailed them every month or six weeks. Most often, if you have reasons, such as the customers purchasing in a specific product category, to mail them more, they will buy more. Then you will have taken advantage of both the data and the communications aspects of direct marketing frequency.
Bill Singleton, president of Algonquin, IL-based consultancy Singleton Marketing, and pens “Show Me the Data” for the Lists & Data Strategies e-newsletter.