RFM and SMEs: How Do You Turn the Theory Into Practice!

I would love some feedback!

I have adopted RFM almost as a religion over my past 20 years of doing CRM. consulting on CRM, and developing software for CRM. I feel really embarrassed, that today was the first time I sat down with a colleague and analysed a few clients' databases based on RFM!

Key points to note are:
1. Average size of database: 5,000
2. Average Number of clients who have bought - 30%
3. Average value of sale - $150 - $350
4. Industry - Wineries

Our software provides the ability to copy customer information into Excel - including RFM. We ranked customer data according to the classic RFM model. Sort on Recency first - give the top 20% a score of 5, the 2nd 20% a score of 4, and down to 1 for the last 20%. We then sorted on Frequency - and applied the same scoring from 5-1. We then sorted on Monetary - and applied the same scoring.

We then sorted the customer base on the total RFM score. That was really interesting!! In our average SME profile, many customers who had only bought once, were ranked on recency, and in the top 20%! And yet - I said it was a religion! - this is the correct way of looking at this.

So my question to you is: what do we advise the clients to do with this data? My thoughts were that we focus on the top 20% for our "normal" campaigns, We then utilise a telemarketing company (who specialises in wineries) to target the other 80%. Those that don't buy from this, are sent a short survey to complete and return as to why thay have not bought again. And then what?

Is there any worth in analysing the other different 20% segments, or is the Pareto Principle alive and well for SME's? Can they afford to treat the other 80% of their client base any differently? Would it make a difference to them?

Remember, we are dealing with SME's - they are looking to us to tell them what to do, and they don't have the big budget marketing spend of big business. They do however, have the data.

I also believe our own analysis of clients shows that it is imperative for companies to follow up quickly and well with people who have given their contact info "to join a mailing list", but who did not buy. (Remember that in our average client base, 70% of people in the database have never bought).

Does RFM mean different things to SME's? Does anyone have any actual, real data on this they would be prepared to share? It's all very well running the analytics, but what is going to excite people, is the benefits. I still have not seen clarified as a tangible benefit in CRM

Looking forward to lots of feedback thank you, and am happy to send through actual databases - with names removed - obviously :-)

Kind Regards
Cathy
PS - Bob - I am still here! :-)