The Holiday in Progress

Gladly Team

Read Time

8 minute read

There it is — the feeling of relief, satisfaction, and triumph following the first wave of holiday havoc. While the sky’s a bit brighter today, unbreakable customer relationships require more than just a single ray of sunshine.

In the words of a wise CX mentor: “Analyzing success is equally as important as placing it on the shelf.” As we recover from the first leg of holiday interactions, this statement seems particularly relevant to continuing holiday momentum. The continued analysis of holiday performance is essential to retaining the pools of customers we’ve worked so hard to support. Like drops of water rolling down undulated surfaces, a droplet’s size, shape, and speed play a significant role in where pools begin to form. The same is true for segmenting customers and accommodating their preferences. These exercises play a crucial role in establishing relationships and building loyalty.

Using the RFM Method for Holiday Customer Segmentation

It’s likely that you already have a system for prioritizing and engaging customers. However, because of the transactional volume attached to the holiday season, adopting a holiday-specific lens of categorization can be a powerful way to build momentum with customers.

For those unfamiliar with RFM segmentation, the acronym stands for Recency, Frequency, and Monetary Value — first-pass metrics that quickly identify where customers might be in their journey and how one might interact with these customers to optimize outcomes. The easiest way to implement RFM is to create three separate lists of customers based on recency of purchase, purchase frequency (number of purchases over a specified period of time), and average order value. Customers that appear within the upper quartile of these lists should be seen as a higher priority, given their valuable connections to your brand.

If time and bandwidth permit, an alternative RFM application would include creating a blended RFM score. This approach combines all three data points and seeks to prioritize customer interactions.

1.) Start by downloading a spreadsheet that lists an aggregated view of customer transactions. The spreadsheet should include transactions from the holiday sales period. If your company doesn’t specify a holiday period start date, it is safe to utilize sales that occurred after October 1st.

2.) Ensure that the report includes the date of the most recent transaction, average order value, and year-to-date number of transactions.

RFM Report

3.) Using Microsoft Excel or Google Sheets, add a fifth column (E) and name it “Days Since Last Transaction.” This column will interpret your data in column B.

RFM Report - Days Since Last Transaction

4.) Input the following formula into cell E2:

=DATEDIF(B2,NOW(),”d”)

Double-click on the bottom right-hand corner of the cell, or drag the formula down for each customer on your list. This formula will determine the days between the current date and the customer’s most recent transaction.

RFM Report - Formula

5.) Add four additional columns to the right of “Days Since Last Transaction.” Name these columns “Recency,” “Frequency,” “Monetary Value,” and “RFM Score.” These columns will rank customers in each of our performance categories.

RFM Report Recency, Frequency, Monetary Value and RFM Score

6.) Input the following formula into cell F2:

=1-(PERCENTRANK.EXC($E$2:$E,E2,1)*10)+9

Make sure to include dollar signs to the left of the specified column and row coordinates. This will lock the reference point for each customer you will be ranking.

Once the formula has been input, apply it to all the remaining customer rows in your “Recency” column.

RFM Report - Formula 2

7.) Input the following formula into cell G2:

=PERCENTRANK.EXC($D$2:$D,D2,1)*10

Similar to “Recency,” this formula will give customers a ranking value based on other data points in your “Number of Transactions (Year to Date)” column.

Once the formula has been input, apply it to all the remaining customer rows in your “Frequency” column.

RFM Report - Formula 3

8.) Input the following formula into cell H2:

=PERCENTRANK.EXC($C$2:$C,C2,1)*10

Once the formula has been input, apply it to all the remaining customer rows in the “Frequency” column.

RFM Report - Formula 4

9.) Once you have added the ranking formulas for “Recency,” “Frequency,” and “Monetary Value” columns, tabulate your customer RFM scores in column I with the following formula:

=F2+G2+H2

Double-click on the bottom right-hand corner of the cell, or drag the formula down for each customer on your list.

RFM Report - Formula 5

10.) Sorting column I (RFM Score) in descending order will give you a quick look at the holiday customers you should pay close attention to.

RFM Report - Sorting

As an additional step, you can divide or color code the list’s upper, middle, and lower thirds. Doing so will create priority among customers that may continue to transact or require support throughout the holiday season.

  • The RFM segmentation method dictates that the upper third of the ranking should represent customers most important to your brand. Relaxing your handle time requirements or offering special promotions with these customers may be an effective strategy to encourage acceleration.
  • The middle third of customers represents those that may be interested in expansion. You should also consider adjusting your approach to support to develop loyalty with these customers.
  • The lower third represents essential customers to your brand but may represent different opportunities than other segments. For these customers, you should take more of a maintenance approach.

RFM Report - Color Coding

There are more complex, sophisticated ways to segment your customers. The RFM segmentation methodology, however, provides a straightforward evaluation of recent transactions. As you continue throughout the year, the RFM methodology may assist in optimizing how you engage with your best and brightest.

Adjusting Your Tone for Future Interactions

“Language is at the very heart of what makes us human.” In an interview with The Guardian, distinguished University of London Professor Geoffrey Crossick discussed how crucial communication was to convey ideas and to affect behaviors and motivations: “It is about how we think, understand the world, and communicate with each other. If we are to understand these activities, let alone to harness technology to help us carry them out, it is essential that we understand language and how it works.”

In pursuing customer experience perfection, our journey must explore the depth of interaction. The words we speak are often disconnected from the tone we hear. This is especially true of support communication. Finding more effective ways to convey ideas and process the world of our customers is an unavoidable part of understanding and delivering unbreakable loyalty.

Given the importance of communication, we partnered with the Gladly Academy to develop a thorough eLearning course on tone. This course will teach you about how tone can impact the customer experience. You will also learn how to create trust and establish sincerity among your customers this holiday season. If you have 20 minutes to take advantage of this free resource, we promise it will be well worth your time.

E-LEARNING COURSE

Gladly Academy: How Your Tone Affects Service (20 Minutes)

START NOW

As we approach the end of 2022, we are so excited to be connected to such professionals within the Gladly Connect Community. On behalf of the Gladly Connect Community team, thank you for being a part of the journey. We have exciting things in store for 2023.

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