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Customer Relationship Management for IM Dummies

Posted on 09. May, 2011 by Daniel Levis in Articles, Blog, customer, intelligence, logic, pareto, relationship, resource, Small Business Internet Marketing, Small Business Marketing, spending, spreadsheet, system, tracking

The Pareto Principle says 20% of your customers produce 80% of your sales and profits. This has profound implications to the wealth and wellbeing of ANY business…

Resources are finite. There is only so much time, money, and energy to invest.

One of the keys to increased conversion, customer value, and retention — and the increased profits they bring you — is the strategic application of your resources.

If you can deploy them with surgical precision… obtaining the highest possible return on resources invested… while avoiding their squander in places where they have negligible or negative contribution to your bottom line, you have a decided competitive advantage.

So why do so many online marketers pursue the quick fix, churn and burn school of marketing that treats all customers alike? Chalk it up to ignorance… temporarily too easy pickings… shoddy products that are anathema to repeat business… laziness… stupidity… pick your poison…

Despite the obvious logic and benefit of the surgical, systematic strike, few entrepreneurs have even considered it… still fewer pursue it. And as a result, billions of dollars are left on the table. Worse, businesses that flourished in cushier times are now floundering on the rocks of extinction.

The first step to avoiding this fate is to start tracking the behavior of your customers… and using that intelligence to take specific actions that encourage continued and increased spending…

Doesn’t it make sense to spend more money marketing to people with a proven propensity to buy from you?

What do you think might happen on your next product launch or promotion if you were to separate your best buyers from the great unwashed? What if instead of just sending them a series of emails you send these VIPs a series of print pieces as well?

What do you think might happen if you were to send your very best buyers a surprise gift in the mail once a year? Or your bread and butter buyers a free printed catalog once a quarter?

Do you think that might increase sales far and above your mailing costs?

Do you think it might also make these customers more responsive to your regular email promotions?

Does the Pope wear a beanie?

But here’s the real million-dollar question:

How do you know which customers are likely to respond enthusiastically to this special attention?

Here’s what I told one of my brightest coaching students who asked this question just the other day…

Your first step is to create an RFM value for each record in your customer file.

R stands for RECENCY (customer purchased within the last x days). F stands for FREQUENCY (customer purchases on average every x days). M stands for MONETARY VALUE (customer’s total purchase volume).

So let’s say Jill Customer made her first purchase a year ago. Her most recent purchase occurred 7 months ago. In between she made 2 additional purchases. And her total spend with your company is $2,780.

How do you compute Jill’s value in order to make a resource-leveraged decision about how much you should be willing to spend to convert her into a customer for your latest offering?

First, you need to create a few simple rules that make sense for your particular business. DISCLAIMER: Every business operates around different purchasing patterns and customer lifecycles so this is a purely an illustrative example…

Recency Rules:

• Customers who last purchased within the last 30 days get an R value of 5.
• Customers who last purchased within the last 30 to 60 days get an R value of 3.
• Customers who last purchased within the last 60 to180 days get an R value of 1.
• Customers who have not purchased within the last 180 days get an R value of 0.

Frequency Rules:

• Customers who purchase every 60 days or less on average get an F value of 5.
• Customers who purchase every 60 to 180 days on average get an F value of 3.
• Customers who purchase every 180 to 360 days on average get an F value of 1.
• Customers yet to make their second purchase get an F value of 0.

Monetary Value Rules:

• Customers who have spent $2,500 or more with your get an M value of 5.
• Customers who have spent between $1,500 and $2,500 get an M value of 3.
• Customers who have spent between $500 and $1,500 get an M value of 1.
• Customers who have spent less than $500 with you get an M value of 0.

You now have a system for ranking the relative value of your customers on a scale of 0 to 15. So what kind of customer is Jill?

Well she hasn’t purchased for 7 months. That pegs her R value at 0.

During her 1-year history as a customer she made 4 purchases. That gives her an F value of 3.

And her total spend with your company is $2,780. That gives Jill an M value of 5.

You now add these figures together to determine Jill’s RFM value — 8. This is Jill’s relative value as a customer.

Your next step is to decide what action you will take in order to maximize that value. Maybe you sub-divide your buyer’s list into three groups — 0-5, 5-10, 10-15. And on your next product launch you send all three groups a couple of postcards inviting them to consume your pre-launch content online.

The 5-10 and the 10-15 group have proven by their past buying behavior that they are quite responsive to your offers. So in addition to the postcards, you send them a sales letter and a couple of follow up reminders by mail counting down to the deadline.

And the 10-15 group — your most responsive and therefore highest value customers — also receives an amazing shock and awe package that includes all of the launch content on DVD, an audio CD they can listen to in their car, and beautifully printed transcripts.

Result: More sales, more profits, more loyalty and retention!

Parting comment. This is not rocket science to pull off. You don’t need high priced consultants or fancy pants CRM software to do this.

Anybody with elementary school math can download a .csv file from their shopping cart and perform the above calculations in a simple spreadsheet.

Will you give it a try?

Until next time, Good Selling!

Customer Relationship Management for IM Dummies originally appeared on The Michel Fortin Blog. Please visit to subscribe to it, or Tweet This.

Why People Are Addicted to Info-Products

Posted on 12. Jun, 2010 by Ryan Healy in addiction, attention, Blog, Contributions, dopamine, drug, focus, guru, information, Matt Ritchel, productivity, Small Business Internet Marketing, Small Business Marketing, spending, success

Have you ever wondered why people buy dozens of info-products… and yet never seem to get around to consuming them, much less using them?

I have.

And for a long time I just blamed it on people being lazy. In my own case, I blamed it on being too busy with client work to get around to some of those extracurricular learning pursuits not necessary to my daily work.

But there is now new research that discounts “The Laziness Theory” and “The I’m-Too-Busy Theory.”

Turns out, it’s not that people are lazy or unwilling to take “massive action” — it’s simply that living an always-on wired life causes people to become addicted to new information.

Addicted to Information?

I know it sounds crazy, but it’s true.

Check out this article — Hooked on Gadgets, and Paying a Mental Price — by Matt Ritchel.

As Ritchel explains, scientists have discovered that reacting to a never-ending stream of “information bursts” causes the brain to become excited and release dopamine, which in turn causes feelings of happiness.

As Wikipedia reports, “Dopamine is commonly associated with the reward system of the brain, providing feelings of enjoyment and reinforcement to motivate a person proactively to perform certain activities.”

So let’s connect the dots…

• Whereas, responding to “information bursts” causes the brain to release dopamine;
• And, whereas, dopamine reinforces the behavior that produced it;
• Thus, replying to emails, tweets, Facebook updates, forum threads, and other forms of real-time interruptions can lead to compulsive behavior, possibly even addiction.

Yikes!

If you’re not careful, you could find yourself checking email dozens of times a day, replying to text messages the minute they arrive, logging onto Twitter multiple times an hour, checking for Facebook updates, seeing what’s popular on Digg…

…and on and on and on in a never-ending dopamine-reinforcement loop.

It’s a dangerous, time-sucking, attention-killing cycle.

Social Media: The Drug of Choice in the 21st Century

Once you’re hooked on social media — with your cell phone in your pocket and your laptop on the kitchen table — you’re little more than a human version of Pavlov’s dog:

1. Every time you hear (or see) a notification, you respond immediately…
2. Your brain rewards you with a little more dopamine…
3. And the cycle becomes a little bit stronger, a little bit harder to break.

The negative side effects of constant distraction (a.k.a. “multi-tasking”) are many.

Ritchel reports, “While many people say multitasking makes them more productive, research shows otherwise. Heavy multitaskers actually have more trouble focusing and shutting out irrelevant information, scientists say, and they experience more stress.”

Let’s not beat around the bush here. Research has plainly shown that multitaskers get less done and are more stressed out than people who focus on a single task at a time.

So I think it’s reasonable to ask: Are email and social media keeping you from success? While you’re pondering this, let me tell you…

Why People Pay Good Money for Information…

… Information They Don’t Need and Will Never Use!

Stress and decreased productivity are not the only consequences of an always-online, always-distracted lifestyle.

You may also find yourself inexplicably compelled to buy information — even information you don’t need and will never use.

This is because multitasking literally rewires your brain.

Recent tests conducted at Stanford “showed multitaskers tended to search for new information rather than accept a reward for putting older, more valuable information to work.”

Are you feeling compelled to buy yet another home study course even though you have multiple home study courses gathering dust on your shelves?

Or are you wanting to sign up for another membership site even though you already have multiple online memberships that you never use?

Well, now you know why.

The More Distracted You Are, the More Money Marketers Make

Marketers like to whine about how hard it is to sell to people who are distracted… how there’s so much competition for people’s attention that it’s hard to make a buck.

I think there’s some truth to this. But I think there’s more truth on the flip side of this argument.

Here’s my theory: The more distracted you are, the more money marketers make.

That’s because the more caught up you become in the distraction-dopamine cycle, the more likely it is you’ll continue to reinforce those positive feelings by seeking out new information.

And the more you seek out new information, the easier it will be for marketers to sell you “secrets” you think you don’t yet possess.

Which means: Not only does multitasking rob you of your productivity, it robs your bank account, too!

Now you know why all the gurus want you to follow them on email, Twitter, and Facebook.

They want you to be distracted.

Because the more distracted and confused you are, the easier it will be for them to get your credit card number — and sell you yet another overpriced course you’ll never use.

With that in mind, don’t you think it’s time to reconsider your use of social media?

Tips for Breaking Information Addiction

(And Taking Back Your Life)

In spite of the risks, I don’t necessarily recommend swearing off cell phones and social media. So here are a few suggestions for getting value out of social technology without letting it rule your life:

• Limit your connections. Connect only with people you really want to connect with. Don’t follow just to be followed.
• Tether social media profiles together so you can control multiple profiles from a single control panel or with a single RSS feed.
• Spend no more than 30 minutes a day on social media. Set aside a specific time to update your profiles and reply to people.
• Turn your cell phone off to block unplanned interruptions. Being accessible all the time should not be a badge of honor.
• Use a tool like RescueTime.com to block distracting web sites during periods of focus time.
• Be cautious about spending money on new information, especially if you have information you’ve paid for that you haven’t used yet.

As we sail deeper into the uncharted waters of the 21st Century, I believe one of the keys to success will increasingly become a person’s ability to block out distractions and focus on completing one task at a time.

Ultimately, self-control and constant vigilance win the day.

Why People Are Addicted to Info-Products originally appeared on The Michel Fortin Blog. Please visit to subscribe to it, or Tweet This.