Customer Value, Purchase Frequency and SMS Text Messaging
All customers are not created equal. Some companies are in hyper-growth mode, with massive consumer markets and any customer is a good customer. Other companies are extraordinarily focused and need only a few customers to make their company highly profitable and influential.
We like to think of customers in the context of value and performance. Consider the following:
The NYSE is a highly focused operation with just 2,385 listed companies as of March 2023. These customers’ will probably list only one time in their entire existence. Crumbl Cookies however, has a massive consumer market and has been in hyper-growth mode for several year. They opened their first store in 2017 and have grown to over 900 stores nationwide as of September 2023. With a little luck they are attracting customers that like to eat cookies every week or at a minimum, more than once in their lifetime.
As you consider these two extremes hopefully it becomes obvious how much a customer is worth has significant impact in how a company goes to market. One very useful tool for ranking and identifying customers is a technique known as RFM (Recency, Frequency and Monetary Value). These three attributes are fundamental and when combined can be very beneficial to improving company performance.
What does this have to do with text messaging?
Everything! In the pyramid chart we show that text messages are only sent to customers that buy 25x or more each year. Why? Text messaging can be very intrusive and companies need to govern how frequently they text their customers. The cell phone is a very personal device and its primary purpose is not to be a free channel for marketing promotions to show up every day, all day. Pumping out promotional messages to all customers just because you have a phone number is a mistake. (retail clothing blog post link here)
However, engaging in two-way texting with your customers is very different. It’s conversational and built on the active participation of two live people having a discussion.
And just for grins and giggles, in the process of creating the illustration above, we sent an email to the CEO of Crumbl, with a few thoughts on Crumbl stores and their use of text messaging… three days later we saw the adjacent post on their Twitter feed >>>
Click HERE to see how ChatGPT answers the following question: how widely used is RFM analysis by companies in determining the economic value of customers?
Buying once…buying twice…three times…Gone!
Let’s starts with a simple focus on Frequency of Purchase. The following illustration is built around the Crumbl cookie experience:
The chart points to the relationship between frequency of purchase and how a customer might engage with the brand. Think about it: how many cookies can one person eat every week? One, two, three… a half dozen? Seriously, how many people do you know that eat through a pink box six pack of Crumbl cookies every week? And if they do, how soon will they land in the hospital?
All kidding aside, it’s important for your company to understand the purchasing behavior of your customers. When a customer walks into a Crumbl store, the staff dutifully asks for their phone number. The transaction is completed and the customer walks out to enjoy their hot baked cookies. In theory, the company then sends the customer follow-up offers, text messages and invitations to return and make another purchase. Frequency of purchase is highly critical for Crumbl.
Based on the illustration, it’s easy to see how RFM can create a compelling visual on frequency of purchase and the value of a customer. It often creates “aha” moments that impact strategy, product offerings, operations, routes to market, marketing channels and margin models. Although the chart above is incomplete and represents a blind build on our part, IF the Crumbl base looks anything like what is shown here, Crumbl and their franchise owners across the country know what’s happening with their customers and which ones are most impactful to their continued growth.
