Valentin Radu: How to use the RFM Model to Drive Continuous Growth

Okay. Hello, everyone. I am going to give everyone another minute to join. Just for anyone who's still kind of trying to grab a coffee or something to drink, just let me know over here in the chat that you can hear me. Well, just a few of you, that would be great. Just so I know that everyone can hear me. Awesome. Thank you, Carlos and Danielle and everyone. I'm really excited. I've been seeing everyone saying hello from their country, so that is awesome. We've got people from all over the world and I will answer all your questions in just a minute. Let me share my screen while we wait for a few more people to join. Let's see. So right about now you should see an. An inception of a ton of screens. Let's.

All right.

Okay, guys, so you should be able to see my screen right now. And I'm just going to tell you a bit about what's coming up and what we're going to be doing today. So I'm really excited to have everyone here. My name is Talia and I'm the founder and the Chief Optimizer at GetUplift, which is sort of an agency. We do conversion optimization. I've been doing it for many years now and I'm really excited to host this event because it is something that I've been dreaming to put on for so many years now. And I have the privilege of really having some amazing speakers join us today. Some of the people that I have met on stage, that I've heard at different amazing events, and we're all going to be there for you guys. So the idea is really to teach actionable stuff. This is not going to be about fluff. I don't want just main strategies, but real hardcore actionable tips, tactics. And other than that, some of the speakers are going to share some of their stuff and all sorts of worksheets that they have and formulas and methodologies. So there's a lot to look forward to. We're getting started in just a few minutes. We're going to start with Valentin and he's going to talk about retention optimization, which is really cool. I'm just going to walk you through this. So I do want you to ask as many questions as possible. Each session has its own chat section on the right hand side, which you guys have been using so beautifully to ask me for recordings, which I will address in a second. So over here on the right hand side, you can put in all your questions, ask us anything that you want. The speakers are there to answer your questions, to do that. If you don't want to do it on the chat. You can also follow us on Twitter itself and just follow the hashtag getuplift where we will be answering all of your questions and tweeting the most important stuff. Now to your question about the resources about the recordings. So the recordings will be available. However, they will only be available for people that attended the event and we will be sending them out bit by bit. So what we're going to do is essentially summarize all the talks that we're having here today. And there's quite a few of those, actually. 9. We'll be summarizing getting the most important stuff for you in our blog, including some of the videos and from whoever the speakers allowed and said we could actually share them. So don't worry about that. We will be doing. We will be sharing whatever we can with you guys. Definitely try and stick and stay here for the live screenings because some of the speakers are going to be offering things that are only relevant for today. What else have I got to say? We have three cool partners, which is Conversion World, Semrush, and Omniconvert. Fantastic, guys. I'm going to tell you each about each one of them. Valentin will tell you about Omniconvert soon. Semrush is offering an amazing offer for you guys, but I'll get to that a bit later. And Conversion World hosts a really good event every year and I will be telling you about that too, as we go along. So that was just a few, you know, bits on what's going to be happening over the next few hours. So don't worry about questions, getting the reports, getting the worksheets that the speakers are sharing. I'm going to make sure that you get everything. As long as you're registered, you should see everything and get everything. So what I'm going to do now is I'm going to call in Valentin, who is our first speaker, and I'm really excited about having him on. Let me just. Hi there.

Hello. Hello, Talia. And hello everyone.

Valentin, I'm really excited having you here to speak because as I've written in my blog post and when I was sharing this event, I. Valentin is one of the smartest guys that I know who has done everything with conversion optimization and extreme amazing tools. He's always in the front line of just bringing in the new stuff and always learning so much from him.

We met.

Did we meet at Conversion Excel Live in Austin? It was that. Okay, awesome. So I've been following Valentin. I've actually visited their Office, which is so, so cool in Bucharest. And yeah. So Valentin, why don't you tell us a bit about what you will be sharing with us today and you can just get started whenever you're ready.

Yeah. So, yeah, I'm also excited to be part of this great, great team, Thalia. And today I'm going to speak a bit about retention rate and how to build an RFM score. This is available also for E commerce website. But not just let me share my screen with you and let me know if you can see it. And also I'm going to cut off my video and yeah, I think we're good to go.

Hold on, let me just make sure that we can see your screen. Okay. Yes, you are definitely good.

Okay, excellent. So today I'm going to speak about how to use the recency frequency and monitoring model, the RFM to drive continuous growth. And before anything, this is the content acquisition versus retention, the RFM model, a few retention hacks and how to get to action. A bit about myself. I'm the CEO and founder of OmniConvert, which is an integrated conversion rate optimization platform. I'm a civil entrepreneur from Bucharest Gemania and I'm passionate about psychology, data relations and of course change, which is the single constant in the universe. So a bit about my own life tests. I've had 17 different jobs, I've co founded four companies, I've had more than 30 relationships, I'm raising two kids and thank God I'm having only one wife which I'm in love with but she's not that passionate about digital and I think that's one of these to a happy relationship. Cool. So this is a part of my team. I've been always looking to improve myself and to focus on growth. What I have to say, all my experience in the E commerce is that it's not a one night stand and is about generating emotions and is about habit forming, you know, like this guy, which is a top performer as you can see, but that means a lot of practice and a lot of focus and it's also about word of mouth. So if you just focus on your own thing and you're not creating relations and amplification, you're not going to get there. And also it's about being data driven and not acting on all the assumptions. I'm going to let you see that guy, you know, that's an old assumption, so let's see it again. He assumed that he's not going to fall down, but actually that's what an old assumption is. Doing to your business. So now let's take a look at how important the retention. So this is a graphic which is very accurate from RJ metrics. So after the 20 months the repeat revenue is more than 50% of the total revenue on an E Commerce. So after 24 months, 50% of the revenue is generated by returning customers. So that means retention rate becomes the most important thing to focus on rather than acquisition or new customers. But that's not exactly the same for all types of visits, all the types of E commerce websites. So if you are having a website which is selling phone cases or appliances, it's different because the item value is different but and the purchase frequency is different. So if the purchase frequency is very high, like I don't know, pet supplies or office supplies or supplements or whatever, electronics, then you should focus on the retention. So depending on what vertical are you addressing, you should take into account the retention because that is generating high growth for your business. So as you can see here, the top quartile is generating more than 50% from repeat customers after 20 months and the bottom quartile quartile is generating less than 50% of the revenue from returning visitors even after 36 months in business. So this is a retention game. If you are in a vertical, which is important, you should focus on that. Another important thing is that the top 1% of your customers are spending 30% more than the average customer. To get an insight about that, maybe you all know, but if you don't know, I'm gonna say that the lifetime value of a single customer from Starbucks is US$25,000. So mainly even if the average order value is so low, like I don't know, 8 to 12 bucks, the total lifetime value is incredibly high. So you should also take into account the repeat customers and the ones which are having a big lifetime value. So another important thing is to know is that the average retention rate in E Commerce is around 30%. And if you have an E Commerce with a year over year growth of 50% for new customers, that's how much revenue you're gonna generate after six years in business. So if you are having 60% retention rate, you're gonna generate five times more revenue than if you're having 10% retention rate. So even though it's not at all important after the first year and after the second year is not that important, you can see here that after 3, 4, 5 years it's becoming crucial to your growth. So after 6 years, 90% of the total revenue is generated by returning customers at the 60% retention rate. So let's focus on a few retention hacks. First of all, don't start unless it's a priority. And I'm going to state a bit about the roadmap to growth. So after doing a lot of things into growth, after consulting a lot of big e commerce websites which are generating more than US$100 million per year, I've actually understood that there is a roadmap to success. So mainly you should take into account the priorities and the first thing you should do is to monitor the right KPIs. The second thing is to set the strategic goals. The fourth thing is to come up with ideas and strategic initiatives and then to prioritize them based on the impact and the resources that you have. And the last but not the least is to do that hard part which is the execution. And after that you should repeat monitor. The right KPIs are actually so you don't have to focus on vanity metrics like traffic or social or whatever. You should focus on lifetime value or retention rate or average order value or conversion rate or net promoter score. These are the most important KPIs to focus on because are showing also the past and also the future of your business. And then to set strategic goals, I want an uplift of, I don't know, 5% to lifetime value in six months. And then you come up with the brainstorming and come up with ideas, not vice versa. So this is a very important part. So in order to understand how these things works, I'm actually showing you this table. So you have the first objective which is to increase the net promoter score and then you have the strategic initiatives like personalized thank you letter after the first order. And this is affecting the retention rate while the PPC hacking is affecting only the traffic or the growth. Building or hiring a growth team is affecting everything. So then you have a total impact score and how this initiative is affecting all the strategic objectives that you have in your business. And after that you decide what to do if you want to use this E commerce growth metrics, I've built it and you can start using it for free. So despite the fact that it's a simple sheet in Google Docs and it's free is going to give you a lot of value if you are using it properly. Because the trap is here to use and to spoil the resources and the opportunities that you have by not doing the right thing at the right time. So all the things are so dynamic that you don't want to miss the chance to do the right things first. Okay. The next thing is to use the proper methodologies. So the first thing is to build your recency, frequency and monitor event. Then is to run the surveys and to understand the pain points of each important segment, like the ones which are having the biggest lifetime value, the highest recency and the highest frequency. And then to do the hygienic steps. So to treat the pain. So before doing over delivery, you should do the delivery. So the cosmetic step is to after you've treated the product and the services, after you've understood why the people are not returning, maybe you have a problem with the delivery or maybe you have a problem with the packaging or the difference between the images and the reality. So the expectations that you are selling on your website. So after that you do the cosmetics, which is do the math. How much can you invest to keep a customer versus to acquire a new one? And then you start to brainstorm based on your budget. So if you want to improve the retention rate, you should know how much can you spend. So another thing which is very important here is to don't stop until you have like 100 ideas. So you brainstorm and you squeeze all the opportunities. So don't run for the first enthusiastic idea. After that you execute. You analyze the impact in your business, like how this affected the net promoter score or the retention or the lifetime value. And of course you restart from the surveys part. The second part is to find out the why. So how many of your customers are placing the second order and why? Because the relation actually starts at the place after the first order has been placed. So from the ones which are not ordering anymore, how many are not placing an order because of the products or because of your services? Because this is a very important route to follow. So if you find that you don't have good quality products, you, you're not gonna solve this thing with delivery time or I don't know, thank you letters or outstanding customer support because people are buying from an E commerce because of their emotions that are being generated after buying the products from your website. So then you go deeper. Which categories are having the baddest, I don't know, customer satisfaction scores and where is the bad quality or where is false expectations. So after you understand that, in order to understand that you do it with on site surveys for returning customers, you do it with post order emails and you can do it with post order remarketing Facebook ads with a proper capping. So you don't want to annoy your audience. So the first step is to Build an RFM model. So what an RFM model actually means is you score your visitor according to the recency. So how recent is the last order? According to frequency, how often that customer bought, and what is the monetary value? What is the total revenue you got from that customer? So then you score them. In this case you have a score from 1 to 4. So 4 means the most frequent buyers are getting the highest grade. So four, the most recent, I don't know, from zero days to 30 days are having the highest recency score, which is four as well. And the ones which are having the biggest monetary value are getting the highest score, which is 4. So then you either sum up all these things into an RFM score. You either use them as they are, or 3, 4, 2, and you, you make different groups with, I don't know, dormant visitors, but with a high revenue or. So mainly you group them into this type of segments like platinum, gold, silver, bronze or lost. And then you come up with the benefits. So you either. So after you segment your database, you might get data such as this from more than 120,000 customers. From a real example, only 4,000 are getting an RFM score of 555. So this is a score from 1 to 5. I must warn you, before building your RFM score, you should take into account the fact that rfm, the many customers you have, the higher grade you should give. So the scale should be higher if you have a huge amount of customers. But if you don't have too many customers, then your maximum score should be only three or four. After that you decide what type of benefits you provide in order to loyalize your customers. So I don't know. Personal assistant Free delivery, free returns, priority support, priority on delivery, courtesy call and discount. So how can we use the NRFM model? So first we identify the best customers. And that means we craft differently our advertising and our position because we understand to whom are we selling and what type of products they are buying. And then you do a proper loyalty program. So instead of blasting everyone in your database with 10% discount because it's weekend, you can blast only the most interested customers with the latest products or with the special treatment. For example, it's much more cheaper for you to buy to give free returns, then give free delivery. Because only, I don't know, 25 or 30% of your customers are returning the goods. That means a delivery. A free delivery means you give it to all your customers, while a free return you give it to only, I don't know, 25 or 30% that leads to a higher retention rate and that leads to higher revenue. And that maybe will lead to your happiness or your team's happiness. I don't know. I'm not a specialist here. I'm still struggling myself to achieve that state of pure Zen and happiness. But here we are. So if you want to get this step by step guide, because we don't have enough time to get into all the details and I want to give you much more value, you can download and you can see this guide at this shortcut. So going further, the next step is to under promise. So after you've done your hygienic stuff, after you crafted your advertisement to be relevant to your audience, to your bullseye audience, you should take into account this principle. Under promise and over delivery, slightly over delivery. So you don't want to surprise every time your audience. But small things are actually delivering serotonin, I think, and dopamine to the brains of your audience and that will become habit for them. So small stuff like handwritten thank you letters or a surprise gift at the first, first order because you, you value the most important customers. So let's say you build up a procedure and you come up with a very, I don't know, funny or nice gift that you can deliver according to your data, right? So you do the math before buying, I don't know, gifts which are 10 bucks or 5 bucks or whatever it is. So another thing is to deliver this at the second order, right? So a small bottle of champagne so you can do any type of things. Another important thing is to, to place a courtesy call after the first order. That is also very important because that means you are a human being that cares for the fact that someone bought, I don't know, a dress or whatever it is. So the cost of a courtesy call can be much more lower than readdressing that customer with a lot of advertisements, Facebook ads or whatever, because that means you care about him. So that will build relations. So in order to improve the retention rate, if I can state a single thing, is that you don't want to improve the retention rate, you don't want to improve the KPIs, you want to install a habit, right? You want to affect the way your customer, your audience is behaving and in order to change the behavior you might not from your own skin. So you want to get rid of something smoking. You want to quit smoking, right? And you can't do that unless you have a strong emotion. So your brain tells you stop, quit smoking, or I don't know, don't sleep, don't go to sleep after 10pm but so from a rational point of view, understand that. But unless you have a strong emotion, you don't change your behavior. So that's what's happening with your audience as well. Another nice thing can be to place a welcome back overlay with a surprise according to the recency score. You can do this with OmniConvert, by the way, so you can segment your audience according to all the data that you have, according to their names, their lifetime value, their RFM score, all this data you can use. And instead of pushing those one size fits all discount codes to everyone, you could get personalized according to the RFM score. Another thing is, as I stated earlier, your extra revenue is generated by new returns minus new conversions plus new returning customers. So the less returns you have, the more revenue you are generating. So you should take into account the cost of the return. Another important thing in building an RFM score is to stand out for something that's more valuable. So the economy that we are living right now in is an experience. Economy is not anymore an economy of common goods, right? So it's not commodity anymore. So we are all looking for better experience because that's what fulfills us. We have so less time and so much money that we are looking to get them positive experience on any interaction with any human being. So that means you should take into account the values that your company has. And I'm gonna state something regarding our own company. So we've, we've stated on our website that we are not gonna sell OmniConvert as a platform for conversion rate optimization to companies which are related to guns and adult and all that stuff which we think is not valuable. So every, everyone can choose for themselves, anyone can choose for himself. But we are not gonna do provide the software for this type of companies. And after that we've been actually accused in the Reddit about this company and I've actually stated this thing because that's my response. And after 24 hours we've got WWF as a customer. So mainly if we are not doing, if we are not standing for what we value, we are not gonna get the customers we are looking for. So of course we are having a program to support charities. We are having this 70% discount for all the charities because we do believe that good companies which are providing real value should be supported. And actually that was a signal. So that's your homework for today. So first of all, what type of emotions are you generating with your product? Because emotions Will build relations. Another thing is that you should make someone responsible for retention. So someone in the company should be responsible or a team should be responsible for retention. Because a principle is that what you are not monitoring is not important. So if you are not aware about, I don't know, how many times are you smoking per day? If you want to quit smoking and you're not aware about that, if you're not quantifying that thing, you're not gonna quit smoking or it's gonna be much more harder by accident to quit smoking. Another thing is to focus on habit forming. So habits. So you need to install positive habits in an ethical way to your customer. Another thing is that you can't draw retention and anything else if you don't monitor it. So what you don't measure, as I've stated, doesn't count. And the fifth thing is to be good, right? So to deliver value. So you can't expect for value if you are not delivering value. So if you have any type of questions, I'm here. So you're welcome to ask.

Well, thank you so much. I'm just going to this and put back your video and my video. Hi there. So I have so much to say because I talk a lot about retention, but I like the way you frame it. I like the way you talk about the measuring of stuff and how amazing and how much scale you can make by just focusing on retention. So many businesses focus so much on gaining the client, you know, getting someone and then just forgetting that they exist. And the real revenue is in the retention. Right. It's in the returning customers. And it costs so much less to retain those people. So if you have a good system in place, you're gonna do great. And I love that this is our opening session and we do have a few questions, but I wanted, before I actually asked them, I wanted to talk to you about the values thing because that blew me away. I was watching live when this was happening, when this guy said, hey, omniconvert sucks and we're not going to use them and everyone should know that they refuse to use us. And I was wondering what you were going to do because this is like bad publicity, right? Someone saying that you suck, but you turned it around. And that is amazing. The fact that you went out and you tweeted about it and you wrote about it on Facebook. So do you see this happening? More and more people complaining about this or did you see that more people were interested now that you are saying, hey, we just don't deal with adult sites and gun control.

Yeah, we've had a very good. We had a positive impact in charities. So we've seen more charities coming to us because of that. And actually, that's what we are standing from. Everyone is free to choose their path. But from my perspective, from my perception, we should support the good causes and we should support the things which are not installing bad habits or, I don't know, installing fears in our brains to focus on what could go wrong. So mainly, if you believe in something, you should stand out.

I think a lot of businesses are scared of doing that. You might be worried about, you know, showing your real face and maybe taking a stand because you might shine, you know, get other people not to come. Like, people may say, hey, OmniConvert sucks, I'm not going to use you. But that's the thing about knowing who your customer is, because not everyone is your customer. And that's a rule for everything. Right? Not everyone is your customer. You need to know exactly who you're talking to.

Yeah. And we don't want any customers because at the end, when you're looking back, Thalia, this is my fourth company already, when I'm looking back in the first companies, I've got nothing but money. But now I want to be. Feel fulfilled that I've actually made a difference. That's the impact that I want to make in the world. So I don't want to support companies which are not like I am.

Okay, so we have questions, so let's start. So hopefully I'm saying this name correctly. Laszlo wants to know, how would you find out why somebody placed a second purchase in E commerce? So how can you kind of track that.

When someone placed the second purchase on an E Commerce with Google Analytics or with your CRM? Because it's much more simple. If you have a CRM or a cms, which is very capable, you can do that. But we are integrated. For instance, in OmniConvert, we are connected with any type of CRM, I don't know, BigCommerce, Shopify, Magento, whatever it is. So we are grabbing all this data and then we are associating the unique ID of the customer with the cookie. And then when that cookie lands on the landing page or on the website, you change the experience on the website according to what you know about the platform.

There are some amazing platforms out there. I myself use OmniConvert. So I'm just, you know, just saying that. But being able to know what your customer is doing, so you can use as though a tool or a CRM to actually see how many purchases a person has made, what products they bought in order to personalize that. So hopefully we answered your question. If not you can refrain it and in there in the chat and we'll, for now we'll just continue to Wes's question which is would we be out, will we be able to see a Google Doc example of the RFM score? Maybe you should send that to us a bit later so that when I'll send that out to everyone via email. Emmy asks about starting E commerce marketing. Right, so let me just find question. What's the one advice you think is the best advice for someone who's starting an E commerce site?

So the best advice is to find out the point of difference. So to differentiate themselves against the competitors, to analyze the market very well and to do the math. So the mathematical modeling of the business is one of the most important things. Even though you have this enthusiasm and you want to build a company and you've identified some products which are the best in your perception, you should focus on the right customers and you should understand how you frame yourself, how you define your audience and what's in it for them. So anything related to Blue Ocean strategy, it might help you to understand what is the competitive advantage that you have and how can you disrupt that industries. Because if you start with just doing the good old stuff like placing some Facebook ads here and there and without building a community or without doing like this, right? So to use this like a ball and then you have the arrow up there. So mainly you should focus on the mathematical model. You should focus on your customers and your points of difference before building your E commerce platform or anything.

It's funny because at the end of the day it's always about knowing who your customer is and understanding the pain. I'm going to be talking about that a bit later but you know, understanding what pain right now is in the market and then going for that, just understanding how you can solve that pain for your customer and that's where you stand out and you disrupt the whole industry. Here's another question from Lionel. He runs a photographic portrait studio. Families return to his site usually every two to three years. So does the RM model still work in such extended periods?

Yeah, it can work, but you should take into account what is your 1%, right? So which are the most important customers and maybe you should define your strategy according to them. So maybe you have the average, right? The problem with the average is that you have extreme that you're not taking into account. But maybe 1% of your customers are not coming back two years every two years. Maybe they are coming every six months or every year. So what you should do is to analyze first and to do the RFM scoring and then to focus on the ones which are having the highest frequency and the higher, highest monetary value. And then by understanding who they are, where are they coming from, what is their age cycle, demographics, whatever, you change your strategy to focus. You know, like a buyer Persona, you talk only to them. Like you talk to a single person. Hey, amy, which is 40 years old and she has, she wants to be photographed with her, I don't know, maybe if she would be 50 with her nephew.

I'm happy you mentioned Personas because later on today we have Claire who's gonna be knocking Personas. She is gonna tell you to stop doing stupid Personas and how to actually do them correctly. So it's cool because you're mentioning like really awesome things. Everything builds on the other.

Right?

Here's a question from. I hope I'm saying this name correctly. Dikshan. What two emotions have you seen being used by social startups to create retentions? Yes.

So can you repeat, what two emotions.

Have you seen being used by social startups to create retentions?

What kind of emotions they. So if it's a social startup, I mean, and if it's in this industry of attention and habit forming and investing or wasting time, the single and most important emotion I think is this fear of missing out, right? So you get this instant gratification. I don't know if you know about that incredible movie, the test tool with the marshmallow test when where small, small kids were put in front of a marshmallow and they said you wait for two minutes and you'll get another marshmallow. So this is about self control. But the truth is that the guys, the people, we, we human beings are always looking for low hanging fruits and instant gratification. So I think that's that. Unfortunately that's the, that's the value, so called value that we are looking for on any type of social network. Right? So if it's a B2C. If it's a B2B there's another.

But I think it's important to know that emotions work in B2B and B2C. Again I will definitely be talking about this soon, but I know that a lot of people think that emotion doesn't work in B2B but I have done some pretty cool stuff with B2B companies and at the end of the day it's about understanding your customers. So I love the marshmallow, by the way, because they never wait, right? They never wait. They just eat the marshmallow. They're like. But there's.

Yeah. And the good part is that the ones which are waiting are getting the most important results. So those were the outliers, Those who are the most. Those were the most successful from that group. The ones which waited for the reward. Postponing the reward.

Okay, well, tell us where we can find you, where people can ask you questions and how they can reach you.

So you can find me on Twitter or on LinkedIn. I just wanted to state that we have a special offer for all the attendees. So if you're using GetUplift as a code, you are getting two months for free of OmniConvert for 100,000 visitors to test and to play with. And the first single and the very first which is gonna drop me an email, he's gonna get a free audit of his E Commerce in terms of retention. So I'm gonna personally look at his website because that is a part of my principle. Right. You should deliver value in order to receive value. I'm starting to practice what I preach. That's what I. That's the gift to the ones which are attending here today.

Okay, so thank you very much, Valentin. It was great to have you. Let me run everyone through what's going to happen in the next five minutes. Okay, So I am going to end the broadcast here. A few minutes later, there will be a recording. You can view it here or I will actually move you all to the next session. And that will be with Aleyda Solis. She is going to be talking about SEO and conversion optimization, which is one of my favorite topics. I will just call you into there. You will wait a few minutes and we will go live. So now's the time to go grab a drink, maybe go to the loo. And we'll be back in five minutes. See you then.