RFV modelling in retail achieves 9:1 ROI on email communications
The challenge
Maximising customer engagement and value requires constant communication with customers, and IKEA are experts in this field. With 3 stores in Bangkok by late 2023, they understand the critical importance of truly knowing their customer base.
Working with Ikano Insight, IKEA are ambitious to build brand loyalty even higher in the local region, by rewarding their most loyal customers and reinvigorating dormant customers who have not purchased recently.
Our specific challenges were:
- drive an increase in store visitation
- increase the number of loyal customer transactions
- increase the average spend per loyal customer.
Targeting customers by value and engagement
As part of their Customer Lifecycle Management programme, IKEA in Southeast Asia conduct regular activation and reactivation email campaigns to their IKEA Family loyalty base.
RFV modelling was applied to the base to enable a segmented offer strategy to be deployed through email and MMS communications.
This enables IKEA to understand their Family members better – they can find out:
- when members last shopped at any of the IKEA stores in Bangkok
- how often they have shopped and therefore, whether they are likely to purchase again
- how much value they contribute to IKEA
- how to differentiate between segments based on transactional behaviour
In total there were nine segments built to capture IKEA Thailand’s Family members – ranging from the best customers in the “high frequency, high value” segment who had high average spend and visited regularly in the last 12 months, to those already “lapsed” or “dormant” as they had not made a purchase or visited the store for 24 months or more.
Customised cashback coupon campaign
The RFV model was then overlayed with a recommendation engine to determine the optimum offer for each value-based customer segment.
IKEA deployed personalised, targeted, promotional communications in addition to newsletters to drive Family member behaviour to meet campaign goals. A series of offers and incentives, channels, and timings, were tested to discover which combination was the most optimal in driving members to purchase and spend more.
The process of RFV model segmentation, customer, control group, and communication channel selection were all automated within the client’s customer relationship management (CRM) tool.
9
times return on campaign investment
40
% lapsed customer spend uplift
461
% lapsed customer conversion uplift
The outcome
Advanced analytics turned raw data into actionable insights, and enabled greater understanding of targeted customers. IKEA identified marketing promotions that illicit the best and most profitable response by segments, allowing further audience optimisation by putting members unlikely to respond in the future into a different category for differentiated handling.
Taking all costs into account, the campaign achieved a ROI of 9:1.
Results indicated particular success with lapsed and dormant customers, often seen as the hardest to convert. This segment delivered an uplift of 461% in conversions and 40% on spend.
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Next steps
This campaign invigorated IKEA Family members to spend more by identifying the right promotions in the right channels and at the right time, to increase ROI and customer response. This proven strategy and model is currently being used and replicated in other IKEA markets globally.
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Find out more about growing customer value
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