Predict and Reduce User Churn with RFM Analysis

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Predict and reduce user churn with RFM Analysis

Problem Statement

Decrease in user activity is a clear indicator of churn. The key to this is identifying the maximum drop-off areas in your customer lifecycle and targeting them before it’s too late. But how do you identify these users?

WebEngage’s RFM (Recency, Frequency, Monetary) Analysis helps you with just that! It is a predictive segmentation feature that can help you create different types of user groups such as new users, hibernating, at risk.

Here is what each RFM segment indicates.

How to use RFM Analysis?

Let’s understand this with the help of an example: As an E-Commerce brand, you want to understand the purchase frequency over a period of time, the resulting conversions, aggregated by the revenue amount.
Under Analytics > RFM, follow these steps:

Step 1: Identify a recency and frequency event. In our example above, recency and frequency event = purchase will help us understand how users compare on recency and frequency of purchase.

Step 2: Identify a monetary event. In our example above, the monetary event = checkout_payment will help understand how many users, in a specified time period, have made a purchase.

Step 3: Specify the event attribute under the aggregate by field. For example, we have selected ‘cart_value’ to understand the average order value for users.

Step 4: Hit the analyse button and get a detailed view of the user segmentation. (Analyzing RFM Grid)

Tip: You can also export static lists of each segment and save it permanently in your dashboard under Segments > Static lists.

Some Use Cases to incorporate RFM in your campaigns

Now that you have identified which segments your users fall in, here are a few examples of the different types of campaigns to execute:

1. Retention campaigns for users who are about to churn

Use RFM to identify users who are ‘about to churn’ and retain them with targeted campaigns.

2. Cross-sell and Up-sell campaigns for loyal users

For a business with multiple offerings, cross selling and up-selling could be ideal way to engage loyal and active customers.

3. Limited period offer campaigns for hibernating users

Nudge hibernating users to engage with your business with the help of limited period offer campaigns.

4. Winback campaign for lost and at risk users

With the help of personalized messaging and special discounts, winback campaigns can target lost and at-risk customers.

Also read:Adda52, India's no.1 Poker site, witnesses over 85% growth in repeat cash game players

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So, what are you waiting for?

Get started with RFM Analysis

Got questions? Please feel free to drop in a few lines at support@webengage.com or get in touch with your Customer Success Manager in case you have any further queries.

Happy Engaging!