AI customer segmentation for e-commerce

RFM vs Engagement Segments: Which One Should Own Your Next Campaign

You have two segments: the people who open everything and the people who spend the most. They are not the same people, and the campaign needs both.

Engagement decides who is safe to email. RFM decides what to say to them. The two are not competitors, they are two different jobs, and the campaign that confuses them will either email people it should not, or say the wrong thing to the people it should.

Two different jobs

Engagement and RFM are not competitors. They are two different jobs, and the campaign that confuses them will either email people it should not, or say the wrong thing to the people it should. Engagement decides who is safe to email. RFM decides what to say to them.

Engagement is a safety system. It tells you who has opened, clicked, and engaged recently, and who has gone quiet. A customer who has not opened an email in six months is not safe to email, because the emails will hurt your deliverability, and the deliverability will hurt every other email you send. The engagement segment is the list of people you can email without damaging your sender reputation.

RFM is a messaging system. It tells you who bought recently, who buys often, and who spends the most, and it tells you what to say to each group. A customer with high monetary value who has not bought recently gets a win-back. A customer with high frequency and low monetary value gets a bundle. A customer with high recency and high frequency gets a thank you. The RFM segment is the message, and the engagement segment is the permission to send it.

The open rate problem

Engagement segments used to be built on opens. Apple Mail Privacy Protection changed that. Since 2021, Apple loads tracking pixels automatically, which means opens are recorded even when the recipient did not open the email. The open rate is no longer a reliable signal, and engagement segments built on opens alone are unreliable.

The fix is to build engagement segments on clicks, not opens. A click is a real action. An open is a pixel load, and the pixel loads whether or not the recipient is there. A customer who clicked in the last 90 days is engaged. A customer who opened but never clicked is not necessarily engaged, and the segment should reflect that.

The four levels of segmentation, as described by The Donut Agency, are engagement, purchase history or RFM, the nine-box grid, and the product layer. Each level adds a dimension, and the store should use the level that matches its data and its needs. A store with a small list should use engagement and RFM. A store with a large list and a large catalog should use the nine-box grid and the product layer.

What the numbers say

Mailchimp's data shows that segmented campaigns have 14.31 percent higher open rates and 100.95 percent higher click rates than unsegmented campaigns. The lift is real, and it comes from sending the right message to the right segment. A segmented campaign is not a better email. It is a better match between the email and the recipient.

An RFM win-back campaign, targeted at customers with high monetary value who have not bought recently, converts at about three times the rate of a generic campaign. The segment is small and the message is specific, and the combination works. The win-back is the clearest example of RFM doing its job: the segment is the customers who are worth winning back, and the message is the reason to come back.

The numbers are not a reason to segment for the sake of segmenting. They are a reason to segment when the segment changes the message. A segment that does not change what you say is not a segment. It is a list, and the list is not worth the effort.

Which one owns the next campaign

The answer is both, in order. Engagement owns the send list. RFM owns the message. The campaign starts with the engagement segment, which is the people who are safe to email. Then it applies the RFM segment, which is the message those people should get. A campaign that starts with RFM and ignores engagement will email people it should not, and the deliverability will suffer. A campaign that starts with engagement and ignores RFM will email the right people the wrong message, and the conversion will suffer.

The practical routine is to build the engagement segment first, as a standing list that updates daily, and then to build the RFM segments on top of it, as the messages change. The engagement segment is the foundation. The RFM segments are the house. A house without a foundation will fall, and a foundation without a house is just a slab.

The next campaign should be owned by both, in that order, and the report should show both numbers: how many people were safe to email, and how many of them converted. The two numbers together are the measure of whether the segmentation worked.

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Frequently asked questions

What is RFM segmentation?

RFM stands for recency, frequency, and monetary value. It scores customers on how recently they bought, how often they buy, and how much they spend. An RFM segment is a group of customers with similar scores.

What is an engagement segment?

An engagement segment is built from email behavior: opens, clicks, and inactivity. It tells you who is safe to email and who is not. A customer who has not opened an email in six months is not safe to email, because the emails will hurt your deliverability.

How did Apple Mail Privacy Protection change engagement segments?

Apple Mail Privacy Protection, which launched in 2021, loads tracking pixels automatically, which means opens are recorded even when the recipient did not open the email. The open rate is no longer a reliable signal, and engagement segments built on opens alone are unreliable.

Do segmented campaigns actually perform better?

How much better does an RFM win-back convert?

What are the four levels of segmentation?

Four levels: engagement, purchase history or RFM, the nine-box grid, and the product layer. Each level adds a dimension, and the store should use the level that matches its data and its needs.