I’ve been thing a lot lately about the concept RFM and how it applies to the insurance industry. If you’re not familiar with RFM it stands for:
Recency – When was the last interaction with your customer?
Frequency – How many policies do they have with you?
Monetary Value – What is the value of that customer?
RFM is a way to analyze and segment your customer base for the purposes of marketing to them to increase your business.
I’m going to ADD one more term that I think is also important, “potential”. In scientific terms, potential energy is energy that is stored up. For the independent insurance agent, potential can be described at how much NEW business they can write with one customer.
Obviously, you really want to go after the customers with the most potential.
If the customer owns a business, they have greater potential than a customer that doesn’t.
I’m working on a way to quantify RFMP for each and every customer in a database. Once you know this, you can segment and then dedicate resources to these VERY valuable customers. You can also quantify what your current book of business is really worth.
Stay tuned as I work out this predictive modeling of insurance customers bases.