The digital landscape is constantly evolving. Hotel digital marketers continue to seek more effective and cost-efficient ways to reach the right audience, at the right place, and at the right time. But do hotel marketers truly know the value of each and every guest and, more importantly, do they understand what motivates guests to choose their hotel, then choose to stay again?
Understanding the lifetime value of guests, including the type of content and promotions that compels them to book direct, is crucial to an effective book direct strategy.
So, what's the secret to understanding the value of your guests and knowing your most profitable guest? The answer lies in RFM (recency, frequency and monetary) modeling. In a nutshell, this means:
RFM analysis looks at all of the bookings and transactions in your customer database during a specific time period, usually the last 2-3 years. The purpose of the database analysis is to determine the value of your guests based on how much they spend with your hotel brand, how often they stay with your hotel brand, and how recently they've made a booking.
With the combined power of RFM data, hotel marketers can get a deeper understanding of a guest's relationship with the brand and use this data to reach a more qualified audience with personalized messaging.
Based on RFM, you can classify your guest database into different value segments. Here are some example segment classifications based on recency, frequency, and monetary values:
These are just some examples of RFM segmentation to help digital marketers better classify the value of past guests.
How can you utilize RFM modeling to elevate your digital strategy and drive revenue?
Classifying your RFM segments is just the beginning. How you utilize these RFM segments on your hotel website and in your digital marketing strategy and campaigns will achieve the most impact on your bottom line. From design to personalization and multichannel campaigns, it's crucial to take a holistic approach when integrating RFM segments into your digital strategy. Here the top5 ways that RFM segmentation can increase direct bookings:
So, you've classified your guest profile data into RFM segments. Now what? While it's great to see a comprehensive list of names classified under 'Premium Best Guest' (aside from an average monetary value and stay frequency) what exactly does this really mean, and more importantly, who's included in this segment, what are their online behaviors, and what do they love about your hotel brand?
The answer lies in guest data.
Once you analyze these key data points, you should start to get a better understanding of who your high-value guests are, what they are interested in, and what they love about your hotel. With these insights you can shape a customer persona, give it a name, and begin building website content and campaigns that go beyond targeting a blanket demographic with a human-centric approach that resonates with potential guests.
These customer personas can influence every aspect of your digital strategy from website design, user experience, and content to digital marketing and your CRM strategy.
2. Use RFM to fuel your digital marketing. By now, many hotel marketers are using customer data to build look-a-like audiences across marketing campaigns to reach new potential guests that match the demographics and travel planning behaviors of past guests. Hotels can take their CRM data and utilize RFM segmentation to reach new potential guests that match their high-value guests and are more likely to book at a higher price point. RFM segmentation to fuel your digital marketing doesn't just allow you to reach high-value guests, it also allows you to reach value-driven guests. For instance, if you need to launch a campaign to fill last-minute inventory at a lower ADR, it's a good idea to market to Frequent Smart Shoppers (segment of guests that stay frequently at a lower price point).
3. Use RFM to implement data-driven design. Once you build personas to understand who your high-value guests are, their interests, and what they love about your hotel, next it's important to understand what they want and need from your hotel website. For instance, if when exploring your RFM segments you find that your Premium Best Guest is predominately over the age of 55, you may want to go with a more traditional navigation structure on your hotel website vs hamburger navigation. If you find that their interests tend to center around arts and culture, your website design should prioritize a calendar of events in content hierarchy ensuring events are prominently displayed and easy to navigate.
4. Utilize RFM in your content personalization strategy. Website content personalization focused on CRM data is highly effective in driving conversions. Take your personalization strategy to the next level by utilizing RFM segmentation to personalize content throughout your website. For instance, if you know that your Premium Best Guest typically stays in a suite and purchases breakfast, create a suite package including complimentary breakfast and serve this package first when a Premium Best Guest visits your website. If the Frequent Smart Shopper segment prefers a more affordable room type but tends to spend more money at the destination, serve this website visitor a more affordable room type and a call-out to a map of things to do nearby the hotel.
5. Launch RFM focused multichannel and CRM campaigns. Launching campaigns that are targeted towards profitable, high-value guests is one of the best ways to increase revenue. Multichannel campaigns focused on a high-value RFM segment should have more luxury and experiential messaging across channels while multichannel campaigns focused on a more price-conscious segment should be centered more on savings. This is where building customer personas and uncovering both the functional and emotional benefits they associate with your hotel brand become crucial to launching campaign messaging that resonates with potential guests. The same strategy applies to your hotel's CRM campaigns. When deploying CRM communication, messaging, imagery, and design should be tailored to each RFM segment to increase CTR and engagement.
When analyzing your RFM segmentation in your CRM data, make sure the segments you are targeting are profitable. For instance, while an RFM segment may spend less money with your hotel brand, if the cost per acquisition is low and it's a large enough segment of your existing and potential customer base, it may be worth investing more than a high-value segment that may be expensive to acquire. In evaluating the profitability of each RFM segment to help you reach your revenue goals faster, the focus should be on cost per acquisition, addressable market, and revenue potential.
Overall, RFM segmentation of your CRM data can be a powerful tool to launch a more personalized, effective, and cost-efficient digital strategy. Whether your top priority is design, content personalization, digital marketing, or simply getting to know your customers better, integrating RFM segments into your digital strategy will make your digital presence more impactful resulting in more direct bookings and ultimately, more loyal guests.
NextGuest (formerly HEBS Digital)
One Penn Plaza 48th Fl
New York, NY 10119
Margaret Mastrogiacomo leads creative strategy and provides strategic direction for marketing initiatives including copy, website design, and campaign development for NextGuest clients. Her responsibilities include strategy and consulting, campaign management, new product development, and more. She has been instrumental in developing award-winning multi-channel marketing campaigns and interactive mini-sites and applications for NextGuest clients. Margaret is also a Qualified Google Advertising Professional. She has excelled in a number of roles since joining NextGuest Digital, including spearheading the creation of the Digital Media and Creative Strategy Department by establishing and implementing internal procedures and directing a team to support this function within the agency. Margaret’s major accomplishments at NextGuest include building new internal creative strategy procedures across departments and offices, working with strategic clients to build award-winning digital marketing campaigns, and the development of many NextGuest products such as Facebook Applications, Sweepstakes, and more.
Brand Marketing Manager
Phone: +1 212 752 9425