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*A Book Review*

Libey and Pickering on RFM and Beyond

By Donald R. Libey and Christopher Pickering

by Michael C. Gray

June 3, 2008

"Half the money I spend on advertising is wasted, and the trouble is…I don’t know which half." -- Viscount Leverhulme, British Industrialist, 1851 – 1925.

The great advantage of direct response advertising is you can measure the effectiveness of your advertising and marketing efforts.

Another advantage of direct response advertising is the ability to analyze in some detail the most valuable asset of any company – the customer list – to determine the health of the business and determine where and how to focus your promotional efforts.

What information do you need to accumulate and consistently study in this process of analyzing the customer list?

Libey and Pickering would respond: statistics relating to recency, frequency and monetary value for the customer list, each promotional channel, and by product line.

A customer who has done business with you most recently is also a customer who is mostly likely to do business with you in the near future. The longer since there has been a contact, the more likely your relationship with the customer has deteriorated to the point where you are no longer at the front of the customer’s mind for satisfying the wants and needs for which your product or service is the solution.

Customers who currently do business with you on a regular basis are most likely to continue doing so, and are more valuable than those with infrequent transactions.

Customers who have high monetary value purchases are obviously more valuable than those who don’t.

The customer list can be analyzed for trends in these categories and for the customers with the desireable traits. Customers who have continued up to the moment to regularly make large purchases are obviously "golden" and deserve special nurturing effort and appreciation. These customers should be "profiled" to find out where more of them might be found.

In analyzing marketing efforts, you will find some marketing channels (internet, television, radio, magazines, newspapers) to be more lucrative than others. Those channels will be favored in your marketing mix.

The product line should be analyzed for profitability and where products are in their lifecycle. Can products be "renewed" or updated to prolong their economic lives?

Marketing guru Dan Kennedy has said that marketing is psychology and math. Psychology is the "fun" part of creating activities that generate marketing results. Math is the "hard" part to analyze the results and better manage the marketing process.

RFM and Beyond is not an easy read, but Libey and Pickering have pointed out key information that should be gathered and studied by every company. Too many don’t do a good job of it.

This can be especially challenging for small businesses that don’t have the resources to develop custom database applications to accumulate this information. There aren’t many "canned" software applications designed for this kind of analysis for small businesses.

To better understand the "math" part of the marketing process, I recommend that you read, study and implement Libey and Pickering on RFM and Beyond.

Buy it on Amazon: Libey and Pickering on RFM and Beyond.

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Libey and Pickering on RFM and Beyond by Donald Libey and Christopher Pickering explains which statistics you need to measure the effectiveness of your advertising and marketing efforts.


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Michael Gray, CPA
2190 Stokes St., Suite 102
San Jose, California 95128
(408) 918-3162
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