RFM stands for Recency, Frequency and Monetary

Segment your customer base with RFM Analysis
Your customers are NOT valued equally. Some customers are worth a lot, while others are worth little to nothing. RFM segmentation is a framework for segmenting your customers based on their buying behavior:

Recency - the last time that a customer made a purchase. A recent
purchasing customer is more likely to make another purchase than a
customer who hasn’t made a purchase in a long time.

Frequency - how many times a customer has made a purchase within a
given time frame. A customer who makes frequent purchases is more likely
to continue to make purchase than a customer who rarely makes

Monetary Value - the amount of money a customer has spent within that
same time frame. A customer who spends more is likely to return than a
customer who spends less.

When RFM segmentation is combined with a marketing automation tool you’ll be able to leverage this segmentation in real time to deliver the right
content and offer, to the right customer at the right time.

Example of RFM Scores by Segment
Read more about Segmentation

Order Recency Score

• Order Recency = 4 (ordered in the last 1 to 7 days)
• Order Recency = 3 (ordered in the last 8 to 14 days)
• Order Recency = 2 (ordered in the last 15 to 30 days)
• Order Recency = 1 (ordered more than 31 days ago)

Order Frequency Score

Frequency is based on quartiles.
• Order Frequency = 4 (more then top 25%  orders)
• Order Frequency = 3 (quartile 3)
• Order Frequency = 2 (quartile 2)
• Order Frequency = 1 (1 order)

Monetary Score

Monetary is based on quartiles.
• Monetary = 4 (quartile 4)
• Monetary = 3 (quartile 3)
• Monetary = 2 (quartile 2)
• Monetary = 1  (quartile 1)

In edrone we will show you the segmentation in our dashboard.

Having the segmentation enabled in the system you will be able to send specific action to different segment. 

Your champions have RFM score of 444
bought most recently, most frequently and have paid the most. 

You have discovered your customer segmentation and now you can engage them differently based on their segment. 

What is most important about RFM is that you can better channel your marketing budget. 

Looking at percentage of Lost Customers (usually around 30 - 60%) of all customers but it is only 15-20% of your revenue.
Similarly with Champions, which is around 1-4% of your customer base but are responsible for 25-35% of your revenue. 

You will take different approach to your champions then to customers you can't loose. 

Read more: Marketing activities with RFM Analysis

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