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RFM Analysis

Recency / Frequency / Monetary Value

An RFM model is a customer segmentation technique that uses recency, frequency, and monetary value to categorize customers into groups. It's a data-driven way to understand customer behavior and predict future purchases.

RFM Model

How it works​

  1. Collect customer transactional data
  2. Set RFM metrics
  3. Score customers based on their recency, frequency, and monetary value
  4. Segment customers into groups based on their RFM scores
  5. Use the segments to create marketing strategies

Benefits of RFM​

  • Identify high-value customers
  • Create better offers and experiences to keep customers engaged
  • Tailor marketing efforts to drive engagement and increase profitability
  • Predict how a new customer is likely to act in the future

RFM metrics​

  • Recency: How recent a customer's last purchase was
  • Frequency: How often a customer makes a purchase
  • Monetary value: How much money a customer spends on purchases

RFM in business​

RFM analysis is a powerful tool for eCommerce stores and is based on the idea that past behavior is a good predictor of future behavior.