By Ramzi Barakat
- Apr 22, 2024
In this article we are going to discuss how you can better understand your customers and personalize your interactions with them at scale using the RFM analysis.
What is the RFM analysis?
The RFM model ranks and categorizes customers based on three essential factors: how recently they made a purchase, how frequently they do so, and how much they spend.
How do you calculate it?
For each metric, assign a value typically 1-5, with 5 being the highest and 1 being the lowest, for each customer relative to other customers. For example if your most frequent customers in a given time frame has purchased from you 10 times then they would be assigned a 5
Based on their rankings you can categorize similar customers in groups such as loyal customers, high spenders, at risk customers etc
4 reasons why you should use the RFM analysis?
This can help you gain valuable feedback and even cross/upsell your customers
Personalized offers are more appealing to customers, improving the likelihood of higher conversion rates and greater spending
By identifying and taking action to understand inactive customers, you can take timely action to avoid churning them and keep them coming back for more.
RFM analysis helps you allocate your marketing resources efficiently by focusing on the most valuable customer segments, it’s much more efficient retaining customers then acquiring new ones
If you have an online store with ordable/ you will have access to an automated RFM report without having to do the math yourself.
The report automatically segments customers in 7 categories based on their purchasing behavior
More importantly, it’s equipped with other marketing tools that allows you to send targeted promotions and campaigns to each segment
Have some questions on how to segment your customers, reach out to us