Recency, Frequency, Monetary Value (RFM)

Recency, Frequency, Monetary Value (RFM) is a customer segmentation technique used to identify the most valuable customers for a business. It is based on the idea that the customers who have recently purchased from a business, who purchase frequently, and who spend the most money are the most likely to continue to do so in the future.

RFM analysis can be used to target marketing campaigns and promotions to the most valuable customers, and to develop strategies to retain and grow their business.

The RFM score is calculated by assigning a score to each customer based on their recency, frequency, and monetary value. Recency is the number of days since the customer last made a purchase. Frequency is the number of purchases the customer has made in a given time period. Monetary value is the total amount of money the customer has spent with the business.

The RFM scores are then used to segment customers into groups. The most valuable customers are typically those with high recency, frequency, and monetary value scores. These customers are often referred to as "A" customers. Customers with lower recency, frequency, and monetary value scores are typically referred to as "B" or "C" customers.

RFM analysis can be used to identify customers who are at risk of churn, and to develop strategies to retain them. It can also be used to identify customers who have the potential to become more valuable in the future.

RFM analysis is a powerful tool that can help businesses to improve their customer relationships and grow their business.