RFM Analysis What It Is and How It Works
Posted: Wed Dec 04, 2024 7:52 am
Even more important for a company is to identify the best customers and reward them through targeted and personalized loyalty actions . RFM analysis, recency, frequency, monetary , is a well-known marketing technique for segmenting your customers quickly and easily and identifying the most "valuable" customers. Many times, attention within companies is directed more towards finding new customers than maintaining current customers, neglecting and forgetting the value that these generate for your company.
RFM Analysis for User Profiling : How Does the Model Work?
The RFM model is based on the Pareto model, according to which 80% of the turnover is generated by 20% of its customers . For this reason, it is important to identify the best customers and keep them.
According to the RFM list of argentina consumer email method, those customers who have recently bought, more frequently and who have spent more in a particular period of time are much more sensitive and reactive to promotions and communications, and consequently to purchases. Thanks to this method, it is possible to identify a small but more qualified number of users to contact. In this way, it is more likely to obtain an equal or greater profit than that obtained if the entire Audience had been involved , significantly reducing marketing costs. With the RFM method, the customer is assigned an individual score, calculated based on three metrics:
Recency: The time since the last purchase; according to the model, customers who have purchased more recently are more sensitive to promotions than users who have purchased less recently.
Frequency: The number of purchases made by a customer; repeat customers are more receptive than one-time customers.
Monetary: the total expenditure of the customer in the reference period; those who spend more are more receptive than those who spend little.
Once the various RFM thresholds have been identified, you can proceed with the planning and configuration of the various personalized marketing activities per segment. The marketing and sales strategies will have to be different based on the segment they belong to. If the user is in the “Best Users” cluster, loyalty activities and campaigns will have to be planned and implemented. On the contrary, if they are “At-Risk Users”, they will have to be encouraged through re- engagement campaigns .
RFM Analysis for User Profiling : How Does the Model Work?
The RFM model is based on the Pareto model, according to which 80% of the turnover is generated by 20% of its customers . For this reason, it is important to identify the best customers and keep them.
According to the RFM list of argentina consumer email method, those customers who have recently bought, more frequently and who have spent more in a particular period of time are much more sensitive and reactive to promotions and communications, and consequently to purchases. Thanks to this method, it is possible to identify a small but more qualified number of users to contact. In this way, it is more likely to obtain an equal or greater profit than that obtained if the entire Audience had been involved , significantly reducing marketing costs. With the RFM method, the customer is assigned an individual score, calculated based on three metrics:
Recency: The time since the last purchase; according to the model, customers who have purchased more recently are more sensitive to promotions than users who have purchased less recently.
Frequency: The number of purchases made by a customer; repeat customers are more receptive than one-time customers.
Monetary: the total expenditure of the customer in the reference period; those who spend more are more receptive than those who spend little.
Once the various RFM thresholds have been identified, you can proceed with the planning and configuration of the various personalized marketing activities per segment. The marketing and sales strategies will have to be different based on the segment they belong to. If the user is in the “Best Users” cluster, loyalty activities and campaigns will have to be planned and implemented. On the contrary, if they are “At-Risk Users”, they will have to be encouraged through re- engagement campaigns .