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  • What is the RFM-Model?
  • What does RFM mean?
  • How does it work?

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  1. RFV/RFM - Model
  2. RFV-Model Segment - Best Practices

RFM-Model

What is the RFM-Model?

Customer segment
R
F&M
Definition

Champion ♥︎

4-5

4-5

Customers with the highest potential value and strong engagement.

Loyalist ☻

2-5

3-5

Customers who have a strong relationship with the brand and make regular purchases.

Potential Loyalist [☺︎]

3-5

1-3

Customers who have the potential to become loyal but need more nurturing.

New ⊕

4-5

0-1

Customers who are new to the brand and have made their first purchase.

Need Attention ‼

2-3

2-3

Customers who are showing signs of disengagement and need attention.

At Risk ☹︎

0-2

2-5

Customers who are at risk of churning and need immediate attention.

Hibernating ☾

1-2

1-2

Customers who have not made a purchase in a long time.

Lost ⊖

0-2

0-2

Customers who have churned and are no longer active.

What does RFM mean?

R → Recency : When was the last time a customer has purchased a product from your brand

F → Frequency : The numbers of times a customer has made a purchase.

M → Monetary Value : The total amount of money a customer has spent on your products or services.

How does it work?

  1. Assign Scores: You give each customer a score for each of the RFM factors (Recency, Frequency, Monetary). Usually, you divide your customers into groups (e.g., top 20%, next 20%, etc.) and assign scores from high to low (e.g., 5 for the top group, 1 for the bottom group).

  2. Combine Scores: You combine the individual RFM scores to create an overall RFM score or segment. For example, a customer with a recency score of 5, a frequency score of 4, and a monetary score of 5 might be in your "Champions" segment.

  3. Create Segments: Based on the combined scores, you create customer segments. Here are some common segments:

    • Champion ♥︎: High scores in all three categories. These are your best customers.

    • Loyalist ☻: High frequency and monetary scores, but their recency might be a little lower.

    • Potential Loyalist [☺︎]: High recency and frequency scores, but their monetary value might be lower.

    • New ⊕: High recency score, but frequency and monetary scores might be lower

    • Need Attention ‼:

    • At Risk ☹︎: High monetary value, but their recency and frequency are declining.

    • Hibernating ☾:

    • Lost ⊖: Low scores in all three categories.

  4. Targeted Marketing: Once you have your customer segments, you can tailor your marketing efforts to each group. For example:

    • Champions: You might offer them exclusive deals or early access to new products.

    • At-Risk Customers: You might send them a special offer to win them back.

    • Lost Customers: You might try a re-engagement campaign.

There are more targeted marketing strategies below this article.

PreviousRFV-Model Segment - Best PracticesNextB2B SaaS

Last updated 2 months ago

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