RFM is a decades-old method retailers use to sort customers. It is simple, and it works.
The three letters
- R, Recency: how many days since they last bought? Lower is better.
- F, Frequency: how many times have they bought? Higher is better.
- M, Monetary: how much have they spent? Higher is better.
Scoring
Give each customer a score from 1 to 5 on each, usually by splitting customers into five equal groups. A customer who visited yesterday, visits often and spends a lot scores 5-5-5. One who visited once, long ago, scores 1-1-1.
The segments
| Segment | Pattern | What it means |
|---|---|---|
| Champions | High R, F, M | Your best customers |
| Loyal | High F | Come often |
| Potential loyalists | High R, medium F | Recent, building a habit |
| New | High R, low F | Just arrived |
| At risk | Low R, high F | Used to come often, now absent |
| Can't lose | Low R, high F and M | Your best, slipping away |
| Hibernating | Low R, low F | Faded |
The most useful segment
At risk and Can't lose. These customers loved you and are drifting. A personal win-back now is worth far more than a promo to everyone.
Want to try it by hand? Read the RFM analysis guide. Or let Selyo do it every hour.