The RFM Model

An article titled Really Simple E-mail Segmentation: Engaging Your VIP Customers from ClickZ spoke to the importance of the RFM model and using it to speak to your VIP customers. Here is a quick summary of this informative article:

What is the RFM model?
» Recency. When was the last order placed?
» Frequency. How many orders have been placed over a given period?
» Monetary. What is the monetary value of these orders?

By scoring customers on these three attributes, you can subsegment this group and identify your most valuable customers.

Since these are the people who are taking the action you want (conversion by filling out a form or completing a transaction), think about how you can both reward them and encourage them toward more of the same behavior.

Possibilities include asking them to refer your organization, write a testimonial and/or product reviews.

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One response to “The RFM Model

  1. Good article here. While retailers end up spending large amounts creating and executing elaborate loyalty programs and promotional campaigns, the response may be disappointing. Accurate knowledge of customers who are more likely to buy the second time can help retailers focus their efforts on this concentrated target group and derive higher benefits from promotions and loyalty marketing. This can be done through RFM model retail analytics. More info here: http://thoughts.manthansystems.com/rfmmodel_business_analytics.php

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