RFM Analysis : : Do Your Customers Make the Grade?
The “80/20 Rule” applies to many things, and marketing is one of them. The rule of thumb is that 80 percent of a company’s business comes from 20 percent of its customers. RFM analysis tells you who the 20 percent are.
Finding the Perfect Customers with RFM Analysis
RFM analysis is an integral part of direct marketing. The “RFM” in RFM analysis stands for Recency, Frequency and Monetary. RFM analysis scores your customers on how recently they’ve purchased, how frequently they purchase, and on a scale of 1-5 (5 being the best) how much money the’ve spent with you. A 555 is your best customer!!
Scoring your customers lets you stretch your advertising budget by focusing your marketing efforts on the ones most likely to respond.