February 23, 2021

RFM customer model

RFM customer model is an excellent way to identify customers groups. Learn how to use this method to improve your customer marketing.

What is RFM model?

RFM model enables you to target specific groups of customers with the same behaviour and communicate more relevant content. This allows you to generate a higher engagement rate, plus increased retention and lifetime value. Similar to other segmentation models, the RFM model is a powerful way to identify customer segments. RFM stands for recency, frequency, and monetary value.

Marketers have extensive customers – such as purchase history, browsing history, previous campaign engagement patterns and demographics. All can be used to identify distinct groups of customers and target them with relevant campaigns.

What are Recency, Frequency and Monetary value?

Carrying the RFM model is the concept that marketers can expand their understanding of customers by analysing three factors. These are:

  • Recency: When was the last customers’ interaction with the brand. Interaction can be a purchase, last website, email open rate etc. The more recent the customer has interacted with a brand, the more likely they will be engaged in communications from the brand.
  • Frequency: How often has a customer interacted with the brand during a specific time frame? Clearly, customers with frequent activities are more engaged and more loyal than customers who seldom do so. 
  • Monetary: How much a customer has spent during a specific time frame? High spenders need to be treated distinctively than customers who spend small. 

It is important to keep in mind that the fact that the RFM model only looks at three specific parameters means that the model may eliminate other variables that are equally, or more, important. Also, RFM marketing is looking at past customer behaviour that may or may not genuinely indicate future activities, preferences and engagement. 

The significance of RFM

RFM analysis allows a comparison between customers. It gives the brand a sense of how much revenue comes from repeat customers (versus new customers), and which tools they can utilise to make customers more engaged.

Stimulate eCommerce marketing with the RFM model

The recency, frequency, and monetary-value model (RFM) empower retailers to build segments around each customer’s behaviour pattern.

Therefore, e-commerce brands have various reasons to segment customers and prospects. An example is organising customers by interests and then delivering relevant marketing campaigns.

Trigger Automated Campaigns Based on RFM

With the Exposebox Customer Journey Builder, you can utilise your RFM model to trigger automated campaigns at every step of the customer lifecycle across all channels. Think about how your scoring model can help you automatically identify users that enter into a Welcome funnel, retention or reactivation campaign.

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