RFM Analysis

Abstract

Recency (R), Frequency (F), and Monetary Value (M) are the most popular database marketing metrics used to quantify customer transaction history. Recency is how recently the customer has purchases; frequency is how often the customer purchases, and monetary value is the dollar value of the purchases. RFM analysis classifies customers into groups according to their RFM measures, and relates these classifications to behaviors such as the likelihood of responding to a catalog or other offer. RFM analysis was probably the first “predictive model” used in database marketing. This chapter discusses the RFM framework, how it can be used and various extensions.