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What is RFM analysis? |
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Answer» RFM analysis is a Business Intelligence (BI) reporting system that analyzes and ranks customers based on their purchasing patterns. R refers to "how recently" a customer placed an order, F refers to "how frequently" the customer orders, and M refers to "how much money" the customer spends. Typically, the customers are ranked into "20%" groups and assigned a number to represent their ranking. Thus 1 means top 20%, 2 the next 20% and so on. In this system a score of 1 is best and a score of 5 is worst. Thus a customer with an RFM score = 1 5 1 would be one who has ordered recently, does not order frequently, and who makes large purchases. |
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