Question

Christopher wants to know why some of his customers left. He recently did an RFM analysis. He should focus on customers with the
RFM score.

Answer 1

Answer:

RFM stands for Recency, Frequency, and Monetary value, each corresponding to some key customer trait. These RFM metrics are important indicators of a customer’s behavior because frequency and monetary value affects a customer’s lifetime value, and recency affects retention, a measure of engagement.

RFM Metrics

Businesses that lack the monetary aspect, like viewership, readership, or surfing-oriented products, could use Engagement parameters instead of Monetary factors. This results in using RFE – a variation of RFM. Furthermore, this Engagement parameter could be defined as a composite value based on metrics such as bounce rate, visit duration, number of pages visited, time spent per page, etc.

RFM factors illustrate these facts:

the more recent the purchase, the more responsive the customer is to promotions

the more frequently the customer buys, the more engaged and satisfied they are

monetary value differentiates heavy spenders from low-value purchasers

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