RFM is a technique used to segment or categorize customers based on their purchasing behaviour.
Recency refers to how long it has been since the customer's last purchase;
Frequency analyzes how many times a customer has bought in the past;
Monetarity evaluates how much this customer has spent.
Together, these three metrics provide valuable insight into a customer's loyalty and value. Companies use RFM to identify their most valuable customers, personalize communication and offers, and better target marketing and sales efforts.
For example, a customer who has bought recently, makes regular purchases and spends significant amounts is the highest value customer and should receive special attention in marketing campaigns.
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