RFM

From: Marco Janeczek <info_at_webadvertising.ca>
Date: Tue 05 Mar 2002 08:32:15 -0600

Recently I subscribed to ClickZ, and found a very
interesting article about RFM.

RFM stands for Recency, Frequency and Monetary. It
basically describes the value a customer places in
relation to the revenue you can generate from that
customer.

Let me explain.

You give a a customer a score of 1(low), 2 or 3(high).

Recency is how long ago did the customer make a purchase.
So for example if the customer made a purchase yesterday,
the score is higher than if the customer made his last
purchase two years ago.

Frequency is the total number of purchases that the
customer has made. So for example if a customer made 10
purchases he will receive a higher score than a customer
who has made 1 purchase.

Monetary is the average purchase amount that the customer
has made. So for example if the customer spent $50, he
will receive a higher scorage than the one making
a purchase of $10.

Then you give this customer a score for each R, F and M,
from 1 to 3.

So if your customer rates 111 therefore the customer is a
very low profit customer. If a customer rates 333 then a
customer is a higher profit customer.

Now, the question is should we concentrate on 333s or
should we concentrate on 111s to convert them to become
333s. ?

The question also is if a customer rates 1, does this mean
that the customer is not interested in the product/service
anymore, or did they move somewhere else to get that product/
service ?

The article describes how this model can be applied to an
Internet Media company.

A transaction occurs when a site visitor either is exposed
to advertising (Impression) or makes a revenue-generation
action (performance). Transactions occur 1) when a visitor
sees a Paid Banner, 2) when a visitor clicks on that banner.

Its a little bit too long to explain the article

http://www.clickz.com/res/analyze_data/article.php/961901


any opinions ?










Received on Tue Mar 05 2002 - 08:32:15 CST