RFM - Customer Value

RFM is a method used for analysing customer value. It is commonly used in Retail but can also be applied to Hospitality.

Each customer has a score with three dimensions. We use 1 to 3 for each dimension.

  • Recency – How recently did the customer purchase?
  • Frequency – How often do they purchase?
  • Monetary Value – How much do they spend?

RFM is regularly recalculated and provides a useful set of segments and can help you target a smaller segment of your customer base with more relevant marketing.

An RFM of 333, indicates a customer who has been recently, comes regulary and spends above average. These are loyal customers who spend the most and you can tailor your marketing to this audience for greatest effect.

This chart if a simplified look at RFM and come be used for more effective and targeted marketing.

Customer Segment Recency Score Range Frequency & Monetary Combined Score Range
Champions 4-5 4-5
Loyal Customers 2-5 3-5
Potential Loyalist 3-5 1-3
Recent Customers 4-5 0-1
Promising 3-4 0-1
Customers Needing Attention 2-3 2-3
About To Sleep 2-3 0-2
At Risk 0-2 2-5
Can’t Lose Them 0-1 4-5
Hibernating 1-2 1-2
Lost 0-2 0-2

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