RFM - Customer Value

RFM Chart

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 5 for each dimension.

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

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 555, indicates a customer who has been recently, comes regularly 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.

Segment Customers Percent Behaviour How to Engage
Champion 44 2.7% Have purchased recently, often and the most Reward them, they will help promote your brand
Loyal 229 13.9% Spends good money, fairly often Try upsell, ask for Reviews, keep them engaged
New 133 8.1% Purchased recently, but not often Start building a relationship
Promising 38 2.3% Recent but haven’t spent much or often Remind them you exist, entice them with offers
Needs Attention 108 6.6% Above average spend or frequency, but hasn’t been recently Make a limited time offer, re-engage
About to Sleep 113 6.9% Below average spend or frequency. Will lose if not engaged. Recommend popular produtcs, re-engage
At Risk 205 12.5% Great spend or frequency, but haven’t beeen in a little while Send personalise offers and interesting brand info
Can’t Lose 126 7.7% Great spend or frequency, but haven’t beeen in a long while Win them back with offers or new products, you want to keep these customers
Sleeping 645 39.2% Have not spent in a long time, low spend and low frequency Try re-engage, but don’t focus effort here

You can read more about RFM and how to utilise it more here

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