Decoding RFM Analysis: A Must-Know for eCommerce
Customer data is a goldmine—if you know how to use it. That’s where RFM Analysis helps you understand your customers and build campaigns they’ll care about.
What is RFM Analysis?
RFM stands for:
Recency: How recently a customer made a purchase.
Frequency: How often they buy.
Monetary Value: How much they spend.
By analyzing these three factors, you can group your customers into actionable segments and target them effectively.
Why Should You Care About RFM?
It’s all about knowing who your customers are and what they need. With RFM, you can:
Identify loyal shoppers and keep them coming back.
Find at-risk customers and bring them back before it’s too late.
Focus on high-value customers who make the biggest impact.
Let’s say you have a segment of customers who used to buy monthly but haven’t made a purchase in 90 days. RFM highlights this, so you can run a re-engagement campaign and recover them before churn.
How to Conduct RFM Analysis
Step 1: Gather Your Data
Export your customer purchase data, including:
Last purchase date
Number of purchases
Total spend
Example:
Customer A: Bought 5 days ago, 10 orders, $1,000 spent.
Customer B: Bought 100 days ago, 2 orders, $100 spent.
Step 2: Score Each Customer
Rank each customer for Recency, Frequency, and Monetary value. Use a scale of 1-5, where higher scores are better.
Example:
Customer A: Recency=5, Frequency=5, Monetary=5
Customer B: Recency=1, Frequency=2, Monetary=1
Step 3: Segment Your Customers
Combine the scores to create actionable segments:
Champions: High scores across all three categories.
At-Risk Customers: Low Recency but moderate Frequency and Monetary.
Dormant Customers: Low scores in all categories.
Example:
Customer A: Champion
Customer B: At-Risk
Step 4: Create Targeted Campaigns
Now that you know who’s who, it’s time to act:
Champions: Reward them with early access or exclusive offers.
At-Risk: Send a personalized win-back email with an incentive.
Dormant: Use an attention-grabbing discount to re-engage them.
Example Campaign:
Subject: “We Miss You! Here’s 20% Off Your Next Order.”
Why Wait? Start Today
RFM Analysis isn’t just for big brands. It’s a practical, data-driven approach that works for any eCommerce store.
Need help getting started? Download our free RFM Analysis Worksheet and discover your most valuable customers today!