What is RFM analysis and how to conduct it

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RFM analysis is a method of studying a customer base, during which it is segmented by three criteria: recency, frequency and total amount of purchases made. The selected evaluation criteria are reflected in the abbreviation "RFM": Recency, Frequency, Monetary. The analysis allows you to divide buyers into several segments depending on how long ago (recent), often (frequent) or a lot in terms of financial investments (money) they bought.
Read our article to find out why marketers need to know this, where such analysis is used, and how the process itself works.

Why do you need RFM analysis?
RFM analysis is needed to identify the most and least profitable clients, and then, poland whatsapp number database based on this data, to build strategies for the company's interaction with each group separately. By classifying consumers according to the specified criteria, you can determine which of them are regular customers, who are simply loyal, who are "sleeping", and who are completely lost, so spending time on them is unprofitable. As a result, you can understand which categories of people respond to your advertising better than others, which means you can adjust future marketing activities taking into account their needs. Such segmentation helps in developing advertising campaigns. It shows who your client really is and how he behaves. Using this information, it is much easier to predict his reaction to certain actions.

RFM analysis demonstrates the well-known Pareto law, according to which 80% of the result is achieved thanks to 20% of the efforts. Translated into marketing language, 80% of the profit is brought by only 20% of the buyers. Identifying these buyers is the goal of RFM research. Subsequent interaction with them will be based on their belonging to a specific segment.
Scope of application
This analysis was first conducted for the purpose of email segmentation. Now it is also used to create scripts for phone calls to clients and to set up targeted advertising on social networks. Marketers use it when they need to make changes to the current marketing campaign. For example, if there are clicks on advertising banners, but sales are falling.

Who is RFM analysis suitable for?
This research method is suitable for companies from the B2C (business to customers) and B2B (business to business) segments, whose client base exceeds 10 thousand contacts. Of course, the number can be less, but in this case, the effectiveness of RFM analysis will also decrease. The desired number of clients is from a thousand.

In addition, the analysis is aimed at those areas of the market where the need for a purchase is not one-time, but periodic: for example, food delivery or a clothing store. For companies working with rare, non-recurring sales (such as real estate), the RFM method will be useless for obvious reasons.