For Recency, the most recent customers get a higher score

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taniyabithi
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Joined: Thu May 22, 2025 5:24 am

For Recency, the most recent customers get a higher score

Post by taniyabithi »

Data Collection: Gather your customer transaction data. This typically includes customer ID, purchase date, and purchase amount. The more historical data you have, the more robust your segmentation will be.

Calculate R, F, and M Scores:

Recency: Calculate the number of days since the customer's last country email list purchase. A lower number indicates higher recency.
Frequency: Count the total number of purchases made by each customer. A higher count indicates higher frequency.
Monetary: Sum the total amount spent by each customer. A higher sum indicates higher monetary value.
Assign RFM Scores (Ranking): This is where you transform raw values into actionable scores. A common approach is to divide customers into quintiles (5 groups) or quartiles (4 groups) for each RFM attribute, assigning a score from 1 to 5 (or 1 to 4), with 5 (or 4) representing the best performance.

For Frequency, customers with more purchases get a higher score.
For Monetary, customers who spend more get a higher score.
Create RFM Segments: Combine the R, F, and M scores to create distinct customer segments. This is where the true power of RFM lies. Some common segments include:

Champions (555): Your best customers. They bought recently, buy frequently, and spend the most. Nurture them with exclusive offers, loyalty programs, and VIP treatment.
Loyal Customers (455, 545, etc.): Highly engaged customers who buy often and spend well. Reward their loyalty and encourage continued purchases.
Potential Loyalists (533, 443, etc.): Recent customers who have spent a moderate amount. Encourage them to increase their frequency and monetary value with targeted promotions.
New Customers (511, 512): Customers who have just made their first purchase. Focus on onboarding them and encouraging repeat purchases.
At-Risk Customers (2xx, 1xx): Customers whose recency score is low, indicating they haven't purchased in a while. Implement re-engagement. campaigns to prevent churn.
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