A customer was asking about how the RFM scoring in Repeat Customer Insights works:
How are your coming up with your recency, frequency, and monetary scores of 1-5?
All three of the RFM scores are based on five groups of 20% of your customer base (called quintiles).
Recency is based on when they last ordered.
Frequency is based on how many orders a customer has placed.
Monetary is from how much they’ve spent over their lifetime.
Customers are sorted for each score and then grouped into one of the five groups.
So a score of Monetary 5 would mean those customers have spent the top 20% of your customers, while Monetary 1 would be the bottom 20%.
- 5 – Top 20%
- 4 – Top 21-40%
- 3 – Middle 20%
- 2 – Bottom 21-40%
- 1 – Bottom 20%
Each of the factors are scored individually so you can have a customer with a Recency of 5, Monetary of 5, but yet a Frequency of 1. They probably just ordered (Recency), spent a lot on their first order (Monetary), and that’s their only order (Frequency).
Interesting how RFM can create a story so easily for a customer right?
That’s what makes it such an easy way to segment and market.
This RFM segmenting (and others too) are included in Repeat Customer Insights. It’ll run all the algorithms and math for you automatically.
It comes with a 14-day free trial so you can see how it works before paying.
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