Putting more F in the RFM customer analysis

RFM is a simple but powerful way to segment your customer base. It lets you rank your customers by using three different measurements.

One of those measurements is how frequently they order (that's the F part of RFM).

Each customer is scored with a number from 1 to 5. Customers with the least number of orders are 1 and the most orders are 5.

This works really well for retail and mail order commerce.

But ecommerce is different.

One thing I've learned from running Repeat Customer Insights is that there are a large portion of customers who only place one order in their entire lifetime.

In some stores 70% or 80% of their customers are one-time customers. That means a regular RFM system might end up scoring one-time customers with higher grades like 2, 3, or even 4.

That's silly.

I've modified Repeat Customer Insights to better reflect how actual ecommerce works.

All customers with only one order will now be scored with a frequency of 1. Customers with more than one order will be scored 2, 3, 4, or 5.

This small change will now make it much easier to segment your store customers.

Want to send Facebook ads to your very best customers? Sure.

Looking to send a discount code to repeat customers? No problem.

Have a batch of burned cookies that you need to get rid of quickly? Ummm, I guess some customers will appreciate them (it's the thought that counts, right?)

Anyways, if you haven't used Repeat Customer Insights yet and you want a better way to segment your customers...

give it a try.

There's a 14-day free trial and this RFM analysis is included in every account.

Eric Davis

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Topics: Customer analysis Repeat customer insights Rfm

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