Where the Automatic Segments get their customer thresholds in Repeat Customer Insights

A Repeat Customer Insights customer was asking about how the Automatic Segments are created:

I am wondering where the app gets the "whale" threshold from, and other thresholds?

All of the Automatic Segments come from the RFM values.

With RFM each customer gets 3 scores from 5 (best) to 1 (worst), where each score is 20% of your customer base. RFM can be pretty easy to use once you understand how the RFM scores are created.

Doing the actual scoring can be difficult without a complex Excel spreadsheet or software like my app, but the concepts behind them are simple.

Once the customers are scored with RFM, the Automatic Segmenting will group them based on two of their scores.

The Whale (FM) group have a low Frequency (2 or 1) but a high Monetary (5 or 4) and represent 12% of your customer base.

Behavior-wise those customers are ordering the least number of times and have spent the most in total (a high LTV). It's likely each order they place is much larger than the average order size for the rest of your customers, large enough to beat out even the more frequent buyers.

Inside Repeat Customer Insights you can drill down into each of the Automatic Segments and get a explanation of their behavior. Even more important though are the suggestions on how to market to them, or if you should ignore them and focus on other customers.

Eric Davis

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Topics: Customer segmenting Rfm

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