RFM Analysis
Segmentation based on Recency, Frequency, and Monetary value of purchases.
Segmentation based on Recency, Frequency, and Monetary value of purchases.
Why It Matters
RFM analysis identifies your most valuable customers and those at risk of churning, enabling precise resource allocation.
Practical Example
Scenario
A fashion brand runs RFM analysis to identify customer value tiers.
Calculation
Champions (recent, frequent, high spend): 8% of customers = 42% of revenue. At-risk (not recent, was frequent): 12% of customers needing win-backResult
Focused VIP program on Champions increased their LTV by 25%. Win-back campaign recovered 18% of at-risk customers
Pro Tips
- 1Score each dimension 1-5, then combine for segments like 'Champions' (5-5-5) or 'At Risk' (1-4-4)
- 2Adjust time frames for your purchase cycle—30 days for consumables, 180 days for durables
- 3Use RFM to prioritize customer service: Champions get white-glove treatment
Common Mistakes to Avoid
Frequently asked questions
Put it to work
Related Terms
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7.7x blended return at scale — seven figures attributed, across five straight quarters · Modern Prairie · Apr 2025–Jun 2026 Read the Modern Prairie case study
