Smartech

Definition

RFM (recency, frequency, monetary) analysis is a marketing technique used to determine quantitatively which customers are the best ones by examining how recently a customer has purchased (recency), how often they purchase (frequency), and how much the customer spends (monetary).

ERF (Engagement- Recency Frequency Matrix)
This is built based on:
Engagement - Any engagement activity (email open, Push Notification click, etc.) that the user performs on the communication content
Recency - The last time users performed the activity
Frequency - The number of times the users performed the activity

Applicable for Push channel activity like Email, SMS, APN, BPN. In case of Email, "Open" and "Click" is considered. In case of SMS, APN & BPN, only "Click" is considered.
Also, applicable for web/app activities other than - product purchase, page browse & product view.

RFM (Recency Frequency Monetary Matrix)
This is built based on:
Recency - The last time users performed the activity. The particular activity considered here is Product Purchase
Frequency - The number of times the users performed the activity
Monetary - The revenue generated from the activity

Applicable only for "Product Purchase" activity.

RFDM (Recency Frequency Duration Matrix)

This is built based on:
Recency - The last time users performed the activity. The particular activity considered here is Page Browse
Frequency - The number of times the users performed the activity
Duration - The time duration of the Page Browse activity

Applicable only for "Product View" & "Page Browse" activity.

How RFM Analysis is calculated?

Every unique user who performed an activity in the given duration, we segment user based on:

  • The last time a user performed the activity
  • Number of times a user performed the activity

Recency Score: The users are ranked in the order of most recent to old activity and then group users in 3 baskets, assigning them the values from 1 to 3, 3 (high) being the most recent.

Frequency Score: The users are ranked in the descending order of activity occurrences and then group users in 3 baskets, assigning them the values from 1 to 3, 3 (high) assigned for high frequency group.

Thus, 3 baskets each of recency & frequency create 9 segments (3 x 3), and the users are assigned each segment by its respective frequency & recency score.

Need Attention
Recency - 1
Frequency - 3

Loyal
Recency - 2
Frequency - 3

Star
Recency - 3
Frequency - 3

At Risk
Recency - 1
Frequency - 2

On the Fence
Recency - 2
Frequency - 2

Promising
Recency - 3
Frequency - 2

Dormant
Recency - 1
Frequency - 1

Hesitant
Recency - 2
Frequency - 1

Novice
Recency - 3
Frequency - 1

Similarly for monetary & duration, the Frequency+Monetary & Frequency+Duration are grouped in 3 baskets respectively.
RFD works only for Page Browse activity.
RFM works only for Product Purchase activity.

Plotting RFM

  • Go to Insights -> Analytics -> RFM
  • Select Contacts. Currently plotted on 'all users'.
  • Select Duration (30, 90, 180, 365 days options available)
  • Select Channel
  • Select corresponding Activity
  • Click 'Plot'

Updated 2 years ago


RFM


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