Analytics Mini Casez Valuing Customers Using the RFM Methed Click the icon to vew the common approach to caloulase FFM. Cick the icon to verw the table summarieng overal cutiomer stabistics miating to RFM. Cick the icon to vinw the custsmer subset internation. Which person resresents the vosT appeasing RFU segment of the 4 listed here? with the RFM value of (Round io the newest whole number.) Which person ropresems the LEAST appealing RoM segment of the 4 insled Rere? Wth the RFM vilue of (Rosund to the cearevi whsle number) wh the Frequency coste of (Alound to the nearest whole number) More Info There are many alternative ways to calculate RFM, but a common approach is the following. Recency = The amount of time (often months) that have passed since the customer last made a purchase. Customers are sorted into 5 possible quintiles (1= bought most recently, 5= bought least recently) Frequency = The number of times a customer has bought within a time period (usually within a year). Customers are sorted into 5 possible quintiles (1= bought most number of times, 5= bought fewest number of times) Monetary Value = Value from the highest purchase made by the customer within the time period (usually within a year). Customer are sorted into 5 possible quintiles ( 1= highest monetary value group, 5= lowest monetary value group). Then the scores are simply dppended together. Thus someone with a value of " 111 " would be in the "bought most recently, bought most often, and spent most money" group, while someone with the code " 555 " is in the "bought least recently, bought least often, and spent least often group." The RFM method has its critics, but one advantage is it is relatively easy to understand by managers. RFM can easily be arranged in any alternative order, such as FRM, but RFM is the most common order. This is because most marketers consider Recency to be the most important of the three variables. More Info More Info