RFM analysis is a method for segmenting customers based on three key metrics: recency of their last purchase, frequency of purchases, and monetary value spent. Understanding these dimensions allows businesses to tailor marketing campaigns for distinct customer groups rather than applying a one-size-fits-all approach. By scoring customers on a scale of 1 to 5 in each category, businesses can identify their most valuable customers and predict their future buying behavior. This segmentation enhances engagement and optimizes marketing resource allocation.
Treating the diverse group of customers as one homogeneous mass will work against you, as sending generic messages wastes resources and frustrates customers.
RFM analysis, which measures recency, frequency, and monetary value, allows businesses to understand customer behavior and tailor marketing strategies effectively.
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