RFM analysis (Recency, Frequency, and Monetary Analysis) is the process of figuring out which users are more prone to engage with your app by looking at:
- Recency: How recently the user engaged with your app
- Frequency: How often the user engages with your app
- Monetary: How much the user spends when purchasing
What RFM Analysis Tells You About the Customer
RFM factors illustrate these facts:
- The more recent the engagement, the more responsive the customer is to promotions.
- The more frequently the users engage with your app, the more engaged and satisfied they are.
- The more money the customer spends, the more the heavy spenders are differentiated from low-value purchasers.
How is RFM Analysis Helpful to Marketing?
The idea behind RFM analysis is that you can make your marketing efforts more efficient if you target those most likely to engage and purchase, as well as re-engage those who are at risk of becoming inactive and uninstalling your app.
RFM is one way to predict these likelihoods.
RFM Analysis in CleverTap
In CleverTap, we use recency and frequency scores to visualize RFM analysis into a set of actionable user segments.
Let’s look at four of the segments on this graph:
- Champions: your best customers. They engaged recently, and engage often. When they purchase, they are heavy spenders. Reward them and they’ll help promote your brand.
- Potential Loyalists: recent customers with average engagement frequency. Offer membership or loyalty programs or recommend related products to upsell them.
- New Customers: those with high overall RFM score but aren’t frequently engaging with your app yet. Build a relationship with them, provide onboarding support and special offers to increase their visits.
- At Risk Customers: they engaged often and purchased in the past, but not recently. Take good care of them! Send them personalized reactivation campaigns to reconnect. Offer renewals and helpful products to encourage another purchase.
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