RFM (Recency, Frequency and Monetary Value) Model

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Definition: RFM (Recency, Frequency and Monetary Value) Model

It is a tool which is used to determine companies best performing customers by evaluating certain parameters. This tool can be even used to identify customer segments and their behavior. It is based on following parameters:

1) Recency: Check out how recently customer has purchased?

2) Frequency: How frequently does he/she purchase?

3) Monetary Value: How much does he/she spends on purchase?

It is a common practice in marketing to know their customer and act upon to maximize its sales.

There are various criticism made for this model as it is only a descriptive type of analysis and used for promotion type of activities.


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