Advanced RFM analysis is similar to RM Analysis, but Advanced RFM take into consideration the Frequency of Customer purchase. It stands for Recency, Frequency, and Monetary value, which are the three key parameters used to evaluate customer behavior.
Recency: Refers to the time elapsed since the customer's last purchase. This helps to identify customers who have recently purchased and are more likely to purchase again in the near future.
Frequency: Refers to the number of purchases a customer has made over a specific time period. It helps to identify customers who are loyal and make regular purchases.
Monetary value: Refers to the total amount of money a customer has spent over a specific time period. This helps to identify customers who have a high spending capacity and are more likely to make expensive purchases.
🧪 Example of Advanced RFM Analysis
For example, if the Loyal Customers shopped yesterday, they get 5 scores for Recency. If they shop very often, they get 5 scores for Frequency. So, Loyal Customers who shop very often and purchased very recently, are identified as “CHAMPION” customers.
Then the Average Spending and Average Basket Value are calculated from the segmented Customer and each Customer is segmented based on those 4 criteria into 10 segments.
❓What is Advanced RFM used for
- Improved targeting: To identify and target specific customer segments based on their Recency, Frequency, and Monetary value. This enables Retailers to create more personalized and relevant Campaigns that are more likely to resonate with customers and drive sales.
- Cocoon's best Customer segmentation: Advanced RFM allows Retailers to identify which Customers to protect and maintain their loyalty. These Customer segments are referred to as CHAMPIONS, LOYAL CUSTOMER, and NEED ATTENTION based on their high frequency of visits but can be incentivized to increase recency to stores.
- Identify potential Growth: Advanced RFM can recognize which Customer segmentation has the potential to become the top customers. These groups of customers are identified as POTENTIAL LOYALIST, PROMISING, and NEW CUSTOMER based on their recent visits but shop less often. By focusing on these customer segments, Retailers can expand their customer base and drive long-term growth and profitability.
- Prioritize to Boost: It is also important for Retailers to pay attention to other customer segments such as AT-RISK, HIBERNATING, ABOUT TO SLEEP, and CANNOT LOSE THEM. These are the Customers that rarely visit the stores and have not been shopping recently. Retailers need to develop Churn Management or targeted retention strategies to keep them engaged and loyal.
🖥️ Make it happen in Ulys CRM
How to access Advanced RFM analysis in Ulys:2 Simple Steps
Step 1: Select Advanced RFM Menu from Segmentation Menu Bar.
Step 2: Select the Option in the Filter Menu and select the period you want to measure.
And here it is.
To identify the spending of each segment of Customers, simply select the preferred segment and a window will pop up.
Customer List within each segment is also available to download.