🎓 Definition

RM analysis is a marketing technique used to analyze customer behavior and determine which customers are the most valuable. It stands for Recency, and Monetary value, which are the two 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.

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 RM Analysis

For example, if the Loyal Customers shopped yesterday, they get 5 scores for Recency. So, Loyal Customers who buy recently and have the highest Basket value, are identified as “CHAMPION” customers.

❓What is RM Analysis used for
  • Identifying the most valuable customers: RM analysis helps retailers identify customers who have recently purchased, and spend the most money, allowing them to target marketing efforts to the most valuable customers.
  • Increasing revenue by targeting specific groups of existing customers (i.e., customer segmentation) with messages and offers that are more likely to be relevant based on data about a particular set of behaviors. By targeting these customers with targeted marketing campaigns, Retailer can attempt to increase their spending and recency, making them more valuable customers.
  • Improving customer retention: By identifying customers who have recently purchased and have a high monetary value, businesses can target these customers with special offers and promotions to retain them as Loyal Customers and reduce the cost of acquiring new customers.
  • Identifying At-Risk customers: RM analysis can also be used to identify Customers who have not made a purchase recently or have not spent much money, allowing retailers to target marketing efforts to these At-Risk Customers to prevent them from becoming Churn Customers.

Overall, RM analysis is a valuable tool for businesses to gain insights into their customer base, make data-driven decisions, and improve their marketing and customer relationship management efforts.

How is the frequency of purchases incorporated into RM analysis?

The frequency of purchases is an essential aspect of understanding customer behavior. Typically, frequency is considered as an additional parameter alongside recency and monetary value. Businesses often analyze how often a customer makes purchases over a specific period to identify loyal or habitual customers who make frequent transactions. This information helps in segmenting customers further and targeting them with personalized marketing strategies.

What types of data or tools are commonly used to perform RM analysis?

To conduct RM analysis effectively, businesses usually rely on transactional data from their sales records or customer relationship management (CRM) systems. This data can include details about customer purchases, order values, and timestamps of transactions. Analytical tools like Excel, specialized CRM software, or more advanced data analytics platforms can be used to process and analyze this data. Some businesses might also use machine learning algorithms or predictive analytics to enhance the accuracy and efficiency of their RM analysis.

Are there any potential challenges or limitations associated with using RM analysis?

While RM analysis offers valuable insights into customer behavior and helps businesses make data-driven decisions, there are some challenges and limitations to consider. One potential challenge is ensuring the accuracy and reliability of the data used for analysis. Inaccurate or incomplete data can lead to flawed insights and misguided marketing strategies. Additionally, businesses should be cautious about making assumptions solely based on RM analysis without considering other factors that might influence customer behavior, such as market trends, competitive landscape, and external economic factors. Finally, over-reliance on RM analysis could result in overlooking potential new customer segments or innovative marketing opportunities, as businesses might focus too much on existing customer data and patterns.

🖥️ Make it happen in Ulys Customer Intelligence

How to access RM analysis in Ulys: 2 Simple Steps

Step 1: Select the Buying Pattern under the Behaviors Menu in the Menu Bar.

Step 2: Select the Option in the Filter Menu and select the period you want to measure.

And here it is.

Learn more about RM Analysis
Basket value
Loyal Customers
Churn Customers