What is RFM analysis and why does business need it?

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The abbreviator RFM (Recency, Frequency, Monetary) means:Recency is a long time (how have customers made purchases for a long time).Frequency is the frequency (how often you buy).Monetary – money (total amount of purchases).RFM analysis is a tool that allows you to segment buyers by frequency, limitation and amount of purchases. With it, you can identify customers who purchase goods for large or very small amounts, and find out with what regularity they do it. Also, RFM-analysis allows you to understand who bought recently, and who - for a very long time.RFM analysis is needed for business to distribute segments of its customers:the hottest - buy often and a lot;components of the middle segment - acquire large sums, but infrequently, or for small amounts, but often;Inactive users - buy very rarely, little and made purchases for a very long time.How to carry out RFM-analysis in practiceThere are several ways. There are services (internet stores, mailing services or CRM-systems),

which allow automatic analysis of customers. They show active and frequently buying customers as well as inactive, rarely making purchases.But not all shopify website design  platforms have such functionality, so the easiest and most affordable way is RFM analysis in the Excel or Google-table.This requires data:1. customer email, phone number or entity by which we will determine who is the client;2. the total number of orders for each buyer;3. the amount of all orders of the client;4. date of its last order.ScreenshotData required for RFM analysis.The advantages and disadvantages of RFM-analysis in email marketingPlusesHelps find the most valuable customers and segment them to create personalized campaigns and mailings.Increases the effectiveness of marketing campaigns by



determining the most appropriate moment to send messages. For example, if it was revealed that the client has stopped buying at all, we remind you of ourselves.Increases the impact of advertising campaigns by personalizing messages and emails that meet the specific needs of each segment.It allows you to optimize marketing costs by reducing the cost of less valuable customers.MinusaRFM analysis does not take into account changes in customer behavior, which can be a critical factor in rapidly changing environments such as the e-commerce market.Do not take into account other factors: customer reviews, their activity in social networks. This can affect the behavior of buyers and their preferences.The results may not be insequently if customers often shop but for small amounts.RFM-analysis does not give a complete picture of the needs of customers and their interests.Our personal experience of RFM analysis: real cageOne of the Handbox customers had a fairly large,