Sandy D. Jap

Recency, Frequency, and Monetary Value (RFM)

Readings

Recency, Frequency and Monetary (RFM) Analysis

This note 'walks' you through an RFM analysis. In this example RFM is used in a test to see which customers are most likely to respond to an offering from a direct mail book club. The results can then be used to predict how the remaining customers will respond and help the firm 'target' likely responders rather than use a mass mailing approach.

Assessing a Model's Performance: Lifts, Gains and Profits

This note explains lifts and gains which are commonly used measures to assess a model's performance. Presumably a model will outperform no model - but how much better is it? Lift and gains are also used to compare alternative or competing models. Starting with some basic information, this note explains what lift and gains are, and steps you through the calculations.

RFM: Is it "Kudzu" or Is it Gold?

RFM is simple, intuitive and works surprisingly well. However, more powerful and sophisticated approaches are available. Is it time to abandon RFM in favor of more sophisticated approaches - or does RFM still have a place in the toolkit?

RFM Migration Analysis: A New Approach to a Proven Technique

A short article discussing another use of RFM analysis by FedEx.

Optional Links

A large assortment of white papers - including a number on RFM as well as other topics such as customer lifetime value - can be found at: Database Marketing Institute