IN THIS CHAPTER
Introducing RFM analysis
Analyzing the data set
Understanding the results
Applying machine learning
If a business can classify its customers according to how frequently they buy, how recently they bought, and how much they spend, its marketers can target those customers and communicate with them appropriately. A recent customer who buys frequently and spends a lot of money would receive a different type of communication than one who rarely buys, spends little, and hasn’t bought anything for a long time.
First used in the direct mail industry over 40 years ago, a popular type of marketing analysis depends on recency (the date of a customer’s most recent purchase), frequency (how often the customer purchases), and money (how much the customer spends).
Named in order of each element’s importance, this is called an RFM analysis. Recency is the most important because the more recently a customer has bought, the more likely he will again: The longer it takes for him to return to a business, the less likely ...