RFM Analysis helps retain the customer base through personalized marketing and increased engagement, thereby improving sales.
Fremont, CA: To succeed in the existing retail landscape, businesses should not confine their duty to just collecting the vital information on the customer base but also thoroughly analyze it. The deeper the insights about the customers, the higher will be the growth of a business. Following a new method of RFM analysis can help achieve this, and it can be tried at specific times. When the business involves selling fast-moving goods in a market brimmed with competitors or the audience is diverse, RFM analysis allows organizing the customer base to reveal the customer data.
Segmenting customers based on three parameters—Recency, Frequency, and Monetary value can define the purchase habits. These data on the date of the latest purchase, how often the customer makes a purchase, and the cumulative value of all a customer’s purchase will give their behavioral traits. Once the customers who share common characteristics are identified, eventually, the one who brings most revenue can be plotted, and businesses can concentrate on them. In short, RFM analysis provides a set of rules for organizing the customer base, and it is the responsibility of business analysts to find insights, thereby applying them.
The reliability of RFM statistics and the simple mechanics of analysis make it affordable for retailers to analyze without a separate analytics department. Specialized marketing analysis tools and built-in plugins for CRM systems will encourage retailers to get deeper insights from their customer base. There are other tools to perform complex RFM analysis with large databases and using complicated data manipulations. Thus, RFM analysis is undoubtedly helpful for any retailer. In the future, RFM analysis will be the first source to give in-depth knowledge of customers enabling the retailers to provide their customers with personalized offers.