RFM Analysis (Recency Frequency Monetary)
01 Definition
RFM Analysis (Recency Frequency Monetary) meaning: Segmenting customers by how recently, how often, and how much they buy.
RFM analysis scores customers on three factors: recency of last purchase, frequency of purchases, and monetary value spent. Each customer gets a rating on each factor, and the combined scores group them into segments like best customers or at risk. It uses only purchase behavior, so it ignores intent, satisfaction, and reasons behind the numbers.
Also called
Why it matters
How RFM Analysis (Recency Frequency Monetary) fits the work
RFM turns raw purchase history into clear segments, helping teams target high value and at risk customers with fitting offers and messages.
In context
A store ranks each customer 1 to 5 on recency, frequency, and monetary value, then targets those scoring 5, 5, 5 with an exclusive early access sale.
Practical note
RFM relies on transaction data alone and looks backward, so it cannot explain why behavior changed. Set score thresholds against your own data, since a good frequency for one business differs from another.