Recency, Frequency, Monetary Value - RFM

AAA

DEFINITION of 'Recency, Frequency, Monetary Value - RFM'

A marketing analysis tool used to identify a firm's best customers by measuring certain factors. The RFM model is based on three quantitative factors:


Recency - How recently a customer has made a purchase
Frequency - How often a customer makes a purchase
Monetary Value - How much money a customer spends on purchases


RFM analysis often supports the marketing adage that "80% of business comes from 20% of the customers."

INVESTOPEDIA EXPLAINS 'Recency, Frequency, Monetary Value - RFM'

Nonprofit organizations have relied on RFM analysis to target likely donors, as people who have made donations in the past are likely to make additional donations. RFM analysis classifies customers with a number ranking system for each of the RFM factors. The "best" customer would receive a top score in each of the three categories score, this allows comparison between potential contributors or customers. Despite the useful information that is acquired through RFM analysis, firms must take into consideration that even the best customers will not want to be over-solicited, and the lower-ranking customers may be cultivated with additional marketing efforts.

RELATED TERMS
  1. Industry Life Cycle Analysis

    A form of fundamental analysis involving the process of making ...
  2. Barriers To Entry

    The existence of high start-up costs or other obstacles that ...
  3. Just In Time - JIT

    An inventory strategy companies employ to increase efficiency ...
  4. Marketing

    The activities of a company associated with buying and selling ...
  5. First Mover

    A form of competitive advantage that a company earns by being ...
  6. Mobile Advertising

    Mobile advertising is a method of advertising that appears on ...
Related Articles
  1. Fundamental Analysis

    The Green Marketing Machine

    Don't let corporations greenwash their dirty laundry. Learn how to spot a phony.
  2. Professionals

    Sales Director Career Provides Daily Challenge

    Find out what you need to do to close the deal on this investment management position.
  3. Retirement

    Generational Marketing: Harvest The Whole Family Tree

    Attract new clients by tailoring your message to specific age groups.
  4. Professionals

    The Marketing Director's Pitch

    Are your shoulder's wide enough to carry a company's reputation?
  5. Professionals

    The Lucrative World Of Third-Party Marketing

    Hedge funds don't sell themselves. Marketing experts reel in the big fish.
  6. Personal Finance

    How Youtube Ad Revenue Works

    Many people make money off of their YouTube videos through ad revenue, but just exactly how does Youtube Ad Revenue work? Quite simply, it turns out.
  7. Investing

    Crowdfunding: Wide Opening For Tech Investors

    Crowdfunding has dramatically changed investing and opened the door for the public to get in on all types of exciting startups, including tech firms.
  8. Entrepreneurship

    Taboola: How "Content You May Like" Makes Money

    Taboola's tagline, “content you may like,” conveys a lot about its business philosophy.
  9. Entrepreneurship

    Emerging Startup Cities Of 2015

    While Silicon Valley and New York have been the birthplace of several well-known startups, other U.S. cities are making names for themselves as tech hubs.
  10. Charts & Patterns

    Why These Could Be 2015's 10 Best Biotech Stocks

    A quick look at a 10 biotech companies that are poised to deliver for shareholders in 2015.

You May Also Like

Hot Definitions
  1. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  3. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  4. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  5. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
Trading Center