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. First Mover

    A form of competitive advantage that a company earns by being ...
  2. Industry Life Cycle Analysis

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

    The existence of high start-up costs or other obstacles that ...
  6. Provisional Patent Application

    A short-term means of protecting an invention that requires less ...
Related Articles
  1. Fundamental Analysis

    The Green Marketing Machine

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

    Generational Marketing: Harvest The Whole Family Tree

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

    The Lucrative World Of Third-Party Marketing

    Hedge funds don't sell themselves. Marketing experts reel in the big fish.
  4. Professionals

    The Marketing Director's Pitch

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

    Sales Director Career Provides Daily Challenge

    Find out what you need to do to close the deal on this investment management position.
  6. Investing News

    Looking to Open a Franchise? These Topped The List In 2014

    These franchise businesses stood out in 2014.
  7. Over the past 10 years, advertising strategies have evolved as a result of technological development as the internet has provided new channels for advertisers to reach a larger audience.
    Personal Finance

    How The Internet Web Ad Industry Works

    Over the past 10 years, advertising strategies have evolved as a result of technological development as the internet has provided new channels for advertisers to reach a larger audience.
  8. For two years, Tinder has been able to stay afloat without relying on any kind of revenue stream. Now, the free match-making mobile app is exploring a new money-making model in an effort to cash in on the international $2 billion-a-year online dating industry.
    Personal Finance

    Tinder to Start Swiping for Cash?

    For two years, Tinder has been able to stay afloat without relying on any kind of revenue stream. Now, the free match-making mobile app is exploring a new money-making model in an effort to cash ...
  9. Not every new company or product makes it, but many successful startups share the following characteristics.
    Entrepreneurship

    6 Characteristics Of Successful Apps

    Not every new company or product makes it, but many successful startups share the following characteristics.
  10. When it comes to managing finances and tracking the markets on the go, there are a number of excellent apps that can be downloaded and installed onto your mobile device.
    Entrepreneurship

    Top Stock Market Apps For News Or Trading Or Both!

    When it comes to managing finances and tracking the markets on the go, there are a number of excellent apps that can be downloaded and installed onto your mobile device.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center