Recency, Frequency, Monetary, or RFM analysis is a technique used to determine which customers are likely to respond to a new offer by examining the following:

Recency - How recently did the customer purchase?
Frequency - How often do they purchase?
Monetary Value - How much do they spend?

For each customer visible in the CRM grid, RFM analysis calculates and assigns a score from 1 to 5 for each RFM measure. A score of one (1) means the least recent, least frequent, or lowest spend, while a score of five (5) means the most recent, the most frequent, or the highest monetary value. The system concatenates each measure into a three-digit score ranging from 111 to 555, a.k.a., the RFM score. The highest score is 555, meaning the customer purchased most recently, most frequently, and at the highest monetary value. The lowest score is 111, meaning the customer has purchased the least recently, least frequently, and at the lowest monetary value.

The system derives RFM scores based on a selected customer population and how an individual's RFM score plots on a relative scale of 100%.

A score of 5 represents a rank in the top 20% of the population, that is, scores in the 80-100th percentile.
A score of 4 represents a rank in the next 20% of the population, that is, scores in the 60-79th percentile.
A score of 3 represents a rank in the next 20% of the population, that is, scores in the 40-59th percentile.
A score of 2 represents a rank in the next 20% of the population, that is, scores in the 20-39th percentile.
A score of 1 represents a rank in the bottom 20% of the population, that is, scores in the 0-19th percentile.

The analytical technique entails establishing a benchmark RFM score and saving it in the CRM record as the "Last RFM." You would use the scores to develop segments and outreach strategies. After some time, you would regenerate RFM scores and compare the results to their Last RFM score to identify customers whose scores improved or worsened, increased or decreased, and develop strategies accordingly.

Where Is It Found

Steps to Calculate RFM

Step 1: PSCUM.CRM Advanced Search

Launch the menu option PSCUM.CRM Customer Management and select Advanced Search.

Select SALES HISTORY within Advanced Search.

The following example uses only Selection 1.

Use the first dropdown control to "Select customers that...".
Use the second dropdown control to indicate customers that "Purchased."
Enter the date range of sales you want to include in the calculation. In this example, we used the current year to date.
Finally - and this is critical - check the box to indicate "Calculate (R)ecency, (F)requency, (M)onetary Score."
Then select DONE to finish.

Once returned to the CRM Grid, note the yellow control labeled "Refresh Needed." Click to refresh the CRM screen and pull up all customers meeting your Advanced Search criteria.

Step 2: Review

Immediately following the RFM score calculation, nine additional columns appear in the CRM grid, highlighted below. Calculated RFM scores are temporary and are shown for comparison with a customer's last RFM score if any. Calculated RFM scores are only visible while Advanced Search is active and disappears from the grid when ended.

In the image above, Rows 14 and 15 have no Last RFM score, probably because one was not previously saved or was removed. Rows 1 through 13 contain the Last RFM score, however, and the current RFM calculation indicates changes in behavior compared to the Last RFM calculation. For example, Row 6 shows a current RFM of 114 compared to the Last RFM of 453, indicating that the customer's behavior changed negatively since the last analysis. That is, purchased less recently, purchased less frequently, but spent more than the last analysis.