Many people have contacted me this month about the idea that it is possible to expand on RFM segmentation (Recency, Frequency and Monetary). We have lightly touched on RFM modeling and suggested that this is only a first step in building segmentation models. Perhaps it is best that we begin by elaborating on RFM, illustrate some of its short comings then outline how we can expand the number of interesting analysis variables.
When I mentioned the increasing interest in RFM, one statistical friend of mine replied, “Isn’t that sort of rediscovering ‘70’s technology?” Though RFM has been around for decades it has not been widely applied. We went from the booming ‘70’s through the growth ‘80’s and into the downsizing ‘90’s. Most of us were so busy trying to keep up with the explosion, we didn’t really worry about exactly how to fine tune.
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