RFM Customer Rating

 Presentation

RFM customer rating allows you to automatically rank your customers according to three criteria:
  • Recency of the order: The number of days since the last order.
  • Frequency: The number of orders made during the analysis period.
  • Monetary value: The total amount spent on orders during the analysis period.
Customers are sorted once a day. This includes all of your users and is based on the importance you assign to each of the three RFM criterion.
Once the RFM has been calculated, medals will be used to represent your customers’ buying behaviour in your order tracking.
 
 Activation

You can access this feature by clicking on the Menu [Marketing \ RFM Customer Rating].
Tick the option “Activate the RFM calculator” to activate this service.



1/ Analysis period

This setting allows you to define the period during which you want to analyse orders.


You can select a period from 1-18 months long. We suggest you select a period adapted to your business.

2/ Criteria Importance

This section allows you to define the weight you want to give each criterion. Select the level of importance for each one then click [Save].



IMPORTANT: After the first activation, the rating calculation will be performed in under an hour.
Afterwards, if you modify these settings they will be updated in under 24 hours.

The calculation is based on order amounts excluding shipping fees. Requests for estimates are not taken into consideration.

Click on image to enlarge

3/ Levels calculated for the analysis period

Once the calculation is finished, you will have access to a table showing different levels calculated according to the buying behaviour of your customers during the analysis period.

With this table you can determine a customer’s rating for each criterion. The values of the levels are independent of the importance you assigned to each criterion. The overall rating is then determined using the importance you accorded to the RFM criteria (as a calculation coefficient).

 
 Viewing Customers

After activating the RFM Customer Rating, the rating assigned to your customers can be viewed in the list of users by clicking on the menu [Marketing\ Users]. An icon showing the different medals is now visible in the email column.



By clicking on the icon you will access the “RFM Customer Rating” tab.



This tab shows you the customer’s buying behaviour during the period you’ve defined.
It includes the customer’s registration date, the date of his/her first and last order, the number of orders and amount spent made since he/she created an account.

The RFM amount is the amount spent during the period selected for the RFM ranking analysis.
The number of RFM orders is the number of orders made during the same period.

Customer Filter :

It is also possible to sort users by their RFM rating by clicking on the [Filter] button.



Newsletters and SMS Campaigns :

When you send out newsletters and SMS campaigns, it will be possible to select the recipients depending on their RFM rating.

Newsletter Filter:



SMS Filter:



For more information:
Creating a Newsletter
Creating an SMS Campaign
 
 Practical Example

Customer Profile

Registration: April 2013
First Order : December 2013
Last Order : January 2014
Total Number of Orders: 3
Total Amount Spent: £1,174.49
Number of RFM Orders: 3
RFM Amount Spent: £1,175.90

With this importance defined for each criterion:



If we determine the rating of each criterion according to the levels in the table:



The medal is assigned to the lower level if the number is between two levels.

Recency: The most recent order was less than 90 days ago, which falls into the level under 136 days and the system awards a silver medal here (rating 4/5).


Frequency: this customer has made 3 orders during the analysis period. This falls into the bronze medal category (a number under 5 and over 2) (rating 3/5).

Monetary: The amount the customer has spent during the analysis period is £1,175.90, which falls into the bronze medal category as this amount is over £381 and under £1367 (rating 3/5).

The average is calculated using these three ratings and applying the coefficients according to the importance you’ve assigned to the criteria.
Recency Coefficient: Important: 2
Frequency Coefficient: Not Important: 1
Monetary Coefficient: Very Important: 3


Here is the calculation formula: (4*2) + (3*1) + (3*3) = 20 / the total of the coefficients, here 6 = 3.33/5 which falls into the silver medal category.

Medal Definitions:

Over 4.25 = Gold
Over 3 = Silver
Over 1.5 = Bronze
Under 1.5 = Chocolate
 

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