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RFM Segments

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Written by Rafał Idzik - Data Octopus
Updated over a month ago

Data View - RFM Segments

The RFM Segments model contains aggregated analytical data about customer segments created on the basis of RFM (Recency, Frequency, Monetary) analysis. This model enables comprehensive analysis of characteristics, purchasing behaviors, and business value of individual customer segments.

Requirements:

  • E-commerce engine: IdoSell

Data structure and description:

Segmentation data

  • Customer Segment - Customer segment determined based on RFM analysis by Data Octopus

Quantitative indicators

  • Clients Quantity - Number of clients assigned to a given segment

  • Clients Quantity Share - Percentage share of the segment in the entire customer base

Time indicators

  • Avg Days Since First Order - Average number of days elapsed since the first order of customers in the segment

  • Avg Days Since Last Order - Average number of days elapsed since the last order of customers in the segment

Price indicators

  • Avg Min Product Net Price - Average net price of the cheapest product purchased by customers in the segment

  • Avg Max Product Net Price - Average net price of the most expensive product purchased by customers in the segment

Order indicators

  • Orders - Total number of orders completed by customers in the segment

  • Avg Unique Item Count - Average number of unique products purchased by customers in the segment

Financial indicators

  • Total Net Revenue - Total net value of all orders completed by customers in the segment

  • Avg Order Net Revenue - Average net order value of customers in a given segment

Purchase preference indicators

  • Avg Quantity Of Purchased Brands - Average number of unique brands purchased by customers in the segment

  • Avg Quantity Of Purchased Categories - Average number of unique product categories purchased by customers in the segment

Characteristics of customer segments

  • Champions (Recency 5, Frequency 5, Monetary 5) The most valuable customers who have made purchases recently, buy frequently, and spend significant amounts. Active brand enthusiasts who regularly return and generate high revenues.

  • Loyal Customers (Recency 4-5, Frequency 4-5, Monetary 3-5) Regular customers with high purchase frequency and good order values. They don't always spend the most, but regularly return and form a solid customer base.

  • Potential Loyalists (Recency 4-5, Frequency 3-4, Monetary 2-4) Recently active customers with growing purchase frequency. They show potential to become loyal customers with proper relationship nurturing.

  • New Customers (Recency 5, Frequency 1-2, Monetary 1-2) New customers who have just begun their journey with the brand. They made a purchase very recently but have low frequency and value of purchases due to short history.

  • Promising Customers (Recency 4, Frequency 2-3, Monetary 1-2) Customers who show interest by buying relatively recently with moderate frequency. They spend less but have development potential.

  • At Risk (Recency 2-3, Frequency 3-5, Monetary 3-5) Previously loyal customers who haven't purchased for some time. Historically, they showed high value and purchase frequency, but their activity is starting to decline.

  • Slipping Champions (Recency 1-2, Frequency 4-5, Monetary 4-5) Former Champions who have stopped buying. Historically very valuable customers with high frequency and value of purchases, whose activity has significantly decreased.

  • Hibernating (Recency 1-2, Frequency 1-2, Monetary 1-2) Inactive customers who previously bought rarely and spent little. They haven't made a purchase for a long time and have low overall value for the business.

  • Lost (Recency 1, Frequency 1, Monetary 1) Customers who have likely permanently left. The lowest scores in all RFM categories – a very long time has passed since the last purchase, they bought rarely and spent little.

  • Others Customers who don't fit into any of the above segments and may require individual analysis.

Use Cases

The RFM Segments Data View is primarily used for:

  • Strategic comparative analysis of individual customer segments in terms of their business value

  • Identification of the most valuable customer segments generating the highest revenues

  • Analysis of price preferences of individual segments (based on average minimum and maximum prices)

  • Examining differences in purchasing behaviors between segments (frequency, value, diversity)

  • Optimization of marketing and pricing strategies for specific customer segments

  • Designing personalized remarketing campaigns tailored to the characteristics of a given segment

  • Evaluating the effectiveness of retention activities for at-risk segments (At Risk, Slipping Champions)

The RFM Segments model enables making strategic marketing decisions based on solid analytical data, which translates into increased effectiveness of marketing activities, better matching of the offer to the needs of customers from individual segments, and optimization of advertising budgets by focusing on the most valuable customer groups.

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