What is RFM and how does it work?

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RFM analysis turns your customer's purchasing behaviour into valuable easy-to-grasp insights.

 

 

What is RFM analysis?

RFM (Recency, Frequency, Monetary Value) is a powerful, innovative way to rank your shoppers. It uses three metrics:

  • Recency (R): how long since since the customer last purchased something from you.
  • Frequency (F): how many buys they made in the last year.
  • Monetary Value (M): how much they spent in the last year.

Each customer gets a score between 111 and 444, which E-goi turns into a profile - such as "Champion", "Loyal" or "At risk" and more.

Example: A "Champion" customer not only has bought recently but shops often and spends a lot. On the other hand, an "At risk" customer made their last purchase long ago, buys once in a blue moon and usually goes for low-price items.

 

 

Use cases

RFM profiles are just the thing to tailor how your brand talks across each stage of your shoppet's lifecycle:

  • Reward your best customers: create exclusive promos for "Champion" and "Loyal" buyers.
  • Build trust: cross-sell related items to "Recent" customers who just bought from you.
  • Win back dormants: send "haven't heard from you" campaigns to people "At risk" or "Needs attention".
  • Avoid one-size-fits-all: adjust your messaging, promos and send frequency to make it on-point for each RFM profile.
  • Track lifecycle value: compare between previous and current RFM profiles to quickly pinpoint people who became in love with your brand and those who are about to go away.

 

 

Requirements

  • An E-goi account with a Corporate plan.
  • An E-goi contact list with your store's purchases synced to each contact.
    Important! To sync your purchase data with your contacts in E-goi (so you can unlock RFM), you'll need to integrate E-goi with your store orders.
  • At least 50 buys made in the store, synced with your contact list in E-goi.

 

 

Before you start

 

RFM metrics and scoring

E-goi assigns each of the three RFM metrics a score from 1 to 4, with 4 being the most favourable and 1 the least:

Metric Score 4 Score 1
Recency Very recent purchase. Purchase made longer ago.
Frequency Purchases quite often. Purchases infrequently.
Monetary Value High purchase value. Low purchase value.

 

The three scores will always be shown as Recency, Frequency and Monetary Value (hence "RFM").

Example: A shopper scoring 431 got 4 for Recency, 3 for Frequency and 1 for Monetary Value.
Important: Recency uses the date of the customer's last buy regardless of when it happened, while Frequency and Monetary Value only consider  buys in the last 365 days. If E-goi hasn't got enough data to calculate the customer's RFM yet, their status in the RFM section of their E-goi profile will state No data.

 

 

RFM profiles

How the three scores fit together will determine each customer's RFM profile.

 

Profile Who these people are What you should do
Champion Recent, frequent and high-value shoppers with the strongest relationship with your brand. Reward them with early access to new products and exclusive offers or experiences.
Loyal Shoppers who buy often and consistently from you. Build even more trust with "you'll love this" reminders, loyalty programmes and high-value cross-selling.
Recent Shoppers who bought recently but their purchase history is short. Welcome them, target them with ultra-relevant promos and encourage their next purchase.
Needs attention Shoppers with declining engagement, possibly drifting away from your brand. Rekindle their flame with personalised offers and incentives to bring them back into the fold.
At risk Shoppers who were high-value but haven't purchased in a long whilte. Craft win-back campaigns, showcase them your benefits and test a highly enticing, limited-time offer.
Inactive People with little shopping activity, old purchases and low value or frequency. Try one last win-back attempt, but consider leaving them alone if they don't engage.
No data Contacts in E-goi who don't hace enough shopping data for an RFM profile yet. Sync your store orders with E-goi to start collecting  purchase data.

 

 

How E-goi calculates RFM

To figure out RFM, E-goi:

  1. Looks at your store's purchase data synced with E-goi's contact list
    • Recency is calculated based on the date of the last purchase.
    • Frequency and Monetary Value are calculated based on the amount and value of purchases in the last 365 days.
  2. Arranges each metric into four dimensions
    • The dimensions are set automatically based on the data in the contact list.
    • Each contact gets a score from 1 to 4 for each metric.
  3. Scores and assigns the RFM profile
    • The three rankings build an RFM score (eg. 444, 231, 111, etc.).
    • The score is turned into one of E-goi's RFM profiles.
  4. Keeps rankings up to date
    • The thresholds for each of the four dimensions are recalculated every 30 days.
    • When someone buys from you, their metrics and RFM profile in E-goi are updated in real time (provided the list already has a minimum of 50 buys required to generate RFM).
    • E-goi stores both the current and previous RFM profiles so you can compare them and use them for segmentations.

 

 

 

Step by step

 

Viewing a contact's RFM profile

1) Edit the contact.

2) Under the contact's profile, you'll see the RFM area.

3) The contact's RFM will be shown. If there isn't yet enough data to get their RFM, it'll state No data. If the contact has had another RFM profile, both the previous and current will be shown.

 

 

Segmenting contacts by RFM profile

1) Go to the Contacts menu and click Contacts for the list you'll be segmenting.

2) You'll see a page with all contacts in that list. In the segmentation section (under New search), choose RFM profile. You can select:

  • Current RFM profile to target contacts based on their current RFM.
  • Previous RFM profile to target contacts based on the RFM profile they had immediately before their current one.
    Combining current and previous RFM profiles helps you pull valuable info from your shoppers. For example, creating a segment with contacts whose current RFM profile is At risk and whose previous profile was Loyal will pinpoint buyers who just aren't feeling it anymore with your brand.

4) Choose the profile you want to use for segmenting (Champion, Loyal, etc.).

5) If necessary, combine this with any other segmentation criteria. Then save your segment.

Examples of high-value segments you can create using RFM:

  • Champions for an early-access promo.
  • Loyal shoppers combined with a specific Total purchase value.
  • Recent customers to trigger a second-purchase flow.
  • Buyers who went down from Needs attention to At risk and require urgent win-backs.
  • At risk or Inactive people who may be receptive to a we-miss-you campaign.
  • Happy campers who went up from At risk to Loyal or Champion, giving you plenty of success stories to tell.

 

 

 

Frequently asked questions

 

When is RFM scoring and profiling updated in E-goi?

When a contact makes a purchase in your store, their RFM profile in E-goi is updated in real time, as long as RFM is enabled for your contact list in E-goi (ie, your store's orders are synced with contacts in E-goi and at least 50 purchases have been made).

In addition, every 30 days E-goi recalculates the four dimensions for each RFM metric.

 

 

What does “No data” mean on a contact's RFM?

It means the contact doesn't yet have enough purchase data for E-goi to measure their RFM.

 

 

What's the benefit of knowing a contact's previous RFM against their current RFM?

The previous RFM tells you how the contact has grown attached to your brand. When segmenting buyers, you can use "previous RFM" together with "current RFM" to easily identify, say, "Loyal" shoppers who suddenly went "At risk" - or "At risk" shoppers who turned into "Champions".

 

Updated:

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