Recency-Frequency-Monetary Analysis

Recency-Frequency-Monetary (RFM) Analysis is a customer segmentation method used by businesses to understand purchasing behavior. It evaluates three key aspects: how recently a customer made a purchase (Recency), how often they buy (Frequency), and how much they spend (Monetary). By analyzing these factors, companies can identify their most valuable and engaged customers, tailor marketing efforts, and improve customer retention. For example, a customer who has bought recently, frequently, and spends a lot is considered highly valuable, helping businesses prioritize relationships and strategies accordingly.