Data marketers the world over will be familiar with ‘Recency, Frequency, Value’ – RFV or RFM for short. The concept involves combining three metrics – ‘Recency’ – the time since the last transaction, Frequency – the total number of transactions made, and Monetary Value – the total value of all transactions. This combination provides a good ‘at-a-glance’ view of a given customer base. These are then usually divided into segments, which can then be expressed on a cross-tab.
This method is then used to target marketing campaigns at those customers deemed the highest value, and therefore the likeliest to buy into whatever goods or services are being marketed. Whilst this method has its merits, it can also be argued that it has its limitations.