RFM Model And Business Analytics: Scrutinize Your Customers, Know Who Will Spend More

By Mr. Ajith Nayar, Manthan Systems

Marketing budgets in large format retails often swell due to the huge database of target potential customers and the carpet-bombing approach they adopt. While retailers end up spending large amounts creating and executing elaborate loyalty programs and promotional campaigns, the response may be disappointing. Accurate knowledge of customers who are more likely to buy the second time can help retailers focus their efforts on this concentrated target group and derive higher benefits from promotions and loyalty marketing.

For over 30 years, direct mailing marketers of non-profit organizations have used a crude form of RFM analysis to target their mails to customers most likely to make donations. The logic was simple: people who donated once were more likely to donate again.