Build your customers segmentation project with RFM

This cours is a tutorial on customer segmentation using RFM method. It involves demonstrating how to segment a customer base into meaningful groups based on common characteristics like purchasing behavior, demographics, or engagement levels.

RFM stands for Recency, Frequency, and Monetary Value. It is a marketing analysis technique used to segment customers based on their purchasing behaviors. Each metric provides insights into different aspects of customer interactions:

1. Recency (R):

Definition: Measures how recently a customer made a purchase.

Purpose: Customers who have purchased recently are more likely to buy again.

Example Question: « How many days ago did this customer last make a purchase? »

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2. Frequency (F):

Definition: Measures how often a customer makes purchases in a given time period.

Purpose: Frequent buyers are usually more loyal and engaged.

Example Question: « How many purchases has this customer made in the last year? »

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3. Monetary Value (M):

Definition: Measures the total amount of money a customer has spent.

Purpose: High-spending customers are often more valuable to the business.

Example Question: « How much revenue has this customer generated? »

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How RFM is Used:

RFM analysis assigns scores to each customer for Recency, Frequency, and Monetary Value. By combining these scores, businesses can segment customers into groups to tailor marketing strategies.

Benefits of RFM Analysis:

1. Identify Valuable Customers: Focus on high-value segments for retention.

2. Improve Customer Retention: Engage recent and frequent buyers with personalized offers.

3. Optimize Marketing Campaigns: Target specific segments for promotions.

4. Predict Customer Behavior: Understand which customers are likely to purchase again.

Example of RFM Segmentation:

RFM is a simple yet powerful tool for understanding and improving customer relationships.