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Scoring / RFM – Customer Profiling
For an entrepreneur there are no saturated markets. There are only opportunities.
Erich Sixt (*1944), German entrepreneur, CEO of Sixt AG (car rental)
The RFM method is a specialized scoring-based customer value analysis that is well established in the mail order sector. It not only takes into account monetary values in rating customers, but non-economic dimensions as well. In the literature one speaks of the RFMR model (Recency Frequency Monetary Ratio), a model that comes from the mail order business. It has been discovered that:
- Customers who have recently ordered something are more likely to order again than customers who have not purchased anything for a long time (recency).
- Customers who order frequently are more likely to order again than customers who rarely order anything (frequency).
- Customers who generate a great deal of turnover are more likely to order again (monetary).
In MOS-TANGRAM solutions, the Contribution Margin II is used for the criteria "Monetary” rather than turnover, since it says more about the profitability of a customer than pure sales figures alone. The rating criteria are thus: the time since the last order (recency), the ordering frequency (frequency) and the Contribution Margin II (monetary).
This is the most advanced and powerful electronic RFM tool on the market. Due to its depth and networked integration into customer, product and order histories, innumerable RFM scenarios can be developed. The easy-to-use storage, journal and report functions give the mail order vendor optimal orientation in terms of his customers’ tendencies, all at the touch of a button. The option of selecting RFM scenarios makes it possible to rapidly implement new advertising campaigns that are sure to bring future success, and to renew old activities that were successful in the past.
The RFM tool integrated into the solutions offered by MOS-TANGRAM uses a method similar to criminal profiling to analyze customer data and identify the most profitable and valuable customers and customer groups, as well as to provide clues to new potentially profitable target groups.
In his RFM analyses, the mail order vendor quickly recognizes tendencies within his clientele that he perhaps was not aware of before. RFM brings to his attention new target groups and whole market segments that can be tapped with great success.
