What is RFM? 

RFM (Recency, Frequency and Monetary Value) is a well known and well-loved technique for segmenting customers by their spend pattern. It segments customers using three key dimensions: Recency, Frequency and Monetary Value.

RFM is an established tool amongst Marketeers, but is increasingly being used by Sales & Account Management teams too. In fact, it helps with all 7 key strategies for growth and profitability in Wholesale, Distribution & Manufacturing businesses:

  1. Attract

  2. Sell

  3. Close 

  4. Onboard

  5. Retain

  6. Upsell

  7. Reactivate

The key to successfully growing a profitable Wholesale, Distribution or Manufacturing business is not just to attract new customers and get them to place their (first) order with you, but to then retain them for as long as possible, and to upsell them and so maximise their re-spend. In fact, a customer's first order in isolation often results in a loss (typically the Sales & Marketing cost of gaining a new customer is greater than the value of the first order, and you might need 3, 4, 5, 10 or even more orders to break even), so retaining and reactivating each customer is critical to ensure you grow profitably and don't fall into the trap of having a "leaky bucket". 

Prospect CRM: Funnel/Flywheel for B2B Wholesalers, Distributors and Manufacturers

Looking for more advice on RFM Segmentation, Strategy & Growth?

You can read more about RFM, how it's calculated and how to use it in our blog article here.

But, for now, we're going to assume you're familiar with the technique, or that you're simply happy take our word for it, and use the data we've calculated for you.

RFM Segmentation in Prospect CRM

Now you know a little about what RFM is, and why it's important for your Wholesale business, let's take a look at some of the analysis on your own customers within Prospect CRM!

Please note: RFM Segmentation and it's associated analysis, tiles, tags, analysis pages and reports are all currently in Preview. First of all, that means we'd love your feedback on this new functionality - either if it isn't working right for you, or if you have an idea that would make it better. Please contact us via our chat, or log your ideas in the Ideas Portal - both of these can be accessed by visiting www.prospectsoft.com/resources. And, in keeping with that desire for maximum feedback, during the Preview phase, this feature will be available to all users on all subscriptions. However, once out of Preview, this feature is expected to be only available on our Professional CRM and Advanced CRM subscriptions.

At a Glance Tiles on a Customer Record

On a CRM Customer record (a Company or Division with an associated active Account or Sales Ledger), you can see the RFM Segment, along with a little extra supporting detail (such as recent turnover comparisons and most recent order date) on the At a Glance tiles in the top right-hand corner.

Sales Analysis Page on a Customer Record (Preview)

If you click that tile, or navigate to the Sales Analysis page on the left-hand side, you'll then see the RFM Sales Analysis page. This page shows the customer's RFM Segment, as well as other key Sales and RFM information.

For example, you can also see which products they tend to buy with you and how frequently they buy them - all on the Sales Analysis page. 

The Last Order date appears in red if it's been longer than when the customer usually places an order with you. This allows your team to be proactive and targeted about getting this customer to re-spend with you e.g. by sending out a win-back campaign.

In the top right-hand corner of each chart, you'll also find a 'See More' link. Clicking this will open a Report that shows the detailed information behind each of the charts.

RFM Segments in Reports

On various Reports, colour coded labels against Divisions allow you to see which customers fall into which segment. Simply add 'RFM Segment' as as a column to any Report to see this with your own custom reports!

Key Standard Reports in Prospect CRM

But, to get you started, we've created some standard Reports in the CRM so you can get started with RFM straight away.

Customers by RFM Segment (Preview)

This Report divides customers into the RFM segments automatically for you, and can be found in the Marketing Report Group here.

Predicted Churn Alerts (Preview)

This Report allows CRM users to instantly see which customers are likely to slip away, and can be found in the Sales Report Group here.


What are each of the RFM Segments and how are they calculated?

Here's a list of all the RFM Segments:

  • Champions

  • Loyal Customers

  • Potential Loyalist

  • New Customers

  • Promising

  • Needs Attention

  • About to Sleep

  • At Risk

  • Don't Lose Them

  • Hibernating

  • Lost

Make sure you check out our article here to learn what each mean and for some actionable tips for each.

Your entire customer based is analysed on the last 2 years of data, and is done on three dimensions:

  1. Recency (how recent is their last order)

  2. Frequency (how many times they've ordered)

  3. Monetary (how much money they've spent)

Without getting too complicated, these dimensions are divided into fifths, and customers are positioned along them.

The way in which your customer data is assigned into the RFM Segments is relative to other customers in your dataset. For example, a Loyal Customer is:

  • Anyone in the top 60% of the combined monetary and frequency values, and

  • Anyone in the top 40% of recency.

Here's a working example...

Example Company Ltd rank:

  • Recency: 3

  • Frequency: 4

  • Monetary: 5

For this business, Example Company Ltd are in the top 20% of highest spenders in the last 2 years, and top 40% of most frequent spenders. Even though their last purchase was 9 months ago, they've ordered more recently than 40% of the rest of the dataset we're comparing them to, making them a Loyal Customer.

To ensure the segmentation is dynamic, scales as your sales/data changes, and works for different Prospect CRM customers, we don't implement hard-coded thresholds and limits.

How do I exclude anomaly accounts?

You have the ability to exclude certain accounts from the RFM Analysis if required. For example, you'd perhaps want to exclude the account that represents your owned direct-to-consumer sales, or ePos systems. Or, perhaps 98% of your customers purchase orders regularly, whereas the remaining 2% might, for some reason, place very high value orders just once a year - something you're aware of, and not out the ordinary, but skewing your analysis.

Although our RFM Analysis is super clever, it doesn't take into account edge case examples like this, so in this instance, you can now choose exclude those customers from the overall analysis.

So, this flag should only really be used for customers who fit into one of these scenarios:

  • Accounts that aren't real customers and represent your own Direct-to-Consumer activity e.g. your own Amazon/eBay/Shopify store

  • Accounts that are only there to account for and represent your own ePos system - your owned retail outlets or trade counters

  • Accounts where you have no control over their spend (e.g. large, and genuinely anomalous, accounts that only ever place one large order with you, once a year)

  • Accounts where there's a reason why they're hibernating (e.g. their business is seasonal, so they temporarily shut down at various points in the year)

  • Accounts whose spend is just very different to the majority of your customers

Step 1: Find Company

Excluding customers from your overall RFM Analysis is an Admin-only permission. To do this, simply go to the account/Company that you want to exclude.

Step 2: Customise Layout

Click the three dots in the top right-hand corner, and select 'Customise' from the drop-down.

Step 3: Add Exclude RFM Flag

In the Categorisation box, select 'Add Field/Report' and then choose 'Add Fields'. At Company level, click 'Show More', then tick on 'Exclude from RFM'. Make sure you save the Customise window.

This option will then appear at the Company level - simply click 'Yes' to exclude this company from your overall RFM Analysis.


Looking for More RFM Info?

Read our RFM blog, watch back our RFM Webinar, or learn more about the actionable insights you can implement within you business!

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