On the way blog - Where you learn new things in two minutes!

After learning what is the RFM algorithm in my previous post . I would like to write today about my adjustments and improvements that helped me during these years as an online marketer. I call it the Priority Potential   RFM or just PPRFM . P - Priority (who to contact first) P - Potential (predicting lifetime value of a customer) R – Recency (most recent deposit) F – Frequency (how many times he deposited) M – Monetary (Lifetime Deposits) Please see attached diagram I did for an online gaming company: Remember we are not changing the RFM algorithm we are just adding two new add-ons. Priority - everything should work according to who do you want to contact first and why. Potential - In this section you put everything you think might influence a customer to buy your product or not. It can be various things so try to think what are the characteristics that differentiate your purchasing customers from your customers that still didn't buy from you and segment them

Let's jump right into the stuff we only have two minutes :-). In this post I would like to write about the RFM algorithm. RFM analysis assigns value-scores to each customer on the basis of her past behavior. Using the quintile system explained above, at the most, 125 different scores (5x5x5) can be assigned. These cells differ in size from one another. A customer’s score can range from 555 being the highest, to 111 being the lowest. The best customers are in quintile 5 for each factor (555) that have purchased most recently, most frequently and have spent the most money. RFM provides a simple framework for quantifying customer behavior. For example, it is possible to infer that customer which has RFM score 155, has made a high number of purchases with high monetary values but not for a long time.  Something might have gone wrong with this customer, for example, he/she has most likely defected to a competitor's products and services or has found an alternate source and th