Updated March 21, 2024

The RFM Analysis Dashboard allows users to segment customers into 10 pre-made segments based on purchase behavior. The dashboard can be filtered by store, time period, and pre-made customer segments.

RFM (Recency, Frequency, Monetary) analysis is a powerful tool for understanding and segmenting a company's customer base based on their purchasing behavior. The technique evaluates three metrics:

• Recency: When was the last time a customer made a purchase?
• Frequency: How often does the customer buy over a given period?
• Monetary Value: How much money does the customer spend?

RFM analysis offers a range of benefits, making it a valuable approach for eCommerce managers:

• Customer Segmentation: RFM allows managers to divide their customer base into specific groups based on their buying behavior. Understanding these segments can lead to more tailored marketing strategies.
• Targeted Marketing: Once you have your RFM segments, you can develop personalized marketing campaigns for each segment. 
• Increase Customer Lifetime Value (CLV): By understanding and targeting customer segments, eCommerce businesses can maximize the value derived from each customer over their lifetime. Personalized experiences often result in better customer retention and more repeat purchases.
• Efficient Resource Allocation: Instead of spending equally on all customers, RFM helps in identifying which customers are more valuable and likely to generate higher returns. 
• Improve Product Offerings: By understanding who your best customers are and their purchasing patterns, you can better curate your product offerings or introduce new products that cater to their preferences.
• Forecasting and Planning: Understanding the buying behavior of different customer segments can aid in inventory management, sales forecasting, and strategic planning.
• Reduce Churn: Identifying customers who haven't made recent purchases (high recency scores) can help businesses initiate campaigns to win back potentially churning customers.
• Enhance Customer Experience:  By understanding customer segments and tailoring offers, you can enhance the shopping experience, fostering loyalty and repeat business.

 

Ellis Customer Segments

Segment	Segment Explanation	Actionable Tips
About to sleep	Below average recency, frequency, and monetary values. Potentially lost if not activated.	Share valuable content related to their past purchases, recommend popular products or bundles at a discount, and use personalized communication to reconnect.
At risk	Spent much with high frequency but a long time ago.	Send personalized recommendation emails based on past purchases, offer limited-time discounts on renewals, and provide useful content or resources related to their interests.
Can't lose	Biggest purchases with the highest frequency but haven't returned for a long time.	Initiate a win-back campaign showcasing new products or best-sellers, ensure they don't turn to competitors by offering exclusive deals, and re-engage with personalized messages.
Champions	Bought recently, buy often, and spend the most.	Reward their loyalty with exclusive offers or early access to new products; encourage them to share reviews or testimonials, as they can be brand ambassadors.
Hibernating	Last purchase was a long time ago with low spend and frequency.	Reintroduce them to the brand with curated product recommendations; offer special flash sales or exclusive discounts to reignite their interest.
Lost	Purchased a long time ago and never came back.	Try a last-ditch effort with a compelling reach-out campaign showcasing what they've missed; if unresponsive, prioritize other segments.
Loyal customers	Spend a significant amount often and are responsive to promotions.	Introduce upsell opportunities with higher value products; engage them with interactive content and ask for reviews or user-generated content.
New customers	Bought recently but not often.	Ensure a smooth post-purchase experience, offer guidance on how to make the most of their purchase, and send them personalized product recommendations to build a stronger relationship.
Potential loyalists	Recent customers have spent a good amount, and made more than one order.	Encourage them to join a loyalty or membership program for exclusive benefits; cross-sell by recommending complementary products.
Promising	Recent customers but have not spent much.	Foster brand loyalty through educational content about the brand's value, offer limited-time promotions or free trials on premium products to entice more significant purchases.

RFM Analysis Dashboard Elements

KPI
Dashboard KPI elements are

• Recency Of Last Order: Number of customers by the recency of last order during the selected period of time. Filtered according to the selected time period. Source: Shopify
• Frequency of Orders: Number of customers by the number of orders during the selected period of time.  Filtered according to the selected time period. Source: Shopify
• Customers By Monetary Spending: Number of customers by amount spent during the selected period of time.  Filtered according to the selected time period. Source: Shopify

RFM Segmentation of Customers

• Average Days Between Orders by Segment chart average days between orders for all segments. This visualisation does not linked to 'Current Period' filter and based on the entire order history.Source: Shopify
• Days Since Last Order By Selected Segments chart shows days since last order for selected segments between. This visualisation does not linked to 'Current Period' filter and based on the entire order history. It shows all customers by default. Source: Shopify
• Total Sales, Total Orders & Customers by Customer Segment chart shows total lifetime sales, orders and customers  so far for all segments. Source: Shopify
• % of Customers Per Segment chart shows % of customers per RFM segment during selected period of time. Source: Shopify