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Customer Purchasing Patterns - RFM Analysis

There are still many businesses in the Mid and Small Market today that have not implemented a business analytics strategy and formalized the tracking of customer buying patterns, as well as others who have not standardized processes around regular engagement with customers using CRM and digital marketing tools, particularly engagement with the cohort of customers whose buying patterns have moved in a negative direction.

Academic research into customer purchasing decisions and buying patterns led to the development of the RFM Analysis paradigm (Recency, Frequency, Monetary), which demonstrated that one of the most important determinants of whether or not a customer will buy again (repeat business) is the 'R' in RFM (Recency). In other words, customers that have been buying from a business will likely continue to do so. Customers who stop buying from a business become increasingly unlikely to do so as time progresses.

It is therefore important that all businesses strive to identify customers whose ordering/purchasing patterns have changed, either by becoming more infrequent or in particular stopping altogether, and proactively reach out to those customers. Companies need to determine the reasons for such changes as well so that they can be addressed or analyzed: customer service issues, product quality, price, competitor/marketplace dynamics, etc.

If you have customer sales data in digital form, which virtually every company does today, then you have the most important prerequisite to being able to determine customer buying patterns and to establish a system to proactively engage customers whose recency (time since last order) is moving further out in time than historical norms.

Get in contact with our team and we can work with your company to establish the digital tools and methods needed to ensure that RFM becomes a key part of your customer retention strategy. Such an engagement project is within reach for companies of all scales given the advancement in cloud-based tools and software, we will take a practical approach based on your needs and resources. It is much easier and more economical to retain an existing customer than to acquire a new one.

FinTechTX Consulting Team

Further Technical reading:

Foundational Paper on RFM:

Bult, Jan Roelf and Tom Wansbeek (1995), "Optimal Selection for Direct Mail," Marketing Science, 14 (4), 378-94


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