JustRFM

Recency Frequency Value software: Simple, Quick, Cost-effective

 
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RECENT UPDATES

[20 Nov 2009] JustRFM has been released for beta testing

[11 Jan 2010] How to use JustRFM if you have over half a million transactions

just rfmThe Methods of Calculating RFM Scores in JustRFM

Using JustRFM, there are three methods which you can use to calculate the RFM Groups/Scores:

Exact Quintiles

This is the 'classic' approach to calculating Groups/RFM Scores and works as follows:

  • First, JustRFM creates 5 segments based on the Recency value, dividing the data file into 5 exact quintiles, where the Contacts with the most recent Transactions (i.e. in the top 20% of the file) are given a Recency value of 5, then the next 20% are given a Recency value of 4 and so on.
  • Then, for each of those quintiles, they are segmented into 5 further quintiles based on the Frequency value for each contact. So, for the Recency quintile of 5, that is segmented into 5 further quintiles where the Contacts with the highest Frequency value (i.e. with the most Transactions) are given a Frequency value of 5, then the next 20% are given a Frequency value of 4 and so on. Then, the same process is repeated for the Recency quintile of 4, then 3 and so on. At the end of this process, you would have 25 segments.
  • Finally, each of those 25 segments is then segmented into 5 further quintiles, based on the Monetary Value of each Contact; i.e. the total amount which all that Contact's Transactions add up to. Those Contacts with the highest Monetary Values in each of the 25 quintiles, i.e. in the top 20%, are given a Monetary Value of 5, then the next 20% are given a Monetary Value of 4 and so on.
  • At the end of this process, you will have 125 segments with a RFM Group of between 111 and 555 with the same number of Contacts within each segment; and each Contact will have a RFM Score of between 3 and 15.

Independent RFM Quintiles

An alternative approach is to still calculate RFM Groups/Scores using quintiles, but by using the Independent RFM Quintile approach, not just the Recency but also the Frequency and Monetary values for each Contact are calculated across the whole data file and are not dependent on any of the other values/RFM factors or any other quintile. This works as follows:

  • First, JustRFM calculates the Recency value in exactly the same way as the approach used in the Exact Quintiles method for calculating the Recency value.
  • Then, JustRFM calculates the Frequency value by dividing the whole of the original data file into 5 exact quintiles, where the Contacts with the highest number of Transactions across the whole data file are given a Frequency value of 5, then the next 20% are given a Frequency value of 4 and so on. i.e. it does not matter in which of the Recency quintiles a Contact was placed - the Frequency value is calculated independently of that.
  • Finally, JustRFM calculates the Monetary Value in the same way - by dividing the whole of the original data file into 5 exact quintiles, where the Contacts with the highest Monetary Value are given a value of 5, then the next 20% are given a value of 4 and so on.
  • At the end of this process you will also have 125 segments with a RFM Group of between 111 and 555, but the number of Contacts within each segment will not necessarily be the same; and each Contact will have a RFM Score of between 3 and 15.

User-Definable Bands

  • Using this method, you can define specific bands which you set for each criteria (i.e. each RFM factor) in order to determine what Recency, Frequency and Monetary Value should be given to each Contact. E.g. You might say that any contact with a transaction in the previous 3 months is given a Recency value of 5, then between 4 and 6 months they get a value of 4, then 7-12 months gives a value of 3, then 13-24 months a value of 2, and any further back than that a value of 1. Thus, you can see that the bands do not have to be even. You must define all the bands for the Recency, Frequency and Monetary Value.
  • JustRFM then calculates the RFM Group/Score for each contact based on your user-defined bands. By definition, the process of calculating the Group/Score for each RFM factor is "independent" of each other factor (i.e. as per the Independent RFM Quintiles method).
  • At the end of this process you will have up to 125 segments with a RFM Group of between 111 and 555, although it is possible that some segments might not have any Contacts within it if your bands are set in such a way as to make this happen; and almost certainly, the number of Contacts within each segment will not be the same.