Recency Frequency Value Modelling

Recency, Frequency, Value (RFV) analysis is a form of transactional  segmentation - classifying customers based on purchase behaviours.

RFV (sometimes called RFM) a powerful tool that shows you how recently your customers transacted with you, how frequently they transact and what their  total value is in a given time period.

This type of analysis is a form of customer classification and segmentation that only using transactional data. This is important and very useful because consumers often day they will do something when asked (claimed behaviour), but they don’t actually do it when they have to spend money.

RFV isn't based on what customers ay, it's based on what they do. RFV looks at the way your customer actually spend. Whereas many segmentation approaches use either attitude survey or audience data, RFV analysis looks only at how consumers actually behave. More savvy marketers will know there can be a very big difference between what consumers say they will do what they actually do.

If you want to grow revenue, understanding transactional data is a great place to start gathering actionable insight that can provide real direction.

What exactly is RFV analysis?

Imagine a 3D cube – a Rubik’s cube is ideal. Then think of three axes – one for recency of last purchase, one for frequency of purchases and one for total value.  By normalising each customer’s metrics into a value of between 1 and 5 or 1 and 10, we can plot all customers into a location in the 3D cube.

You can see an example, below with a whole customer base plotted in three dimensional space:

Benefits of RFV

Because RFV segmentation is transactional it gives real insight into what customers actually do, not just what they say.  

Using this information you can give each customer a Recency, Frequency and Value score.  This score can be used to allocate your customers into segments which allows you to design CRM strategies that meet individual customer states;  if they are high value and high purchase frequency customers you need to retain them, if they are about to sleep, you need to reactivate them, and if they are lost you need to win them back.

RFV classifies at the individual customer level, which means you can message them based on their anticipated needs. 

We offer recently frequency value modelling at a fixed price and with a fixed set outputs. Reports are reproducible and can be run as and when required, be that daily, weekly, monthly, or quarterly.

You can see the costs of RFV modelling here