Overview

RFM (Recency, Frequency, Monetary Value) is a key ecommerce metric indicating customer behavior. It highlights likely buyers. RFM's "Can't Lose Them" gauges once regular but now absent customers, aiding ecommerce in customer retention or recall.

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What is RFM: Number of “Can’t Lose Them!”?

The “Can’t Lose Them” metric is a type of RFM (Recency, Frequency, and Monetary Value) metric used to identify customers who used to visit and purchase quite often, but haven’t been visiting recently. This metric can be used to target potential customers who are in danger of churning and send them relevant promotions in order to entice them to return. It is also useful for gathering survey insights to understand what went wrong and what can be done to improve the customer experience and avoid further churn.

Formula

RFM: Number of “Can’t Lose Them” = ((X- time since last transaction) + (Y- total number of transactions) + (Z- total spending value))Where X = number of days since the customer’s last transaction, Y = total number of transactions the customer has made, and Z = total spending value.

Example

“Can’t Lose Them” measures dormant customers in ecommerce. For example, Tanya bought five times in six months online but hasn’t bought in three months.RFM: Number of “Can’t Lose Them” = ((90-3) + (5) + (1000)) = 1092In this example, Tanya has a “Can’t Lose Them” score of 1092 which means they are a customer that the ecommerce store should consider trying to bring back.

Why is RFM important?

RFM: Number of “Can’t Lose Them” helps businesses measure customer loyalty and identify customers who have been loyal but have not been active lately. By targeting such customers with relevant promotions, ecommerce businesses can entice them to come back and make more purchases. This metric is also useful for understanding what improved customer experience and policies need to be implemented in order to prevent them from churning.

Which factors impact RFM?

The “Can’t Lose Them” metric is impacted by the recency, the frequency, and the monetary value of customer purchases. The co-relation between RFM and other ecommerce metrics is fairly strong as customers who make frequent purchases will often have a relatively higher monetary value as well. Additionally, customers who have a high “Can’t Lose Them” score are more likely to be engaged with the business and purchase more often from the online store.

How can RFM be improved?

There are several ways that ecommerce businesses can improve their “Can’t Lose Them” metric. Customers should be segmented based on the time since their last purchase and sent relevant promotions that encourage them to visit and purchase from the store. Additionally, it is important to gather customer feedback through surveys to identify the reasons why they are not purchasing anymore and address any customers service issues.

What is RFM’s relationship with other metrics?

RFM: Number of “Can’t Lose Them” is an important metric that helps ecommerce businesses measure customer loyalty and identify customers who haven’t been purchasing recently. This metric should be used alongside other ecommerce metrics such as segmentation, customer loyalty, and customer feedback to gain insights on customer behavior and loyalty. Ecommerce businesses should use this metric to target customers who have stopped purchasing to help bring them back.