The Basics of RFM Segmentation

by Bill Ruppert

Introduction

The most basic and important Circulation issue is "Who to mail?" The other issues of how often to mail, when to mail, and what to mail can only be settled once the basic "Who" question is settled.

A simple and effective way to make these decisions is to use Recency, Frequency, and Monetary Value (RFM) Segmentation. This article discusses segments and how to define them using RFM.

You can use scoring to rank names to be mailed, or you can group your names into segments and select the segments to mail. Scoring is difficult and has a lot of pitfalls. (I'll have to write an article about that someday!)

In any case, I believe that RFM Segments are well suited for most business-to-business mailers.

Outline

This article defines segments and how they are used. It explores issues with defining RFM Values. These values are used them to create RFM Cells and Cell Groups. Using product history with RFM and some ideas on how to use RFM and "firmagraphic" enhancements to generate prospecting list ideas are discussed. Finally, a few RFM based reports are presented.

First section: Segments

The Basics of RFM Segmentation

• Segments
• RFM Values
• RFM Cells and Cell Groups
• RFM Enhancements
• RFM Reports