RFM is an abbreviation of Recency, Frequency, and Monetary, and stands for a special approach to segmentation. By monitoring such values as recency, frequency, and monetary you can easily identify customer groups with certain needs. In other words, you can use the data you get from the CRM system and apply RFM segmentation method to create specific player segments.
CRM systems provide you with comprehensive data you can use, but you can get better results by also using the RFM method to segment players. So, how does RFM segmentation work? First, you need to characterize your customer according to the following attributive values:
- Recency: simply refers to the last date a customer performed a transaction on your site
- Frequency: indicates how often the customer conduct transactions
- Monetary: shows the total amount which the customer spent on your site
Next, you should segment your customers into three groups for each attributive value (R, F, M), each group of which should then be divided into four different groups — from the highest value to the lowest.
With RFM segmentation, you can identify customers who spend the most but not often, active but low-spending customers, new customers who spend above average, etc.