RFM Analysis is a data-driven customer segmentation method that evaluates three key behavioral dimensions:
Recency (R): How recently a customer made their last purchase. Customers who bought recently are more likely to buy again.
Frequency (F): How often a customer makes purchases within a given time period. Frequent buyers tend to be more loyal and engaged.
Monetary (M): How much money a customer has spent in total. High-spending customers represent the most valuable segment of your base.
By scoring customers on each dimension (typically on a 1-5 scale), you can create segments like "Champions" (high across all three), "At-Risk" (previously high but declining recency), or "New Customers" (recent but low frequency/monetary).
RFM analysis is particularly powerful for e-commerce because it requires only transactional data — no surveys or complex integrations needed. It helps you prioritize marketing spend by identifying which customers deserve VIP treatment and which ones need re-engagement campaigns.
