What is it?
RFV (Recency, Frequency and Value) analysis provides a broad view of customers over the past twelve months, classifying them according to three parameters:
Recency: how recent the customer’s last purchase is;
Frequency: how often the customer makes purchases;
Value: how much the customer spends on his purchases.
Using these three parameters, customers are classified into nine categories. This customer segmentation will help in the decision making process for targeted marketing strategies and customer success, be it offering more targeted discounts, contacting certain customers, offering promotions, among others.
How does it work?
In BIMachine, each customer is classified with parameters that, analyzed individually, receive a score from 1 to 5, according to the period of the last purchase, the frequency of purchases and the amount spent on purchases.
Following the didactic pattern, the ranges end up being classified with 1 being the worst score and 5 being the best.
Recency
1 – Last purchase occurred more than 270 days ago;
2 – Last purchase occurred between 181 and 270 days ago
3 – Last purchase occurred between 121 and 180 days ago
4 – Last purchase occurred between 61 and 120 days ago
5 – Last purchase occurred in the last 60 days.
Frequency
1 – Made up to 10 purchases in the last 12 months;
2 – From 11 to 30 purchases in the last 12 months;
3 – From 31 to 50 purchases in the last 12 months;
4 – Made from 51 to 100 purchases in the last 12 months;
5 – Made more than 100 purchases in the last 12 months
Value
1 – Have spent up to R$ 10.000,00 in the last twelve months;
2 – Spent between R$ 10.000,00 and R$ 30.000,00 in the last twelve months;
3 – Spent between R$ 30,000.00 and R$ 50,000.00 in the last twelve months;
4 – Spent between R$ 50.000,00 and R$ 100.000,00 in the last twelve months;
5 – Spent more than R$ 100,000.00 in the last twelve months.
Based on these scores, the R.F.V. index is always calculated by analyzing the Recency and the arithmetic mean of Frequency + Value. That is, if a customer bought in the last 60 days, made purchases of $ 60,000.00 and more than 100 purchases, he will have the following scores:
R = 5
(F+V) / 2 = 4.5
Where R = Recency, F = Frequency and V = Value.
Below, we detail the scores for each customer classification, as well as suggested decision making strategies.
Customer Champions
Champion Customers stand out by having the most recent purchase made in the last 60 days (Recency = 5) and an average F+V equal to 5.
Profile:
They have purchased recently, very frequently, and spend a lot.
What to do.
Reward them. They can be the first users of your new products. They will be promoters of your brand.
New Customers
New Customers are customers with purchases in the last 60 days (Recency = 5) and an average F+V of less than 2.
Profile:
They have purchased recently but infrequently.
What to do?
Start building a relationship, offer support, generate value quickly.
Loyal Customers
Loyal Customers have purchases between 61 and 180 days ago (Recency = 3 or 4) and an average F+V between 3 and 5. That is, they buy with a high frequency and value. They are just below the Champion Customers.
Profile:
They spend a lot and frequently. Responds well to promotions.
What to do?
Offer higher value products (upsell). Ask them to evaluate. Engage them.
Promising Clients
Promising Customers also have purchases in the last 120 days (Recency = 4 or 5), but have an average F+V of up to 3. That is, they differ from new customers by spending more, buying more frequently, or even both.
Profile:
They have bought recently, but have spent very little.
What to do?
Get them closer to your brand, offer free trials.
Potential Clients
Potential Customers made their purchases in the last 180 days (Recency between 3 and 5 and had an average F+V of up to 3. They are just below Promising Customers.
Profile:
They have bought recently, spent a good amount and bought more than once.
What to do?
Offer a loyalty program and recommend other products.
Hibernating Clients
Hibernating Customers made their last purchase between 181 and 270 days ago (Recency = 2), however, they bought frequently and/or with considerable value, with the average F+V being up to 4.
Profile:
Last purchase was quite a while ago, spent little and bought little too.
What to do?
Offer relevant products at special discounts. Recreate value with the brand.
Concerned Customers
Concerned Customers are customers who also made their last purchase between 181 and 270 days ago (Recency = 2), and who bought very often and also spent a lot, with an average F+V between 4 and 5.
Profile:
Has high frequency and spent a lot with you, but has a VERY long time not buying.
What to do.
Offer great and popular products, discounts. Reconnect!
Clients at Risk
Customers at Risk are customers who the last purchase occurred more than 270 days ago (Recency = 1) and had an average F+V up to 4.
Profile:
They haven’t bought in a long time, very few times and have spent very little.
What to do?
Revive interest with general campaigns. Don’t suffer too much from it.
Customers We Can’t Lose
These are customers who have not bought for more than 270 days (Recency = 1) and had an average F+V between 4 and 5. In other words, they have not bought for a long time and, when they did buy, they spent a lot and often.
Profile:
You have high frequency and have spent a lot with you, but have not bought for even longer.
What to do?
Win them back with new products, talk to them.
Finally…
The RFV (Recency, Frequency and Value) analysis segments customers in such a way that decision making can be directed according to three performance indicator parameters of the relationship with the consumer, helping in engagement, brand strengthening, new product launches and customer retention.