Using RFM for anti-defection campaigns

While Average Customer Purchase Latency is much better at predicting defecting customers, it can be difficult to calculate unless you use software like my app.

An alternative is to use RFM. It's a bit easier to calculate (the core is three simple sorts) and much easier to understand. RFM also gives you a lot more analysis options than Average Latency.

Using RFM for defection detection is weaker than Average Latency because RFM is more of a relative measurement (e.g. customer A is more defected than customer B) while Average Latency is more absolute (e.g. customer A has defected).

But not every system calculates Average Latency but many calculate RFM. Even old-school paper catalog marketing systems use RFM in their customer analysis. To use RFM for defection you'll want to set it up like so:

Using this criteria, you'd want to use your anti-defection campaigns on customers with a Recency of 2.

(You could use a win-back campaign on Recency 1 customers but that's a different conversation)

Eric Davis

Promote products that create your best customers

When it's time to run a promotion, how do you pick the products to feature? Best sellers are okay but wouldn't it better to promote the products that crate the best customers? Repeat Customer Insights will analyze your product and buyer behavior to show which products and variants lead to the highest quality customers.

Learn more

Topics: Rfm Customer defection