Set up RFM analysis

Important

This topic applies to Dynamics 365 for Retail and Dynamics 365 for Finance and Operations.

This topic explains how to set up a Recency, Frequency, and Monetary (RFM) analysis of your customers.

Recency, frequency, and monetary (RFM) analysis is a marketing tool that your organization can use to evaluate the data that is generated by customer purchases. After you set up RFM analysis, customers are assigned a calculated RFM score as they make purchases. The RFM score can be a three-digit rating or an aggregate number, depending on how your organization has configured RFM analysis. Here’s how the rating works if your organization uses a three-digit rating for the score:

  • The first digit is the customer's recency rating, which is how recently the customer made a purchase from your organization.
  • The second digit is the customer's frequency rating, which is how often the customer makes purchases from your organization.
  • The third digit is the customer's monetary rating, which is how much the customer spends when he makes purchases from your organization.

For example, your organization has set the ratings on a scale of 1 through 5, where 5 is the highest rating. In this case, a customer rating of 535 tells you the following information about the customer:

  • Recency rating of 5 – The customer recently made a purchase.
  • Frequency rating of 3 – The customer purchases products from your organization moderately often.
  • Monetary rating of 5 – When the customer makes a purchase, he spends a significant amount of money.

If your organization uses an aggregate number for the score, the individual ratings are added together. For the same example, the customer has a rating of 13 (5 + 3 + 5).

To set up RFM analysis for the customers in your organization.

  1. Go to Call center > Periodic > RFM analysis.

  2. On RFM analysis page, select New. In the RFM definition field, enter a name for the RFM definition. For example, you could call the definition RFM-A.

  3. Enter a start date and end date for this RFM definition.

  4. On the General FastTab, do the following:

    • If each section of the RFM score must contain an equal count of customers, select the Even distribution check box.
    • Select the Add scores check box to aggregate the three scores. For example, this would give a customer an RFM score of 13 instead of 535.
    • Select the Save history check box to require the system to save the statistical data for customers so that the data can be used to calculate the RFM score.
  5. On the Recency FastTab, do the following:

    • In the Divisions field, enter the number of divisions, or groups, which will be used to calculate the recency score for customers. For example, if you have 100 customers, a division of 5 means that there are 20 customers for each score. The 20 customers who have made purchases most recently have a recency score of 5. The next 20 customers have a recency score of 4, and so on. If you have 50 customers, 10 customers have a recency score of 5, 10 have a recency score of 4, and so on.
    • In the Priority field, select how much weight to give the recency parameter in relation to the other parameters when the RFM score is calculated for a customer. For example, you might place more value on the recency score than the monetary score.
    • In the Multiplier field, enter the value by which to multiply the recency score. If you do not enter a value, the score will not be multiplied.
    • In the Period field, select the time period by which the recency score is calculated. For example, by week or by month.
  6. On the Frequency FastTab, do the following:

    • In the Divisions field, enter the number of divisions, or groups, which will be used to calculate the frequency score for customers.
    • In the Priority field, select how much weight to give the frequency parameter in relation to the others when the RFM score is calculated for a customer.
    • In the Multiplier field, enter the value by which to multiply the frequency score. If you do not enter a value, the score will not be multiplied.
  7. On the Monetary FastTab, do the following:

    • In the Divisions field, enter the number of divisions, or groups, which will be used to calculate the monetary score for customers.
    • In the Priority field, select how much weight to give the monetary parameter in relation to the others when the RFM score is calculated for a customer.
    • In the Multiplier field, enter the value by which to multiply the monetary score. If you do not enter a value, the score will not be multiplied.
    • In the Gross/net field, select whether the customer’s monetary score should be calculated by using the gross or net invoice amount.
    • If a customer’s return amounts should be subtracted from the customer’s total invoice calculation, select the Subtract returns check box.

View a customer’s RFM score

Use this procedure to view a customer’s RFM score.

  1. Go to Call center > Journals > Customer service.

  2. On the Customer service page, in the Customer service pane, in the search fields, select the keyword type to search on and enter the search text.

  3. Select Search.

  4. On the Customer search page, select the customer record that you want, and then click Select customer.

The RFM score is displayed in the Order history group on the right side of the Customer service page.

View or clear the history of an RFM analysis record

Use this procedure to view or clear the history of an RFM analysis record.

  1. Go to Call center > Periodic > RFM analysis.

  2. On the RFM analysis page, select the record that you want to view.

  3. To view the record history, select the History FastTab.

  4. To clear the history of the record, select Clear history.