Understand the RFM analysis report
RFM (Recency, Frequency, Monetary value) analysis provides a detailed view of your customer base by segmenting them into groups based on their historical value to your brand. This lesson will guide you through how the RFM model works and how to customize its inputs to reflect your business specifics.
Note: RFM Analysis is available in both the intelligence section of Klaviyo Advanced KDP (previously CDP) and Marketing Analytics.
Evaluate your opportunities for each RFM group
Each RFM group offers unique opportunities for targeted marketing. Tailor your strategies to each group's behavior and potential to maximize your retention efforts. In the next lesson, we'll dive into how to build a targeted retention strategy using RFM groups.
Champions
These are your best customers.
They purchased recently, and they also purchase often with the highest overall historical order value.
Your opportunity: incentivize and reward these customers for referrals and user-generated content. Lean into this group to fuel your growth.
Loyal
These are valuable customers who are engaged.
They purchased somewhat recently or purchase often, but their total historical spend is lower than your Champions.
Your opportunity: retain these customers and offer upsells or incentives to increase their AOV, hopefully moving them to Champions.
Recent
These folks are engaged right now.
They have made a recent purchase, but they do not tend to purchase frequently.
Your opportunity: turn them into repeat customers. Use intelligent and relevant cross-selling and upselling tactics to get them to buy again.
Needs attention
These are high-value customers who have not purchased recently.
Your opportunity: re-engage these customers before they go. Seek to understand why they are unengaged, and use that information to bring them back to the fold.
At risk
These are lower-value customers who have not purchased recently.
This group is likely made up of one-time or few-time buyers who wanted to see what you were all about, and they didn’t spend much.
Your opportunity: Just like your Needs attention customers, re-engage your at-risk customers before they go. Seek to understand why they are unengaged and use that information to bring them back to the fold.
The last group is Inactive. An Inactive customer is an infrequent customer who hasn’t purchased in a long time. For an Inactive customer, try a winback campaign to re-engage them or offer them an exclusive promotion or coupon. However, if they are unengaged (especially if they do not interact with your winback or promotional emails), consider cleaning up your list and suppressing these profiles before they harm your deliverability.
Understanding percentiles, scoring, and customer groups
For a given customer, Klaviyo will determine their percentile among all customers for recency, frequency, and monetary value. Once those percentiles are determined, Klaviyo then assigns the customer a score of 1-3 for each (recency, frequency, and monetary).
While you can change the scores to whole numbers, we recommend using percentiles because they provide more precise control over customer data and make it easier to define customer groups as buying habits change. For example, you could assign a score of 3 to customers who fall within the top quartile (75th percentile and above) of purchasers, which includes those with the highest frequency of purchases.
By default, scores will be assigned using default thresholds. These include:
Recency scoring
- Customer’s most recent purchase was within the last 180 days: 3 score assigned.
- Customer’s most recent purchase was between 180 and 365 days: 2 score assigned.
- Customer’s most recent purchase was outside of the last 365 days and indicates that they are unlikely to ever purchase again: 1 score assigned.
Frequency scoring
- Top 33% (usually 3 or more purchases): 3 score assigned.
- Middle 33%, but less than the 66 percentile (usually 2 purchases): 2 score assigned.
- Bottom 33% of users (usually a single purchase): 1 score assigned.
Monetary scoring
- Top 33%: 3 score assigned.
- Middle 33%: 2 score assigned.
- Bottom 33%: 1 score assigned.
Customer groups
The model below visualizes how these 3 scores are blended together to determine your potential customer buying group. All RFM metrics and their scores (1-3) can be visualized on this cube and where they fall within each of its sides or quadrants. For example, the top green corner of the model illustrates a customer who has earned the top score of 3 for all RFM metrics.
Here are the possible score breakouts (listed from left to right in RFM order)
Champions: 333, 332, 323
Loyal: 321, 322, 331, 232, 233
Recent: 312, 313, 311, 222, 223
Needs attention: 213, 221, 123, 132, 133
At risk: 231, 212, 122, 131, 211
Inactive: 111, 112, 113, 121
How can I use this RFM analysis report to grow my retention strategy?
In the next lesson, we will dive into how to use RFM group insights to build a targeted retention strategy, utilizing a proven framework to boost ROI and enhance customer engagement.