Analytics Mini$$ Case: Valuing Customers Using the RFM Method

RFM is a method frequently used by direct marketers to assess the value of customers. RFM stands for$($R$)$ecency$,($F$)$requency$,$ and$($M$)$onetary Value.

Imagine you are a direct marketer for an online company that specializes in selling unique candies from around the world that are difficult to acquire in the United States. You have a large customer$$ database, and you would like to apply the RFM method to value your current customers. You have two jobs.$$ First, $(1),$ you need to assign the correct RFM code values to a subset of your customer database.$$ Second, $(2),$ based on this RFM coding scheme you need to identify which customer subgroups should be targeted with a specific type of direct marketing message.

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