How to find your most profitable customers

How to find your most profitable customers
Photo by Scottsdale Mint / Unsplash

How to find your highest leverage customer segments:

Use the RFM Model to segment and prioritize.

RFM stands for Recency, Frequency and Monetary Value.

The more recently, frequently and the higher the monetary value assigned to a customer, the more valuable they are.

Here's a more granular breakdown - did they:

⏰ Buy more RECENTLY?

These customers generally have a higher probability of making a repeat purchase in the *near future*. No guarantees they will solidify into CONSISTENT buyers though.

🔢 Buy more FREQUENTLY?

A measure of loyalty. You can count on these customers to buy more CONSISTENTLY over time for the duration of their relationship with you. But it's not indicative that they will buy soon. Maybe they'll buy 6 weeks from now - or 6 months...or 6 years. But you can count on them to keep buying (at least moreso than the other two categories).

💰 Buy more in terms of MONETARY VALUE?

Those who buy your big ticket offers are more likely to buy another high-priced product. These are your "whales".

In summary, the RFM model is a simple way to ensure you:

1.) Focus your limited time and resources
2.) Appropriately target your offers to the right parts of your customer list