Cross-border e-commerce RFM customer segmentation model: an important tool for measuring customer value and profitability

Customer segmentation is one of the core concepts in customer relationship management. It divides a merchant’s existing customers into different customer groups through classification indicators such as customer value, customer behavior, and customer preferences. This segmentation not only helps identify the needs of different customer groups, but also enables merchants to adopt more targeted marketing strategies for different customer groups, thereby increasing customer satisfaction and loyalty and achieving more effective market penetration. .

RFM customer segmentation model is a customer segmentation method widely used in database marketing. It uses three parameters: “last purchase (Recency)”, “purchase frequency (Frequency)” and “purchase amount (Monetary)”. Dimensions are used to evaluate the level and structure of customers, the quality and value of customers, and the reasons for customer churn, thereby providing a basis for enterprises to formulate relevant marketing strategies.

Latest purchase (Recency)

The most recent purchase refers to the number of days since the customer’s last purchase at the time of analysis. The smaller the value, the closer the time the customer purchased the product, the higher the possibility of repeat purchase, and the customer is a valuable consumer. As part of the RFM model, R (Recency) emphasizes the number of days since the last consumption, that is, how long ago the customer last consumed. The closer the customer was to the last consumption time, the stronger the profit-making potential they have.

Purchase frequency (Frequency)

Purchase frequency refers to the number of times a customer purchases within a certain period of time. The larger the value, the higher the consumption frequency, indicating that the customer’s loyalty and value are higher, and the possibility of repurchase is greater. F (Frequency) is equally important. It reflects the number of times a customer has consumed something in the recent period. Customers who purchase frequently are usually more satisfied. Customers in different industries often have different purchasing frequencies. For example, the purchasing frequency of customers in the furniture industry is much lower than that of customers in the clothing and other consumable industries.

Purchase amount (Monetary)

Purchase amount refers to the amount consumed by customers within a certain period of time. The larger the value, the greater the possibility that this type of consumer’s purchase intention for the product will be converted into purchase behavior, the greater the contribution to the merchant, and the more attention should be paid to the value of this type of consumer. M (Monetary) consumption amount refers to the amount consumed by customers in the recent period. Data shows that 40% of customers contribute more than 80% of a company’s turnover, and the average consumption of the top 10% of customers is usually the performance Ten times that of the worst 10% of customers.

RFM customer segmentation model dynamically displays the entire profile of a customer, providing a basis for personalized communication and services. Cross-border e-commerce customer service personnel can segment customers based on their consumption time, frequency and amount, and carry out relevant work accordingly. With this information, companies can better understand the characteristics of each customer group and develop more precise marketing plans.