Application of Recency, Frequency, Monetary Analysis in Customer Segmentation

Customer segmentation is the process of dividing customers into disjoint groups based on shared characteristics. This helps companies to better understand customer needs or behaviors and tailor marketing strategies, products or services to meet specific segment requirements. RFM analysis (Recency, Frequency, Monetary) is a common customer segmentation technique used in marketing to evaluate and segment customers based on their transaction history. It is a simple yet powerful segmentation method, which supplies deep insights in customer data and then sharpens specialized marketing strategies. In this paper, we apply RFM method to segment customers of an online retail company. We thoroughly analysis each groupand recommend suitable marketing strategies accordingly.