RFM stands for Recency, Frequency and Monetary Value. It has been used by direct marketers for over 40 years as a segmentation tool to increase marketing ROI. The basic premise of RFM is that customers who have purchased more recently, more frequently and have spent more with your company are your best prospects for future direct marketing campaigns. Like data mining/response modeling, the goal of RFM is to increase marketing ROI by communicating (via direct mail, call center, etc.) only with customers that are likely to respond. Done well, you increase your ROI as you attain almost the same number of sales by contacting only a fraction of your customer base -- a great way to make your marketing efforts more effective in tough economic times like now.
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