Abbr.: Recency, Frequency, Monetary Value. The RFM-value is a marketing ranking system for customers and can be a helpful tool in direct marketing. The best customers receive top scores in each of the three sections.
The R-value (recency) reflects how recently guests have stayed.
The F-value (frequency) reflects how many bookings were made.
The M-value (monetary) reflects the spending level.
A scale, such as 1 to 5 or similar, for all three areas determines the ranking for and value of each customer. For example:
The profile that generated the lowest revenue is assigned an M-value of 1. The profile that generated the highest revenue is assigned an M-value of 5. All other profiles are placed on the scale in-between these two values.
The same scale is applied to the R- and F-values: profiles with stays that are longest in the past are assigned a value of R 1, profiles with the most recent stays R 5. Profiles with the lowest number of stays are assigned the value F 1 and profiles with the highest number of stays F 5.
This may result in a customer’s RFM-value of “R 4 – F 3 – M5”.