If you've seen me speak at any of the last 4 Infusionsoft events, you've probably heard me talk about RFM analysis.
RFM stands for recency, frequency, and monetary. Recency asks the question: "How recently did customer purchase?" Frequency asks, "How often does customer purchase?" Monetary asks, "How much has customer spent?"
I won't discuss RFM analysis in depth here but there's a whole method to determining who your best customers are based on these 3 metrics (used separately, "R or F or M," or collectively, "R+F+M").
The order in which they are listed is important: RFM (recency first, then frequency, then monetary). That's because recency is most important. Those who've most recently purchased from you are more likely to buy again versus those who have come back the most or have even spent the most.
Amazon understands this too.
I took a look at my Amazon account and here's how many purchases I've made in past years:
2011 - 173 purchases
2010 - 165 purchases
2009 - 110 purchases
2008 - 101 purchases
2007 - 22 purchases
Now there's a lesson about frequency here too (notice how my order frequency has increased every year, without fail --- 2008 being the biggest "leap" in my customer loyalty). And I will tell you MOST purchases are books. Hands down.
You'd think all Amazon would show me is books... books... books under their "recommended product" area. After all, 80 to 90% of my purchases have been books. Frequency and monetary metrics will all lead to books.
But amazon knows something about recency --- that no matter how frequent or consistent a customer has been purchasing one group of items, what they've done LAST is king.
Check out my very last purchase:
(Health Freaks: Don't judge me! I remember having these as a kid and within 2 minutes of my nostalgia, my order was placed and shipment on its way! That's why I love Amazon!)
Now check out what Amazon is showing me today:
Don't get me wrong... they are still showing me books on the "second row" but look what has taken over! I've only ordered candy ONE time from Amazon, and it was this most recent purchase. But amazon knows whatever I'm into NOW is what they must sell me.
And I've seen this time and time again. When they've noticed me buying dvds, they sold me more dvds in subsequent visits. When they've noticed me buying office products, they've offered me other office products. Heck, they even do it by what I research but haven't yet bought. What I most recently search for makes it on the list too (surprisingly "ABOVE" what I've proven to buy in the past).
The point is RECENCY trumps everything else and if you're going to spend your hard-earned marketing dollars (or in Amazon's case, valuable website real estate), you'd better bet on recency!
As I mentioned above, there's a method that takes all 3 metrics and comes up with your absolute best prospect and I'll be talking about it in one of my upcoming home study courses. But for now, hope you enjoyed this lesson from my Amazon account!
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