RFV: when, often and what
As regular readers know I usually try and come up with a pithy title for my blog. Try as I might I just couldn’t find one for RFV. It felt like giving a nickname to a wise and respected elder; disrespectful considering the years of wisdom that have been accumulated.
So we’re left with plain old RFV.
RFV is going to be unfamiliar territory for many. I also don’t want to wade into a heated dialogue about the merits and disadvantages of RFV compared to other methods of scoring and segmentation. RFV does have its limitations, but everyone has to start somewhere and this method is the least scary and most achievable.
What does RFV stand for?
Like the title suggests it’s shorthand for when, how often and what a customer or supporter does.
R is for recency; when was their last purchase or donation.
F is for frequency; how often do they purchase or donate.
V is for for value (sometimes shown as M for monetary…but we have a Prime Minister and not a President) which is an evaluation of the financial size of the purchase or donation.
Each individual in the universe being measured has each of the three elements measured. These actual measurements are then split into bands. For example recency 5 = last purchase within last 6 months; 4 = last purchase 6-12 months; 3 = last purchase 12-24 months; 2 = last purchase 24-36 months and score 1 = anyone who’s last purchase was over 36 months ago.
The same is done for the F and the V. This is a blog so there’s not enough space to go into too much detail to go into score calculations and band splits. What you end up with is a compound 3 digit score. As I generally use a 5x5x5 system this gives me 111 as being the least preferable and 555 being the best.
What’s interesting about RFV, if you’ve never looked at your data in this way, it’s usually the first time you see what your customers or supporters are really doing. What is the most common purchase value? How often do people really purchase or donate? Are sales or donations tailing off, with a decline in recency?
RFV can be a first step and yes to some it’s a bit naive, but if nothing has ever been done it’s a great place to start; a place to help people focus on their data and understand how much it can help inform business decisions. Its naivety is its charm – it’s approachable and understandable by even the most un-data-ry analysis phobic marketer.