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The RFM Formula in Direct Marketing

January 21st, 2005 by Bob Bly

The answer to the ?Test Your Direct Marketing I.Q.? quiz (see below) is (a). When someone makes a donation, you should send a solicitation asking for more money as soon as possible ? ideally, that same day or the next day.

To me, that?s counterintuitive: I?d think that if Joe just gave us money, he would be tapped out and want to wait awhile before giving us more. But testing shows that the opposite is true, and has allowed direct marketers to develop the RFM formula, which stands for recency, frequency, and monetary.

RFM says:

* Recency — the person who bought (or donated) the most recently is the most likely to buy (or donate) again.

* Frequency — the person who buys frequently is more likely to buy again than the person who buys infrequently.

* Monetary — the person who spent the most money is more likely to buy again (and will spend more) than the person who spent less money.

There are very few rules that hold in DM, but RFM is one of them. It is nearly a universal truth, with virtually no exceptions.

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This entry was posted on Friday, January 21st, 2005 at 8:08 am and is filed under Direct Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

47 responses about “The RFM Formula in Direct Marketing”

  1. Derek Scruggs said:

    So what if they donate again? Do you send yet another letter right away?

  2. Jim Logan said:

    Interesting.

    What I’m taking away from this for further thought is that common wisdom is formulated from the perspective of all that were approached for donations, not from the perspective of those that donated. The RFM formula is intriguing because it’s based solely on the perspective of those that gave.

    The people that donated have a unique paradigm on giving as compared to the masses that were approached for donations.

    Excellent food for thought and integration with other go-to-market and DM opportunities!

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    I read a book about the rise and fall of Jim Bakker (PTL Club)… the man was a marketing genious. He had this all down.

    He had a list of “whales” (so to speak) and minnows. He worked them well.

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    I thought the most profitable customers according to RFM were low R, high F, and high M.

    … better go and study some more.

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