RFM Analysis in Python

Objective

Perform RFM Segmentation Analysis on sales data

RFM is a marketing technique used to group and analyze the value of customers based on three key characteristics:

This analysis is done to develop the appropriate marketing campaigns for each group of customers.

Recency : How recently a customer has made a purchase. If they made a purchase recently, the likelihood of them making another purchase is high. However, if the customer hasn't made a purchase in a while, you may need to bring them back with new promotional offers.
Frequency : How often a customer makes a purchase. If they purchase often, you will know their spending habits and preferences. If they make one purchase and never return, they could be a good candidate for a customer satisfaction survey.
Monetary Value : How much money a customer spends on purchases All purchases are valuable. But if a customer has many recent purchases at a high price point, you have a valuable returning customer with the potential of becoming a brand loyalist. However, if a customers' recent purchases are at a low price point, perhaps cross-selling may help increase their spending.