More than 100 years ago, Italian economist Vilfredo Pareto wrote a paper arguing that 80% of the land in Italy was owned by 20% of its population. This would come be to be known as the Pareto Principle. Over time, this observation would become a staple in applications ranging from math and software to sports and even accident prevention.
For eCommerce, the 80/20 rule is simple: 80% of your business comes from 20% of your customers.
Who are these valuable customers? How can you find them? What can you learn about them when you do? That’s where the 80/20 RFM analysis comes in. RFM stands for Recency, Frequency, and Monetary value — the three metrics used to determine a customer’s worth. Our 80/20 RFM analysis explores these three metrics in your existing customer base.
By examining the length of time since a customer’s last order, the number of orders they’ve made over a certain timeframe, and how much money they’ve spent with you in that period, we can help you can narrow down which buyers you should be focusing your efforts on. Figuring this out can mean the difference between doubling your growth — or watching your revenue fall.