Strategic Database Marketing 4e: The Masterplan for Starting and Managing a Profitable, Customer-Based Marketing Program

database, we keep track of who they are, what they buy, when they buy, and how much they spend.

To create the recency code, you sort your entire database by purchase date, with the most recent at the top. Then you divide the database into five exactly equal parts—quintiles, which you number from 5 (the most recent) down to 1 (the most ancient).

every customer should have in his or her database records three single digits: one for recency, one for frequency, and one for monetary. Every customer is either a 555, 554, 553, 552, 551, 545, 544… down to 111.

Now that your file is coded for recency, go ahead and do a promotion to your customer base. Not a special test promotion, but some communication that you had planned to do all along which asks customers to respond or make a purchase. Keep track of which quintile every customer is in and which ones respond.

12 percent,

For a business file of 20,000 records, therefore, there probably should not be more than 20 RFM cells, each one having about 1,000

The purpose of both modeling and RFM is the same: to increase profits by deciding not to mail nonresponsive customers.

shopping cart within the e-mail.

Customer lifetime value is the net present value of the profit that you will realize on the average customer during a given number of years—typically three years.