Describe how an RFM score is calculated on a scale of 1 to 5

Question

What will be an ideal response?

Answer 1

To produce an RFM score, the RFM analysis first sorts customer purchase records by the date of their most recent (R) purchase. The 20 percent of the customers having the most recent orders are given an R score of 1, the 20 percent of the customers having the next most recent orders are given an R score of 2, and so forth, down to the last 20 percent, who are given an R score of 5.
The RFM analysis then re-sorts the customers on the basis of how frequently they order. The 20 percent of the customers who order most frequently are given an F score of 1, the next 20 percent of most frequently ordering customers are given a score of 2, and so forth, down to the least frequently ordering customers, who are given an F score of 5.
Finally, the analysis sorts the customers again according to the amount spent on their orders. The 20 percent who have ordered the most expensive items are given an M score of 1, the next 20 percent are given an M score of 2, and so forth, down to the 20 percent who spend the least, who are given an M score of 5.