Customer Value
Every business wants customers who are always likely to place big orders, but how do you know which customers they are? Two well-known models for calculating customer value are RFM and CLV:
- RFM model (Recency-Frequency-Monetary) which infers who the company's priority customers might be by looking at the customer's purchase and transaction history - i.e. past actions - so that we can better target sales campaigns.
- CLV model: (Customer-Lifetime-Value) in contrast to the RFM model, focuses on future actions, profitability by taking into account sales and purchase data.