mikefarrar@fico.com

K. I. S. S. : Keep It Simple, You Big Dummy

Blog Post created by mikefarrar@fico.com on Jul 11, 2014

Harry and David, for those of us who aren't familiar, sells fruit by mail. It's delicious fruit. It's a simple business. You put fruit in a box and you mail it.

 

Yet somehow they managed to go bankrupt. Harry and David overexpanded, and the financial crisis drove them under. While reorganizing, they realized that maybe they needed to do their marketing analytics better.

 

So what did they do better? Three little letters, my children: R... F... M

 

Recency...Frequency...Monetary Value

 

Analytics bears fruit | SAS

 

RFM taught Harry and David such surprising things as:

 

  • There's a segment of customers who only order at Christmas
  • That some customers are predictably more profitable
  • That loyal customers exist, and their behavior can be tracked and measured
  • That all of this can be exploited profitably

 

Harry and David's profits are up 20% since putting RFM analytics in place. Surely that isn't all marketing, but the marketing surely isn't hurting.

 

This isn't ground-breaking stuff, folks. It ain't forcing Big Data to jump through Hadoops. I think it gets pretty easy to get lost in the Big Data hype that RFM is still there, that it's easy to implement, easy to explain, inexpensive, and effective. You don't have to search high and low for a data scientist to put it in play in your organization, and you don't need multimillion-dollar Yoyodyne Digital Datawhack hardware.

 

Simple, cheap, and effective. Not a bad way to go about it.

 

R...F...M

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