A direct mail customer purchase model

Abstract

A general customer purchase model is presented for segmenting direct marketing customer files for direct mailings. The model specifies the functional relationships among the traditional recency, frequency, and monetary value (RFMV) variables. Because of the generic nature of the model, it can be used by different direct marketing businesses for a variety of different customer mailings. Strategic implications of the model are discussed for: a) defining active versus inactive customers, b) selecting customers for special mailings, c) comparing multiple customer lists for a single company, d) an overall company purchase score for a company with multiple programs/customer files, and e) product purchase scores for special product offers.