Jim answers questions from fellow Drillers
(More questions with answers here, Work Overview here, Index of concepts here)
Topic Overview
Hi again folks, Jim Novo here.
Both RF(M) scoring and Lifecycle Grids use the same key predictive metrics – Recency and Frequency. So what’s the difference? RFM is a predictive “snapshot” at a specific point in time; LifeCycle Grids are more like a “movie” designed to be predictive over different periods of time. Another way to think of this: RFM is tactical, LifeCycle Grids are strategic.
You dig? Let’s Drill …
Q: We’re a telecom company trying to get a handle on customer churn and defection, so we can come up with some programs that will hopefully extend customer participation. We live in the no contract space, offering a service that’s an add on to wireless phone service, so we don’t have a good indicator as to when the customer relationship might end.
A: Ah, yes. Your business model is “built for churn”, as I said on my blog the other day. The behavior then is more like retail, where independent decisions are made in an ongoing way, deciding again and again to purchase.
Q: I think your LifeCycle Grids method will show best what is happening to our customers. If using this method, there doesn’t seem to be any reason to do the RF scoring as customers are just going into cells based on where they fall in the Recency and Frequency spectrum. Is that correct? Is there any real difference between RF scoring and the LifeCycle Grids approach?
A: You are partially correct, they are two versions of the same idea – both are scoring using Recency and Frequency. The traditional RF(M) scoring where customers are ranked against each other is a “relative” scoring method used primarily for campaigns – it is tactical, an allocation of resources model.
Continue reading Difference between RF(M) Scores & LifeCycle Grids?