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Direct marketing is fundamentally the scientific control of customer acquisition and contact. The recurring question is whether Customer A merits an additional contact based on his past purchase behaviour. This question applies equally to direct mail, catalogue, phone, field or Internet contact.

The process of making this decision is customer segmentation. Not all customers have purchased identical amounts. Some have ordered more often, some have ordered more recently.

Consequently, not all customers should be contacted with the same effort and expense. The cornerstone of direct marketing segmentation is RFM (Recency, Frequency and Monetary values).

Since direct marketing segmentation is a science, it is important to quantify customer behaviour so that we can test the short and long term effect of our segmentation formulae. The purpose of RFM is to provide a simple framework for quantifying that customer behaviour.

Once customers are assigned RFM behaviour scores, they can be grouped into segments and their subsequent profitability analysed. This profitability analysis then forms the basis for future customer contact frequency decisions.