# Recency Frequency Monetary (RFM) > *Recency, Frequency, Monetary Value (RFM)* is a simple but powerful framework for segmenting a customer, audience, or donor list according to transaction patterns – focusing on how long ago they were active (recency), how often they were active (frequency), and how much they spent or contributed in total (monetary value). RELATED FUNCTIONS: [[Sales]], [[Marketing]], [[Gifts & Grants]] In the days before the intertubes, direct mail was a primary channel of communication between arts organizations and their constituents – season brochures, annual appeal letters, exhibit or production postcards, and on and on. The problem was that printing and postage cost real money per recipient, and most recipients would immediately throw them away. So, arts organizations with limited staff (and any organization who cared about their budget) needed a simple and reliable way to learn who in their list to mail things to, and who NOT to. Recency Frequency Monetary Value (RFM) fit the bill. It still does. The beauty of the RFM approach is that it doesn't require deep or complex analytics, and you need only a no-frills data system that captures names, contact information, transactions, dates, and amounts. You sort your current customer or donor database three times, and then you add three new codes to every record: - **Recency**: Sort your entire database by the purchase or contribution date of each record, with the most recent at the top. Then divide the database into five exactly equal parts (quintiles), which you number from 5 (the most recent) down to 1 (the most ancient). - **Frequency**: Pick a transaction type and time period that matters to your organization (ticket transactions per year, financial contributions per year, events attended per year). Then sort the database by this number, most to least, and again divide the result into five equal parts, numbered from 5 (the most frequent) down to 1 (the least frequent). - **Monetary Value**: Create a field that totals the amount each household or individual in your database spent or contributed – per month, per year, or for whatever period you care about. Then sort the entire database by this number, most to least, divide it into five equal groups, and assign code numbers 5, 4, 3, 2, and 1. Now you have a three-component code for every entry in your customer or donor database. The most recent, most frequent, and most economically significant records will be coded 5-5-5. The least across all three categories will be coded 1-1-1. You can update these codes every month, every quarter, or just every year. How you use these new codes is the part that matters. You don't ignore everyone below 5-5-5. Rather, you become more thoughtful about when, how, and for what purpose you communicate with different segments. Also, you need to be careful in how you consider the Monetary Value rating, since it's not always a good predictor of future purchase. And high values in that category often mean that the individual or household is already besieged by other announcements and offers. While this system was developed and refined over the past many decades, in a marketing and sales context that relied significantly on postal mail, it still has high utility today. The challenge, even in a digital world, is to find ways to focus your team's attention, segment or sort your constituents in productive ways, and communicate strategically rather than in scatter shots. Sources: - Hughes, Arthur Middleton. *Strategic Database Marketing: The Masterplan for Starting and Managing a Profitable Customer-Based Marketing Program*. McGraw-Hill, 2012. - Murphy, Casey. “[What Is Recency, Frequency, Monetary Value (RFM) in Marketing?](https://www.investopedia.com/terms/r/rfm-recency-frequency-monetary-value.asp)” Investopedia, November 19, 2022. --- ## Tags (click to view related pages) #frameworks #functions/marketing #functions/sales #functions/gifts_grants