A Big Data Based Dynamic Weight Approach for RFM Segmentation

Abstract

Using the RFM (Recency, Frequency, Monetary value) model can provide valuable insights about customer clusters which is the core of customer relationship management. Due to accurate customer segment coming from dynamic weighted applications, in-depth targeted marketing may also use type of dynamic weight of R, F and M as factors. In this paper, we present our dynamic weighted RFM approach which is intended to improve the performance of customer segmentation by using the factors and variations to attain dynamic weights. Our dynamic weight approach is a kind of Custom method in essential which roots in the understanding of the data set. Firstly, Analytic Hierarchy Process is used to calculate the subjective weight, then the entropy method is applied to calculate the objective weight. Finally, we use comprehensive integration weighting method to combine the subjective and objective weight to obtain the final weight of the index to calculate the individual user value and quantify the user value difference. The experiment shows that the dynamic weight we used in RFM model is vital, affects the customer segmentation performance positively. Also, this study indicates that customer segments containing dynamic weighted RFM scores bring about stronger and more accurate association rules for the understanding of customer behavior. At last, we discuss the limitations of RFM analysis.