Comparison of the RFM Model's Actual Value and Score Value for Clustering

Abstract

Clustering algorithms and Recency-Frequency-Money (RFM) models are widely implemented in various sectors of e-commerce, banking, telecommunications and other industries to obtain customer segmentation. The RFM model will assess a line of data which includes the recency and frequency of data appearance, as well as the monetary value of a transaction made by a customer. Choosing the right RFM model also influences the analysis of cluster results, the output of cluster results is more compact for the same clusters (inter-cluster) and separate for other clusters (intra-cluster). Through an experimental approach, this research aims to find the best data set transformation model between actual RFM values and RFM scores. The method used is to compare the actual RFM value model and the RFM score and use the silhouette score value as an indicator to obtain the best clustering results using the K-Means algorithm. The subject of this research is a stall-based e-Commerce application, where data was taken in the Wiradesa area, Central Java. The resulting data set consisted of 273,454 rows with 18 attributes from January 2022 to December 2022 by collecting historical data from shopping outlets to wholesalers. The analysis of the data set was carried out by transforming the data set using the RFM method into actual values and score values; then the dataset was used to obtain the best cluster data. The results of this research show that transaction data based on time (time series) can be transformed into data in the RFM model where the actual value is better than the RFM score model with a silhouette score = 0.624646 and the number of clusters (K) =3. The results of the clustering process also form a series of data with a cluster label, thus forming supervised learning data.