RFM-based repurchase behavior for customer classification and segmentation

Abstract

Customer behavior modeling and classification are well-studied areas for applications in retail. Past studies implemented the purchase behavior modeling based on the physical behavior of a subject. In this research, we apply the recency, frequency, and monetary (RFM) model and data modeling techniques to detect behavior patterns for a customer. Each transaction attributed to a customer is part of one's behavior, and an instance of the feature vector, it is modeled on a set of transactions to constitute repurchase behavior. The proposed scheme is validated by simulating a publicly accessible real-world data set with a need-tailored multi-layer perceptron (MLP) and also support vector machine (SVM) and decision tree classification (DTC) methods. The experiments yield a high customer classification rate of more than 97% for the different numbers of the customers. Empirical analysis shows that eight transactions are sufficient to classify a customer with high accuracy.