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EMA - RFM Assignment: By: Isha Mishra (C20-066)

This document provides an analysis of customer data to determine each customer's Recency, Frequency, and Monetary (RFM) scores. The data includes invoices with customer IDs, dates, amounts and quantities. Pivot tables were used to calculate recency based on most recent date, frequency as count of invoices, and monetary as total amount spent. These values were divided into quartiles to assign RFM scores from 1 to 5, with 5 being the best customer. The results show the RFM scores for each customer ID.

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Isha Mishra
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465 views6 pages

EMA - RFM Assignment: By: Isha Mishra (C20-066)

This document provides an analysis of customer data to determine each customer's Recency, Frequency, and Monetary (RFM) scores. The data includes invoices with customer IDs, dates, amounts and quantities. Pivot tables were used to calculate recency based on most recent date, frequency as count of invoices, and monetary as total amount spent. These values were divided into quartiles to assign RFM scores from 1 to 5, with 5 being the best customer. The results show the RFM scores for each customer ID.

Uploaded by

Isha Mishra
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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EMA – RFM Assignment

By: Isha Mishra (C20-066)


Objective: To find the Recency, Frequency & Monetary of different customers from the data
given.

Understanding of the data:


Given data is data of different customers who has done shopping in a store. The data mainly
consists of Invoice number, Stock Code, Description, Quantity Purchased, Invoice date, unit
price, Customer ID, Country, Transaction type, Invoice amount.

1) Invoice Number- It is a unique number assigned to each invoice. It is used to identify


different transactions, so it is unique. In this data also all the invoice number is unique
per different transaction.
For purchases the Invoice number starts with digit 5 for e.g. 55513.
For returns the Invoice number starts with alphabet C for e.g. C553222.
2) Stock code- It is a unique code given to a particular set of same items. It is used to
identify an item of stock. In this data also different stock code is given to the different
set of items. For e.g. 16011 is assigned to all animal stickers.
84879 are assigned to assorted colour bird ornament.
In this data different colour of same item is given different alphabets in the stock
code.
For e.g.: 15044A is assigned to pink paper parasol, 15044B is assigned to blue paper
parasol, 15044C is assigned to purple paper parasol, and 15044D is assigned to red
paper parasol.
3) Description- It describes the product and tells what it is. It can also be the name of the
different products. For e.g. Assorted colour bird ornament, party bunting, charlotte
bag suki design etc.
4) Quantity- In this data quantity tells how much quantity a particular customer has
purchased or return. Positive number like 16, 12, 10 etc. tells the customer has
purched particular quantity. Negative numbers like -1, -2, -3 etc. tells the customer
has returned particular product in this quantity.
5) Invoice Date- It tells time and date at which particular transaction is being done.
6) Unit Price- It tells per unit price of the product.
7) Customer ID- It is the unique number assigned to particular customers. It helps the
store to define all its customers.
8) Country- Country in which the store is located and the transaction has taken place. Eg
in this data the country is United Kingdom.
9) Transaction Type- It is the type of transaction which has happened. For eg in this data
there are 2 type of transaction purchase and return.
10) Invoice amount- It is the total amount for which the bill has been generated.

Cleaning of the Data:


For RFM Analysis the data fields which we have taken for the analysis are as follows:

 Invoice Number
 Quantity
 Invoice Date
 Customer ID
 Invoice Amount.

I did not take stock code, description, unit price as it already comes in the Invoice amount.

I also dropped variable country as it is same for all the data. And even the transaction type
can be easily identified from the invoice amount as positive means purchase and negative
means return.

Assumption:
I have considered purchase and return together and have added both to find the total invoice
amount.

RFM Analysis:

Step-1

First the analysis is done with the help of pivot table:

For Row labels I have considered customer ID and Invoice number


Step-2

Then sum of quantity purchased, sum of invoice amount, count of invoice date and maximum
of invoice date has been found by using pivot table.
Step-3

Then I have taken recent date as 16-06-2011 as the data I have is from 16-05-2011 to 15-06-
2011 to find the most recent visit of the customer.

To find the most recent visit of the customer in the store I substrate the 16-06-2011 from the
max of invoice date found through pivot table

Step – 4

Now we divide the sum of invoice amount, count of Invoice date and recency into 4 parts
using =PERCENTILE.EXC($C$7:$C$2660,I1)

With 1 being the lowest rating, and 5 being the highest.

Step – 5

I found the RFM using if functions as follows:

Recency: =IF(F7<=$I$4,5,IF(F7<=$J$4,4,IF(F7<=$K$4,3,IF(F7<=$L$4,2,1))))

Frequency: =IF(D8<=$I$3,1,IF(D8<=$J$3,2,IF(D8<=$K$3,3,IF(D8<=$L$3,4,5))))

Monetary: =IF(C8<=$I$2,1,IF(C8<=$J$2,2,IF(C8<=$K$2,3,IF(C8<=$L$2,4,5))))
Results:

The results of RFM of the different customers are as follows:

In this I have rated the customers on the scale of 1 to 5 with 1 being worst and 5 being best
customer in terms of recency, frequency and monetary.

For e.g. 555 the best customer.

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