Analysis of Four Customer Types: Composite, Constrained Loyal,
Disloyal, Specious Based on RFM Model
1. Composite – R↑ F↑ M↑
● Characteristics: These are the best customers; they purchase frequently, have high
spending value, and have made recent transactions.
● Strategy:
○ Maintain loyalty through exclusive customer programs.
○ Offer special deals to retain them.
○ Personalize their experience to strengthen engagement.
2. Constrained Loyal – R↑ F↑ M↓
● Characteristics: They purchase frequently and recently but have low spending per
transaction.
● Strategy:
○ Encourage them to spend more by suggesting complementary products.
○ Provide promotions to increase average order value.
○ Enhance service to build long-term loyalty.
3. Disloyal – R↓ F↓ M↓
● Characteristics: These customers have low purchase frequency, low spending, and
haven’t made recent transactions.
● Strategy:
○ Send promotions or remarketing campaigns to attract them back.
○ Investigate reasons for their inactivity (price, quality, service, competitors).
○ Introduce incentives such as discounts or vouchers to encourage repeat
purchases.
4. Specious – R↓ F↑ M↑
● Characteristics: They used to have high spending and purchase frequency but have
not returned recently.
● Strategy:
○ Re-engage them with special discounts or personalized offers.
○ Improve customer service to understand why they left.
○ Offer exclusive deals or personalized content to bring them back.
Customer Type Recency Frequency Monetary Strategy
Composite High High High Retention, upgrades,
personalization
Constrained High High Low Encourage spending,
Loyal upselling
Disloyal Low Low Low Reactivation, investigate
reasons
Specious Low High High Re-engagement,
personalized offers
How to Collect Data for RFM Customer Analysis
To classify customers into Composite, Constrained Loyal, Disloyal, and Specious,
businesses need to collect and process data from various sources.
1. Identify Key RFM Metrics
● Recency:
○ The date of the customer's last transaction.
○ The time elapsed since their last purchase.
● Frequency:
○ The total number of purchases within a specific period (month, quarter, year).
○ The average number of purchases per month/quarter.
● Monetary:
○ The total amount spent by the customer.
○ The average value per transaction.
2. Data Collection Sources
🔹 CRM (Customer Relationship Management) Systems:
● Stores transaction history and customer purchase records.
🔹 POS (Point of Sale) Systems:
● Collects data from in-store purchases.
🔹 Website & Mobile Apps:
● Tracks customer behavior, website visits, purchase frequency, and order value.
🔹 Email & SMS Marketing:
● Monitors email open rates, response rates, and interactions with promotions.
🔹 Loyalty Programs:
● Provides insights on reward points and customer engagement.
3. Data Processing and Analysis
Step 1: Collect data from multiple sources and store it in a database (SQL, Excel, Google
Sheets, etc.).
Step 2: Clean and normalize data (remove duplicates, correct errors).
Step 3: Calculate Recency, Frequency, and Monetary values for each customer.
Step 4: Assign scores (e.g., 1-5 or 1-10) for each RFM component, with higher scores for
better-performing customers.
Step 5: Classify customers into Composite, Constrained Loyal, Disloyal, or Specious
segments.
Step 6: Analyze the data and develop targeted marketing strategies.