for quantifying that customer behaviour. Once customers are assigned RFM behaviour scores, they can be grouped into segments and their subsequent profitability analysed. This profitability analysis then forms the basis for future customer contact frequency decisions. RFM SCORING The purpose of RFM scoring is to project future behaviour (driving better segmentation decisions). In order to allow projection, it is important to translate the customer behaviour into numbers which can be used through time. Too often, direct marketers will use static customer selections. When initially building their segmentation system, they may consider their best customers to be those who have purchased more than, say, $100. If the mailer is relatively new, this definition will degrade rapidly. The RFM BASICS Direct marketing is fundamentally the scientific control of customer acquisition and contact. The fundamental question is whether customer A merits an additional contact based on their past purchase behaviour. This question applies equally to direct mail, catalogue, phone, field or Internet contact. 1 The process of making this decision is customer segmentation. Not all customers have purchased identical amounts. Some have ordered more often, some have ordered more recently. Consequently, not all customers should be contacted with the same effort and expense. The cornerstone of direct marketing segmentation is recency, frequency and monetary values (RFM). Since direct marketing segmentation is a science, it is important to quantify customer behaviour so that the shortand long-term effect of segmentation formulae can be tested. The purpose of RFM is to provide a simple framework

when and how much has been bought. Consequently, it focuses, almost exclusively, on the best customers. As discussed in an earlier paper, 2 meaningful scoring must focus on significant differences in customer behaviour. Applying this method to frequency, many cases are seen where more than 50 per cent of customers have only purchased once. If the single/multi-buyer variable is considered in the selection, there is very little choice, it is either to mail the 50 per cent or not. Recency and monetary value can be applied but this helps very little. Most mailers find that over 50 per cent of their customers place very small orders. These customers form the overwhelming majority of the one-time buyers. Recency helps slightly, if a company is new and growing rapidly. If, however, the business has been in existence a decade or more, it will again find that well over 50 per cent of its INTRODUCTION Recency, frequency, monetary (RFM) scoring has been the foundation of most direct marketing segmentation for decades. Consistently, the most recent buyers out-perform all others, multi-buyers (who have a purchase frequency greater than once) beat one-time buyers and, at the bottom of the segmentation chain, the remainder can be sorted by life-to-date monetary sales. And as long as the world moves along at a steady pace, the methodology seems repeatedly to select the better customers. This paper looks beyond common acceptance and examines areas of weakness in RFM. John Miglautsch is founder of Miglautsch Marketing, Inc. which providers database marketing consultation. Their Model-to-Mail TM system allows ordinary marketing people to dramatically increase profits by understanding key opportunities to improve their marketing strategies and tactics. LIMITATIONS OF RFMJohn holds a BA and MA from the University of Wisconsin and PDM from the University of Missouri. He was a major contributor to the 8th Edition of Successful Direct Marketing Methods. In 1995, he founded the International Society for Strategic Marketing, Ltd. with members in over 70 countries.Abstract Inherent in the basics of RFM are built its fundamental limitations. RFM alone by definition cannot move beyond this point. Segmentation of 1-1-1 requires the creation of additional variables. As you attempt to move beyond the 1-1-1s, and as your variables proliferate, you will find it necessary to understand automated analysis. As you investigate this process, remember, the 1-1-1s are your biggest customer segment and probably your greatest untapped potential.

The authors gratefully acknowledge the helpful comments of Gene Laczniak and two anonymous reviewers, along with commenfs and suggestions from Connie Bauer s graduate direct marketing students ABSTRACTThe purpose of this article is to inspire critical thinking about what constitutes direct marketing. To accomplish this, we discuss problems with the prevailing current definition and present a new conceptual definition of direct marketing. This definition distinguishes direct marketing from direct mail, direct response advertising alone, direct selling, and consumer goods telemarketing.

A n Evaluation of OptionsGEORGE ABSTRACTThis article identified three combinations of hardware and database software for multiuser applications: mainframe or minicomputer-based, microcomputer network with first generation LAN database, and microcomputer network with a client-server database. It compares their desirability on five "decision variables": power, cost effectiveness, number of users, comfort, and control. Mainframe computers scored lower than network computing. Both networks combinations offer power, cost effectiveness, comfort and control, but the client-server LAN database architecture is emerging as the one of choice, particularly as the number of users increases. They offer a combination of com. puting power, ease of use, and new functionality which promises to release marketing from the confines of the mainframe world.