Question

Ajax Inc. is one of the customers of a well-known linenmanufacturing company. Ajax has not ordered linen in some time, but when it did order in the past it ordered frequently, and its orders were of the highest monetary value. Under the given circumstances, Ajax is most likely to have a[n] RFM score of 511.

Answer 1

Answer:

False, its score should be 155.

Explanation:

RFM analysis scores customers on a ranking that goes from 1 - 5, with 5 being the best parameter (555 is the ideal customer). The factors used in a RFM analysis are recency, frequency, and monetary value.

Companies perform RFM analysis based on the idea that 80% of the company's total business comes from only 20% of its customers.

In this case, Ajax would get:

• 1 for recency since it hasn't purchased anything in a long time,
• 5 for frequency because when it used to purchase goods, they did it quite frequently
• 5 for monetary value because they were the largest sales