Monetary value

The Monetary value of purchase(s) can be measured in different ways, e.g. average order value of £50, total annual purchase value of £5,000. Generally, customers with higher monetary values tend to have a higher loyalty and potential future value since they have purchased more items historically. One example application would be to exclude these customers from special promotions if their RF scores suggested they were actively purchasing. Frequency is often a proxy for monetary value per year since the more products purchased, the higher the overall monetary value. It is possible, then, to simplify analysis by just using Recency and Frequency. Monetary value can also skew the analysis with high-value initial purchases.

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