Targeting Valuable Customers within a Retail Reward Program Database by RFMG Model

Despite the proliferation of database marketing in the marketing engineering literature, there is little research that focuses on how to segment customers and find out the valuable customers within a reward programs database. The paper develops a RFMG model, which based on RFM model by creating gap coefficient to consider purchases made at competitors, to target valuable customers. The validity of our model is statistically tested using a reward program database of a shopping mall in Beijing. The results show that RFMG model not only can target more valuable customers than RFM model but also can find out the most valuable customer group in a reward program database.