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Predict Quarterly Sales with the RFM Model

Predict Quarterly Sales with the RFM Model

Learn how to predict quarterly sales using recency, frequency, and monetary analysis.

In this lesson, we’ll predict a customer’s quarterly spending from historical transactions. We’ll use the CDNOW dataset, which contains the historical online purchases of compact disks and applies the RFM (recency, frequency, and monetary) model to predict quarterly sales numbers.

Here are the details of the dataset.

Feature Details

Feature

Data Type

Details

customer_id

Integer

Unique identifier of a customer

date

String

Date and time of the transaction

quantity

String

Quantity sold in a transaction

price

Integer

Total sale amount

RFM model

RFM model is a method used in marketing to analyze and segment customers based on their historical purchasing behavior. The three elements of the RFM model are:

  • Recency: How recently a customer made a purchase.

  • Frequency: The number of purchases made by a customer in a given time period.

  • Monetary: The total amount spent by a customer.

Data processing

First, let’s load the dataset and change the data type of the ...