Int. J. Electronic Customer Relationship Management, Vol. 8, Nos. 1/2/3, 2014 15 Copyright © 2014 Inderscience Enterprises Ltd. Customer’s life-time value using the RFM model in the banking industry: a case study Esmaeil Nikumanesh* and Amir Albadvi School of Industrial Engineering, Tarbiat Modares University, Tehran, Iran Email: sn391@yahoo.com Email: albadvi@modares.ac.ir *Corresponding author Abstract: The customer’s life-time refers to the relationship between the customer and the organisation in which the organisation can achieve more profit from its customer. The RFM model is based on three variables: recency, frequency, and monetary. The methodology of the present paper is to review the databases of Agricultural Bank of Iran, to review the literature, and to interview with experts using questionnaires. Parameters of the RFM model are limited to five variables in three areas of recency, frequency, and monetary value. Variables are weighed using experts’ judgements. The number of data records of customers, 12,359, is then classified into 852 special, 1755 major, and 9373 normal classes through applying a clustering method. In addition, customers are segmented into eight groups by the distance to mean of the three parameters of the model. The results show that the normal customers who form 80% of the total customers have the lowest profitability. Keywords: customer’s life-time value; customer relationship management; Agricultural Bank of Iran; RFM model; segmentation. Reference to this paper should be made as follows: Nikumanesh, E. and Albadvi, A. (2014) ‘Customer’s life-time value using the RFM model in the banking industry: a case study’, Int. J. Electronic Customer Relationship Management, Vol. 8, Nos. 1/2/3, pp.15–30. Biographical notes: Esmaeil Nikumanesh has received MS degree in Tarbiat Modares University, Iran. His research interests are information technology, information system, customer relationship management. Amir Albadvi is Associate Professor of Industrial Engineering at Tarbiat Modares University, Tehran, Iran. He obtained his PhD in information systems from London School of Economy. He holds Master’s and Bachelor’s degrees from Sharif University of Technology, Tehran, Iran. His research interests include e-Business strategy, management of information technology, strategic management, business process reengineering. 1 Introduction Customer Relationship Management (CRM) systems can help organisations increase the productivity of their interactions (King and Burgess, 2008; Saeed et al., 2011;