In the stress of having to meet our fundraising goals, we often search for the magic bullet that will unleash all of our donors’ giving capacity. Along with hiring and new tools, we borrow for-profit techniques, and we are now using the language of retail and online marketing and salespeople. We’ve expanded direct mail to direct marketing, because it encompasses a range of very direct outreach efforts.
One of the recent tools is from retail, “RFM”, or recency, frequency, and monetary value. We use this measure to look for our highest-level donors in the highest giving levels, but RFM measures more than just someone’s lifetime gift value.
Let me explain the tool along with caveats around each one as they relate to fundraising.
- Recency refers to the last gift made in the nonprofit ethos. If someone is a $5,000 donor, we pay attention. But if that $5,000 gift was 10 years ago and a memorial gift, it carries much less value than someone who has given $1,000 per year over each the past 5 years.
- Frequency refers to how many gifts have been made by the donor in her lifetime. Frequency is high for monthly donors — and even higher for staff giving through payroll – if pledge payments are counted. If only pledges and outright gifts are counted, then major gift donors, who make a pledge over 5 years, have lower frequency scores than loyal annual giving donors.
- Monetary value refers to the constituent’s lifetime giving total. If in-kind and planned gifts are excluded from this calculation, then frequent donors to your annual auction get very low scores, along with that one donor who is leaving your organization a trust to build the new theater.
An additional consideration when using RFM for prospect segmentation includes how to handle nondonors.
Our own Greg Duke notes that RFM was invented for buyers in retail, so non-buyers were not part of the equation. He recommends scoring nondonors as 0-0-0 (no recency, no frequency, no monetary value) so that this pool does not overwhelm the donor pool.
To calculate RFM after considering all of the above caveats, have your chosen software line up the entire set of recencies, frequencies, and monetary values and then split the lists into 5 bins for each category (R, F, M).1
The lowest 20% of scores (longest ago, least frequent, lowest giving total) are scored with a 1, with the remaining 40%th percentile, 60th percentile, 80th percentile given 2, 3, an 4, respectively and the highest given a score of 5. Then the scores are concatenated, such as 5-5-5 for the most recent, frequent, and highest lifetime donor.
When the scores come out, we are tempted to look only at the 5-5-5 rated donors and ignore the rest. However, there is much more to be learned about our donors beyond who is at the top of the giving heap, and I discuss some of these ideas in my upcoming book, From Engagement to Planned Giving: Five Ways to Use RFM Scores in Fundraising.
First, remember that if you are counting only pledges and outright gifts in your monetary total, then your major gifts donors will be buried in frequency and recency bins 4 or even 3. I recommend using the RFM tool to identify what a major gift donor’s RFM was the day before he made his first major gift. Find out whether the donor’s RFM just before the first major gift is a signal of an upcoming decision, including openness to the cultivation of the gift officer working with him.
Second, consider Lawrence Henze’s teachings on identifying planned gifts.2 If we focus on donors whose monetary score is high, we miss those whose recency and frequency scores are high, and so we miss out on our planned giving prospects. My book outlines how to measure pre-planned giving RFM scores as well as measuring RFM momentum – a key indicator for direct marketers that we fundraisers have not deployed yet. If someone is escalating giving at all, we must notice that not only to steward his increased engagement well but also to segment him optimally.
Third, annual giving can make great use of RFM scores. Imagine being able to reactivate long-lapsed donors who are scored 5 in monetary value: Finding them gives the opportunity to figure out why they lapsed. Other uses for the annual giving team can include:
- RFM by appeal or campaign helps identify what solicitation assets to give more budget and attention to.
- RFM by the month that the donor normally gives allows for planning for both volunteer solicitations and timing of the ask to maximize impact.
- RFM scores by demographic characteristics, especially constituency, can test and adjust paradigms in the shop. If you discover that the most recent and highest value parents give in August, then you can focus on that cohort in August instead of assuming that parents are low-level donors because you have always solicited them in September.
- Pay method is often a differentiator. One study I conducted showed that the email domain of our most loyal and highest level annual donors was “.edu” and their most common pay method was payroll deduction. The faculty and staff, in other words, were the biggest fans. I was able to steward those gifts better, improving renewal rates.
Fourth, engagement staff can also use RFM scores, but not for giving – for engagement instead. Some organizations track event fees as an indicator of capacity, which is wise. Imagine being able to count recency, frequency, and total fees (and other non-gift payments) paid by your constituency. You would be able to find those who are truly engaged and those who like the attention and social aspects of your engagement outreach but do not participate any further.
Finally, membership organizations often set up membership echelons, and escalation among those echelons is a key indicator of increased investment. Adding membership RFM will also point out those who are currently engaged, frequently engaged, and sending in more cash than their membership level asks for. Highly invested members are worth both stewardship and cultivation.
Whenever we buy the next magic bullet, we are tempted to look for a quick win. Then we realize that the tool takes work to use, and then we give it less attention than it deserves. I speak frequently on how to squeeze the sponge dry from an expensive screening; I also advocate for using any tool that your staff has set up, including doing these suggested RFM scores. I also suggest adding them to your prospect scorecard.
What did you find? To discuss these ideas and the others which will wait for the second edition of my book, write me at marianne@staupell.com.
- Some data scientists use 3, but that works well only if your giving data is highly compressed. ↩︎
- Here is an easily accessed presentation on Lawrence’s work: https://static1.squarespace.com/static/5d23cdc9a10ed400017d67a0/t/5d361bb63cb4c50001a7d10b/1563827128338/wpgc_july_2014_-_planned_giving+success_-_think_loyalty_first.pdf ↩︎