Including loyalty in your beyond-RFM segmentation

Since Sandy first donated to your organization in 1992, she’s given over 100 gifts.  Nothing exorbitant – she’s now giving $30 every three or four months – but she also has volunteered, come to three walks, signed up for emails, and taken almost every advocacy action you offer.

On the other hand, you acquired Miriam from an outside list in 2012.  She gave $25, but nothing since then.  You don’t have her email or phone number, but a last chance lapsed package piqued her interest four months ago and she gave another $25.

What do these two have in common?

They look the same on a traditional RFM analysis: they are both 4-6 month $25-49.99 multis.

And if you use only a traditional RFM analysis, you will treat them the same.

That’s silly.  If you were looking only at these paragraphs to judge, Sandy would seem to be a good candidate for monthly giving, upgrade strategies, and/or planned giving.  Miriam probably has a 50-50 chance (or worse, given industry averages of lapsed reactivated retention rates) of never giving you another gift.

It’s easy to criticize this, but harder to do this analysis writ large, when you are doing five-to-seven-figure list selects.  So how do you draw these lines?  Here are a few ideas:

Lifecycle analysis.  Way back when (November 2015 – ah, those were the days), we talked about how there isn’t just one retention rate – there are several, based on where a person is in their donor journey.

This lifecycle analysis can layer on to your segmentation analysis and on to your messaging.  Some sample categories:

  • New.  What it says on the tin.
  • 1st year.  They have given a second gift, but it’s been less than 12 months since their first gift.
  • 2nd year.  Gifts in their first two years.
  • Core: Donors who have given in each of the past three 12-month periods
  • Lapsed: A gift 13-24 months ago.
  • Deep lapsed: A gift 25+ months ago.
  • Lapsed reactivated: Someone who has given a gift in the past 12 months after a gap of at least a 12-month period

Your mileage and organization may vary – it’s more important to look at this analysis than it is to have the same precise categories.

So you may not have a separate piece for Sandy, but you might want to make sure there is language like “As one of our most loyal donors” or “You’ve stood with us for more than 20 years.” or the like in the existing piece.

As for Miriam, as a lapsed reactivated donor, you are still worried that you might lose her again.  Perhaps you want to stay close to the tactics that recruited her (or won her back or both).  She might also be worth an e-append or phone append to see if you can find a channel that further engages her.  Or maybe you want to use a less aggressive ask string – your goal for a lapsed reactivated donor is to make donating a habit again, rather than to increase their giving just yet.

Gift density.  Take a look at the number of gifts someone has made, then divide by the number of years since a person’s first gift.  This is how many gifts you will get from them in an average year (or at least what you have received).

Sandy’s number is above four.  Four is a bit of a magic number (some would say three or even two– again, having a number is more important than what the number actually is) to indicate strong likelihood of monthly giving.  When someone has a pattern of giving frequently, this ask isn’t nearly the heavy lift it is trying to get someone to go from one gift per year to twelve.

Miriam is below one.  One is a separate magic number, as below one indicates a likelihood to lapse (by definition, they’ve done it at least once)  That should trigger some of the anti-lapse efforts discussed above.

One is also a magic number in that if someone gives you exactly one gift per year (and they’ve been with you a few years), that’s the bucket they see you in.  So, if they look unlikely to upgrade and they look unlikely to increase the frequency of gifts, the only other way to increase their lifetime value (other than increasing their retention rate) is to decrease costs.  Let’s say you send an average of 14 mail pieces per year and do two telemarketing cycles.  This person probably can decrease this substantially and save costs.

Longevity.  Length of donation is something that should be honored.  Not only are milestone anniversary notes and certificates and the like a good thing to do from a moral and ethos perspective, but they will also make sure that your most loyal donors know that you know they are important to you.

Channel responsiveness.  Change your tactics to suit the terrain.

All of these are even more important when looking at borderline segments.  Should you mail the 13-18 $15-$19.99 multis?  Maybe just those that have been with you five years or more?  Or with previous high gift densities?  Or just mail responsive?

But there’s more to it than even that; tomorrow, we’ll talking about using other interactions with your organization to define and customize.

Including loyalty in your beyond-RFM segmentation

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