Learning from political fundraising: hypercustomization

fireworks4_amkOn the path to his win in Iowa, Ted Cruz took an unusual position for a presidential candidate. He spoke out against fireworks regulations.

Usually, Iowa contests focus on broad national issues that a person would be expected to lead on as president (plus ethanol).  Fireworks range as a national issue somewhere around garbage collection and why-don’t-they-do-something-about-that-tacky-display-of-Christmas-lights-on-Steve-and-Janice’s-house.

But from a data perspective, the Cruz campaign knew its supporters.  There’s a great article on this here.  Here’s a quote:

“They had divided voters by faction, self-identified ideology, religious belief, personality type—creating 150 different clusters of Iowa caucus-goers—down to sixty Iowa Republicans its statistical models showed as likely to share Cruz’s desire to end a state ban on fireworks sales.

Unlike most of his opponents, Cruz has put a voter-contact specialist in charge of his operation, and it shows in nearly every aspect of the campaign he has run thus far and intends to sustain through a long primary season. Cruz, it should be noted, had no public position on Iowa’s fireworks law until his analysts identified sixty votes that could potentially be swayed because of it.”

As we unpack this, there are several lessons we nonprofits can take from this operation:

The leadership role of direct marketing.  Cruz’s campaign is run by a direct marketing specialist.  Contrast this with Marco Rubio’s campaign, which is run by a general consultant, or Jeb Bush’s, which was run by a communications specialist.  As a result, analytics and polling in the campaign are skewed not toward what generalized messages do best with a focus group or are the least offensive to the most number of people.    

In fact, in the campaign, the analytics team has a broader set of responsibilities than normal.  Analytics drive targeting decisions online and offline.

The imperative to know your constituents.  Much political polling is focused on knowing donors in the aggregate.  The Cruz campaign wanted to know them specifically.  So they gathered not just people who were supporters and asked them about local concerns.  This came up with 77 different ideas, including red-light cameras and, as you probably guessed, fireworks bans.  We’ve talked about knowing your constituents by their deeds and by asking them; what’s important about this example is the specificity of the questions.  It’s not “what do you like or dislike”; it’s “what do you care about.”

Testing to know potential constituents.  One the campaign had these ideas, they tested them online with Facebook ads.  The ads weren’t specific to the Cruz campaign, but rather asked people to sign up for more information about that issue.  Once they had these data, they not only had specific knowledge of what people cared about, but the grist for the mill of data operations that could model Iowa voters and their key issues.  

Focusing on actual goals.  Cruz’s end goal is to drive voters, just like ours is to drive donations.  By simplifying things down to what gets people to pull their levers/hit the button/punch the chad, they had a crystallizing focus.  One can debate whether this is a good thing, as the campaign sent out a controversial Voting Violation mailing that attempted to shame infrequent voters with Cruz leanings to the polls.  (It should be noted that these mailings are the part of campaign lore — they’ve been tested and found to be very efficient, but few campaigns have ever wanted to backlash that comes inevitably from them.)  But that focus on things that matter, rather than vanity metrics like Facebook likes , help with strategy.

Hypertargeting: All of this led to some of the most targeted direct marketing that has been seen in the political world.  When telemarketing was employed for particular voters, not only would the message reflect what they cared about (e.g., fireworks bans) but also why they cared about it (e.g., missed fun at 4th of July versus what seems to some as an arbitrary attack on liberty).  This came from both people’s own survey results and what models indicated would matter to them.

So now, let’s look at this in a nonprofit direct marketing context.  How well do you know your donors and potential donors?  Or how well do you really know them?  And how well do you play that back to them?

I’ve frequently advocated here playing back tactics to donors that we know work for them and focusing our efforts on mission areas and activities we know they will support at a segment level.

But this is a different game altogether.  The ability to project not only what someone will support, but why they well, and designing mail pieces, call scripts, and emails that touch their hearts will be a critical part of what we do.  And once you have this information, it’s cheap to do: if you are sending a mail piece or making a phone call already, it’s simplicity itself to change out key paragraphs that will make the difference in the donation decision.

This also applies in efforts to get donors to transition from one-time giving to monthly giving or mid-major gift programs.

So, how can you, today, get smarter about your donors and show them you are smarter about them?

Learning from political fundraising: hypercustomization

Getting donor intelligence by asking your donors

Yesterday, I said you can get a good idea of who your donor is through their actions.  The trick here is that you will never find donor motivations for which you aren’t already testing.  This is for the same reason that you can’t determine where to build a bridge by sitting at the river and looking for where the cars drive in trying to float across it, Oregon-Trail-style.


Damn it, Oregon Trail.  The Native American guide told me to try to float it.
Don’t suppose that was his minor revenge for all that land taking and genocide?

To locate a bridge, you have to ask people to imagine where they would drive across a bridge, if there were a bridge.  This gives you good news and bad news: good news, you can get information you can’t get from observation; bad news, you get what people think they would do, rather than what they actually will do.

True story: I once asked people what they would do if they received this particular messaging in an unsolicited mail piece.  Forty-two percent said they would donate.  My conclusion — about 40% of the American public are liars — may have been a bit harsh.  What I didn’t know then but know now is that people are often spectacularly bad at predicting their own behavior, myself included.  (“I will only eat one piece of Halloween candy, even though I have a big bucket of it just sitting here.”)

There is, of course, a term for this (hedonic forecasting) and named biases in it (e.g., impact bias, empathy gap, Lombardi sweep, etc.).  But it’s important to highlight here that listening to what people think they think alone is perilous.  If you do it, you can launch the nonprofit equivalent of the next New Coke.

“The mind knows not what the tongue wants. […] If I asked all of you, for example, in this room, what you want in a coffee, you know what you’d say? Every one of you would say ‘I want a dark, rich, hearty roast.’ It’s what people always say when you ask them what they want in a coffee. What do you like? Dark, rich, hearty roast! What percentage of you actually like a dark, rich, hearty roast? According to Howard, somewhere between 25 and 27 percent of you. Most of you like milky, weak coffee. But you will never, ever say to someone who asks you what you want – that ‘I want a milky, weak coffee.’”  — Malcolm Gladwell

With those cautions in mind, let’s look at what survey and survey instruments are good for and not good for.

First, as mentioned, surveys are good for finding what people think they think.  They are not good for finding what people will do.  If you doubt this, check out Which Test Won, which shows two versions of a Web page.  Try to pick out which version of a Web page performed better.  I venture to say that anyone getting over 2/3rds of these right has been unplugged and now can see the code of the Matrix.  There is an easier and better way to find out what people will do, which is to test; surveys can give you the why.

Surveys are good for determining preferences.  They are not good for explaining those preferences.  There’s a classic study on this using strawberry jam.  When people were asked what their preferences were for jam, their rankings paralleled Consumer Reports’ rankings fairly closely.  When people were asked why they liked various jams and jellies, their preferences diverged from these expert opinions significantly.  The authors write:

“No evidence was found for the possibility that analyzing reasons moderated subjects’ judgments. Instead it changed people’s minds about how they felt, presumably because certain aspects of the jams that were not central to their initial evaluations were weighted more heavily (e.g., their chunkiness or tartness).”

This is not to say that you shouldn’t ask the question of why; it does mean you need to ask the question of why later and in a systematic way to avoid biasing your sample.

Surveys are good for both individual preferences and group preferences.  If you have individual survey data on preferences, you absolutely should append these data to your file and make sure you are customizing your reasons to give to the individual’s reason why s/he gives.  They also can tease out segments of donors you may not have known existed (and where you should build your next bridge.

Surveys are good for assessing experiences with your organization and bad for determining complex reasons for things.  If you have 18 minutes, I’d strongly recommend this video about how Operation Smile was able to increase retention by finding out what donors’ experiences were with them and which ones were important.  Well worth a watch.

If you do want it, you’ll see that they look at granular experiences rather than broad questions.  These are things like “Why did you lapse” or “are we mailing too much?”   These broad questions are too cognitively challenging and encompassing too many things.  For example, you rarely hear from a donor to send fewer personalized handwritten notes, because those are opened and sometimes treasured.  What the answer to a frequency question almost always leads to is an answer to the quality, rather than quantity, of solicitation.

Surveys are good when they are well crafted and bad when they are poorly crafted.  I know this sounds obvious, but there are crimes against surveys committed every day.  I recently took a survey of employee engagement that was trying to assess whether our voice was heard in an organization.  The question was phrased something like “How likely do you think it is that your survey will lead to change?”

This is what I’d call a hidden two-tail question.  A person could answer no because they are completely checked out at work and fatalistic about management.  Or a person could answer no, because they were delighted to be working there, loved their job, and wanted nothing to change.

Survey design is a science, not an art.  If you have not been trained in it, either get someone who is trained in it to help you, or learn how to do it yourself.  If you are interested in the latter, Coursera has a free online course on questionnaire design here that helped me review my own training (it is more focused on social survey design, but the concepts work similarly).

You’ll notice I haven’t mentioned focus groups.  Focus groups are good for… well, I’m not actually sure what focus groups are good for.  They layer all of the individual biases of group members together, stir them with group dynamic biases like groupthink, unwillingness to express opinions contrary to the group, and the desire to be liked, season them with observer biases and the inherent human nature to guide discussions toward preconceived notions, then serve.

Notice there was no cooking in the instructions.  This is because I’ve yet to see a focus group that is more than half-baked. (rim shot)

My advice if you are considering a focus group: take half of the money you were going to spend on the focus group, set it on fire, inhale the smoke, and write down the “insights” you had while inhaling the money smoke.  You will have the same level of validity in your results for half the costs.

Also, perhaps more helpful, take the time that you would have spent talking to people in a group and talk to them individually.  You won’t get any interference from outside people on their opinions, introverts will open up a bit more in a more comfortable setting and (who knows) they may even like you better at the end of it.  Or if you hire me as a consultant, I do these great things with entrails and the bumps on donors’ heads.

So which do you want to use: surveys or behavior?  Both. Surveys can sometimes come up with ideas that work in theory, but not in practice, as people have ideas of what they might do that aren’t true.  Behavior can show you how things work in practice, but it can be difficult to divine deep insights that generalize to other packages and communications and strategies.  They are the warp and weft of donor insights.

Getting donor intelligence by asking your donors

A direct marketing bridge to… major gifts

Direct marketing specialists and major gift specialists seem to be opposites in style and approach.  One is impersonal, mass-market, with knowledge of the aggregate not the specific – the marketing equivalent of the Air Force; the other is all about personal relationships, forged one on one, with intimate knowledge of that one person you are pitching – the equivalent of boots on the ground Army or Marines.  This can often cause them to be rivals in the same ways the service branches are; they can also work together to accomplish a mission together like the service branches.

As a direct marketer, developing a small budget to a major gifts program is part defensive.  I once worked with a major gift officer who would mark a donor as no mail, no phone, and no email the moment they got on her radar screen.  Not only did this deprive us of the only real source of revenue we had from these donors, but it also deprive the donor of the information that was tethering them to the mission and tugging at their heart strings.  And when she left, we had no way of differentiating real unsubscribes from these unsubscribes of pseudo-convenience.

This is going to happen if you can’t create a positive experience for potential major donors in your direct marketing program.  Yet it can happen and it can cost tens or hundreds of thousands of dollars for the nonprofit.  There are only two reasons to stop communications with your potential major donors in this way: 1) if they ask you to or 2) you have a relationship with that donor to the point that there is a substitute communications strategy and ask framework in place.

So your role in direct marketing is to build the relationship with the donor over time.  This doesn’t necessarily mean a slower cadence; rather, it means different types of pieces, including a donor newsletter telling them about their accomplishments – the true impact of their giving.  It can also include higher-touch, higher-value communications – handwritten notes or cards, invitations to special events or briefings, or the like.  These can enter the communication stream gradually as your relationship builds.

Direct marketing is also a great vehicle – in fact, a primary vehicle – for identifying those donors who may be receptive to a major donor ask.  While some amount of wealth is certainly a necessary condition for a person to be able to make a major donation, the more important thing to the organization is the tie to the organization.  People often forget this.  If I had a nickel for every time a nonprofit brainstorming potential targets thought of hitting up Bill Gates or his foundation because of a friend of a friend, I would be blogging about what yachts are the most fun to waterski behind.


If this man is your major donor strategy,
you do not have a major donor strategy.

What you are looking for is:

  • Giving history – long, repeated, multiple gifts per year, and increasing gift amounts
  • Participation – telling a story, coming to an event, volunteering
  • A clear passion for at least one aspect of your mission either from his/her giving history or participation

The one exception to this is people who make unusually high (whatever this is for your organization – probably between $100 and $1000) first gifts.  This is probably a person who has been interested in your cause for a while or has an important reason to start giving now – they may be ripe for personal interactions as much as your loyal long-term donors.

Looking at this compact list, you can see that you can not only help solicit major donor prospects, you can help create them.  This is by incorporating upgrade strategies into your communications.  If you have well-defined recognition for different levels of giving (and you should), you can make those aspirational, especially for those on the cusp of reaching them, by making the ask for the next highest level of recognition.  Those recognition levels should also be a prominent part of your mail, phone, and online communications, as well as your acknowledgments for these donors.

Finally, remember to thank extremely well.  If you are at lost as to how, check out 50 ways to thank your donors.  Some are usual, some are a bit nutty, but they may spark some ideas to giving your major donors and potential major donors the love they deserve.

A direct marketing bridge to… major gifts

5 simple rules of thanking donors

Your acknowledgment/thank you’s should be:

For everyone.  E-very-one.  I once worked with a nonprofit that thanked everyone who gave $250+ on letterhead, $10-249 on copy paper, and under $10 not at all.  My first step was to thank everyone.  I know that the love discussion from yesterday can come under pressure when finances are tight.  But as an exercise, go back and look at the first donors of your last ten large bequests.  My guess is that the majority were under $20 and some under $10.  Thanking everyone is not only right and polite; it is a great investment in your long term.

That doesn’t mean that you have to ask for a $2 gift again, or in the same way.  You still have a responsibility to maximize your contribution toward your cause. But you do have to be grateful that they gave a gift.


That doesn’t all mean that you shouldn’t differentiate your thank you’s.

Differentiated by reason for giving. Part of making people feel special is to treat them specially.*

Your different types of donors are supporting different types of things for different reasons.  Your monthly sustaining donors are giving, presumably, because of appeals you have make about the need for steady, predictable income.  Your advocacy donors – those who donated in conjunction with an urgent appeal for change – are going to be the exact opposite.  They will be looking to support the urgent rather than the constant need.  Thus, the messaging should be dissimilar for these.

Differentiated by lifecycle.  If someone is a lapsed donor who is reactivating, remember the prodigal son.  Now is the time to kill the metaphorical fatted calf and welcome them back and letting them know you appreciate that they are coming back, especially if you had been using lapsed-type “why has thou forsaken us?” language to get them back.

Similarly, new donors should have a whole new set of acknowledgment and onboarding messages.  I won’t repeat my blog post on onboarding for new donors and supporters, except to commend that piece to you.

Differentiated by amount given/quality of supporter.  This in part pragmatic – you want to invest more in keeping your better donors.  But it is oft said that smaller gifts are given from the heart and major gifts are given from the brain.  This is partly misleading, in that you have to engage the heart of your major donors first, but the pitch that you make to a major donor is more about the long-term impact that they are going to make with their investment.  Similar language just isn’t appropriate for a $10 donor, who is helping your mission, but not because of a transformative legacy they are looking to leave.  There too is a difference in messaging necessitated by a difference in reasoning.

And then there’s the obvious part – your largest donors should have higher touch acknowledgments.  That includes handwritten notes, personal phone calls, cards for special occasions like birthdays or holidays.  The key that many, many organizations forget is not to let high touch get in the way of a timely thank you.  If you normally send out thank you letters every day, but your high dollar donors get a letter from your ED that s/he sends out every 1-2 weeks, you are falling into this trap.  You are essentially differentiating backwards – your best donors are receiving the worst donor service.

The way to avoid this is to get the standard receipt and thank you immediately as you normally would do, then to follow up with your high-touch thank yous.  Few will mind if you say “I know you got our standard thank you last week, but I wanted to personally reach out to tell you how much your gift meant to me.”  Rather the opposite in most case.

This is imperative because one of the best predictors of whether someone will give again is how quickly and well they are thanked.  So, the final rule is:

Timely.  Get your receipts out as soon as you can, because of the impact on the next gift.  If it’s for a high-dollar donor, consider differentiating even on timeliness, with first-class postage on those thank yous.  Take a look at Blackbaud’s mystery shopper experience here.  Your donors are used to get receipts in week one (for the above average) or week two (for the just average).  You want to be above average to get those additional donations.

Thank you for reading.  Tomorrow, we’ll talk about different ways to thank your donors: some that are a bit nonstandard, all of which help express your gratitude.

* It’s statements like that that are the reason I make the big bucks.

5 simple rules of thanking donors

Beyond RFM – doing intermediate-level segmentation

By now, hopefully, you have seen the benefits of segmentation and the value of RFM as a preliminary tool.  But you have probably intuited a few of the flaws in it already:

  • The distinction between recency groups is sometimes artificial. Let’s say two people give $20 per year, one at the end of January and the other at the beginning of February.  The former would be at 13 months for a January mailing; the latter at 12 months.  A few days difference could mean that one gets mailed and the other didn’t.  (In fact, I’d love to test a segmentation out to 13 months instead of the standard 12 because of this; please comment or email me if you’ve done this, so I can share and illuminate myself).
  • The distinction between frequency groups is artificial. Your multidonors range from people who donate once a year over a series of years to people who donate to literally every communication they get.  RFM analysis gives these two people the same number of communications.
  • The distinction between monetary value is artificial. You probably saw this one coming, given the first two.  Which donor would you prefer – a donor who donates $10 ten times per year or a donor who donates $50 once a year?  RFM prefers the latter; I’m guessing you would prefer the former.
  • It carries literally no other information. The $25 dollar donation of today could be from someone who clipped coupons to raise the money to donate or Bill Gates divesting himself of what he found in one cushion of his couch.  What a person donates is an indicator of capacity, but it’s a blunt tool when a scalpel is possible.
  • You probably noticed I was talking only about the mail in examples. RFM doesn’t look at channels of donation, nor at the sensitivity of people to those channels.

Let’s address this last one first, as we look for ways to customize RFM more than using it alone.

Separate RFMs by channel. When you do your telemarketing list pull, you will almost certainly want to call deeper into your file to people who have made a previous telemarketing gift than those who you are trying to make their first gift on the phone.  Same thing in the mail: you may be willing to mail multidonors out to 48 months $50-99.999 for people who have given through the mail, but only to 12 months or 18 months $50-99.999 for people who have only given online or on the phone.  Separate RFMs by channel will help you make these determinations.  Remember that you are looking to make sure that you have a strong multi- or omni-channel program, but that doesn’t mean you have to be agnostic as to channel of origin or preference.

Cadence analysis.  This goes to your $10 10x versus $50 1x donor example above.  You have to figure out who likes/needs multiple communications to make a gift or gifts and who doesn’t.  Some ways you can do this:

  • Look at how many types of offers you have going to a person in rotation; hammering the same key on a piano over and over isn’t music, nor will the same approach be music to your donor’s ears.
  • Take a look at how many times you mail someone in acquisition. Sometimes chronic non-responders need a different offer (as with rotating your offers above), but you can also see whether someone after seven or 17 or 27 times of getting a message from you means they almost certainly won’t donate and you can bless and release.  The same holds true for your lapsed donors as well.
  • Test consistent communication versus no communication versus resting periods to see what happens when you try different cadences.
  • Look at frequency of gifts within a certain period of time, rather than ever. You can see dramatic results sometimes by decreasing your mailings to your one-time-per-year donors versus your multi-per-year donors.

Mission area: I mentioned this when discussing customization types, but tailoring your communications toward the area of your donor’s interest is also a legitimate segmentation target.  Why would you send that advocacy alert to people who care only about your work in schools or your calendar with pictures of dogs to your car people?

Income: If you don’t want to ask that millionaire for $17, a wealth append can get you the information you need to customize your ask strings and communications strategy.

Location: Zip codes are the poor person’s income append and can be free-ish, so that’s a potential win.  More often, though, you can use zip code modeling to breathe life into underperforming acquisition lists.  Simply find your top X percent of zip codes from your current file and ask for just those zip codes from the rental list.  It will be slightly more expensive to rent per name this way, but it can provide a 20%+ lift in response rates and/or average gifts.  This is also a way to test new lists while minimizing risk.  One caution: you don’t want to do this for all lists or you risk self-limiting your acquisition strategy.  If a list works well for you across zip codes, use the whole thing – that way you give yourself a chance to be wrong about a zip code long-term.

Demographics: Some nonprofits find that different messages work better for men versus women.  Age can also be helpful, as you work to avoid sending your one millennial donor your planned giving brochure (there’s optimistic and there’s delusional…).  With demographics, backtesting makes initial sense, where you see how people of different demographics responded to previous appeals and messages, then use that data to define your strategy.

Previous responsiveness: It sounds obvious, but it’s ignored by CRM: if someone like getting your calendar three years ago, they may like getting it again.  Replace “calendar” with member card, action alert, survey, etc., and you have the makings of a profitable add on to your usual list mix.

Those are some of the things you can add to spice up RFM.

I said at the beginning that this was intermediate segmentation.  Advanced segmentation is modeling.  The hacks above will help get you many of the benefits of modeling at a fraction of the cost, but it won’t get you all of the benefits, so definitely leave yourself open to building smarter and smarter donor modeling solutions.

Any other segmentation recommendations you’ve seen work?  Please leave them in the comments.

Beyond RFM – doing intermediate-level segmentation

RFM part 2 – segmentation goals beyond net revenue

From yesterday, we had a sample membership mailing with these results from last year, and we were going to cut any segment that didn’t get $.33 per piece or more, since that is what the piece costs.

To do so would actually cost us dearly.  As we discussed this week, there are more goals than just the immediate gaining of revenue.  Looking at mail pieces alone with a “here’s a piece; here’s another piece” mentality can ignore what other things a mailing can do for you.  Let’s take a look at this chart of historic gross per piece by segment with two ideas in mind: groups we want to invest in and testing opportunities.

RFM Gross

Take a look at our $50-99.99 37-48 single donors.  They have an anemic response rate of .3% and an average gift of $80, so they would only gross $.24 per piece to mail to (and thus lose $.09 for each piece sent out).  Should you mail these donors?

There are some organizations that would say no – they think that every segment should net positively in a donor mailing or that they should only do no net cost acquisition.  I’ll try to demonstrate why I think these people are wrong.

With a response rate of .3%, it would take 333 1/3 pieces to generate one donor.  At a net loss of $.09 per piece, that’s a cost of $30 to acquire that donor.  Chances are that that is higher than you are spending in your acquisition mailings to get new donors.

But you aren’t acquiring just person off the street.  You are getting someone who then slots into the 0-3 $50-99.99 M segment for the next mailing.  You can see if the person got this mailing again for their next one, they would be predicted to gross $3.62 per piece sent to them or people like them, which is very nice.

Let’s run the numbers assuming that their average gift is $50, your retention rate per year for lapsed reactivated donors is 50%, your retention rate per year for multi-year donors is 70%, and it costs you approximately $10 to mail your $50-99.99 donors for one year.  To make the math easy, we’ll assume only one donation per year (it should higher) and we’ll assume that any donation is worth a net of $40 knowing the mailing costs (in reality, you would want to look at both the possibility that someone will give multiple times per year and that you will have to mail someone even when they don’t give).

This works out to:

.5 * 40 + .5 * .7 * 40 + .5 * .7^2 * 40 + .5 * .7^3 * 40 … .5 * .7^n * 40

(Can you see why I simplified the math?)

What this basically says is that there’s a 50-50 chance of getting any future gift from this person and they have a 30% chance of lapsing every year thereafter.  We aren’t using a discount rate because interest rates now are so low.

To simplify, it’s $20 + $14 + $9.80 + $6.68 and so on.  A bit of high school calculus later and this donor will likely return an average of $66.67 to your organization.  All for the cost of $30.

If you had a magic box where you could put in $30 and didn’t know what it would give you back, but knew the return would average over $60, you’d put money in.  I myself would ask if I could put in more than $30 to speed things up, like asking the genie for more wishes.

See the full comic and other fun stuff here

In general, your multi donors are going to be far better donors.  However, you need to communicate to single time donors in order to get those multi donors.  You also need to talk to those people whose last donation has been a while to renew them for future support.

The corollary to this is that you shouldn’t just look at this segmentation and see what to cut; you should also be adding back in.  Looking at these gross revenues per donor, you are probably (hopefully) wondering why you wouldn’t want to mail 7-12 month single donors of $100+, or deeper into your $1000+ donors, or more.  These are all correct thoughts.  Looking farther back into your pieces, you might see that someone has made the previous mistake – they looked at a small sample size of a $1000+ mailing, found that no one responded, and cut the segment.

Thinking further about this, you can see that perhaps the $1000+ donor shouldn’t get this piece, but they probably should be communicated with.  These are your best and best potential donors and there probably is a way to increase their value more so than not communicating with them.

Similarly, you’d love to renew those $15-$19.99 13-24 month donors, but this also isn’t the way to do it.  Now we are going to break out of yes/no segmentation and into using segmentation to create differentiated communications.  For simplicity sake again, we’ll assume that we have four treatments we are going to try:

  • This mail piece, plus a pre and post email, for our “normal” donor segment (red)
  • This mail piece with “lapsed” language, plus a pre and post email, for our lapsed segments (green)
  • A high-touch invitation-style mailing to higher-value donors with first-class postage to invest in getting their gift (with email and higher-touch telemarketing as well) (blue)
  • A prerecorded outbound voice mail campaign, coupled with an email ask to less valuable or less likely donors to attempt to renew them without high marginal costs. (yellow)

I’ve oversimplified here.  With the high-touch piece, we’d almost certainly want to test borderline segments part with the high-touch and part with the control to see if the additional investment is worthwhile.  You’d also want to test what segments telemarketing works best with.  And so on.  But for first steps, it’s directionally correct.

So let’s color in the mail plan with these four layers.

RFM four color

Note that you are able to contact more people with more appropriate language with this strategy.  Segments that a pure net perspective would have ignored are renewed in this new model and our most valuable donors are treated that way.

But that’s still just RFM with some embroidery on top.  It’s a fine model, but there’s more that can be done.  We will go beyond RFM tomorrow to add a few other pointers tomorrow.

RFM part 2 – segmentation goals beyond net revenue

The building block of donor segmentation: RFM

Over 80 percent of nonprofit marketers know the term “communication segmenting” according to a Bloomerang survey.  Over 60 percent say they segment their files.  This means that almost 20 percent of them don’t know what segmentation is and 20 percent more know about segmenting, but don’t.

Let’s see if we can reduce those numbers.

Segmentation, as you can see from my last two posts, really is for everyone, regardless of the size of your file. We’ve talked about, obliquely, two different types of segmentation – yes/no segmentation (will someone be communicated with or not) and segmentation to help create versions or customizations.

RFM analysis can help with both of these.  It stands for:

  • Recency: Usually used as how recent was someone’s last donation to the organization. You may occasionally also look at their last interaction with the organization, but we can put that aside for now.  This is perhaps the primary driver of segmentation and, if there is an answer to the “how many people do we have on file?” question, it’s when it phrased as “how many people have donated to us in the past two years” or the like – with a time horizon and action attached to it.  Do yourself a favor and add “recency” to your Microsoft Word dictionary; you are going to be using it a lot and Microsoft Word doesn’t know that word exists.
  • Frequency: We go from the most often used to the most often ignored – how many times someone has given to the organization (or interacted with in non-donor contexts). This is often simplified to single v multi, as this dyad makes it easier to plan your communication.
  • Monetary value. This is usually measured by another TLA (three-letter acronym): HPC or highest previous contribution – what’s been the highest amount the person has made in any one gift. This is an area of some debate, as if someone makes gifts of $20, $20, $20, $20, $500, $20, $20, $20, and $20, it is fairly predictable that they are probably better grouped with the $20-$24.99 donors than the $500-$999.99 donors and their ask strings changes along with this (more on ask strings here).  One solution is to use a formula like 2/3 of their HPC + 1/3 of their most recent contribution or half of their HPC + half of the average of their last five contributions.  But this is something worth testing how it works best for your file.

Let’s do a yes/no segmentation with RFM.  We have a membership mail piece that has historically very well with a number of segments.  It costs $.33 to mail and you are looking for segments that net.  Here are what your RFM response rate, average gift, and gross revenue per piece would look like from last year.

Response rate:

Average gift:

Gross per piece:
RFM Gross

(these are intentionally realistic, but false, data)

To explain, the first numbers are the months (so 0-3 is someone who last gave a gift in the past three months), S & M stand for single and multi (get your mind out of the gutter), and the dollar amounts across the top are that person’s highest previous contribution.

Looking at this, to maximize net revenue, we can cut some of the segments to lower HPC groups and to one-time donors.  Anything under $.33 per piece isn’t going to net us money.

This is a decent baseline that answers the question “I have this mail piece going out in February; to whom should it go to maximize the net revenue of the mailing?”.

However, we are going to look at it as “how do we maximize the value of this donor by treating them appropriately?” and layer in some treatment segmentation tomorrow.

The building block of donor segmentation: RFM