Analytics for Annual Fund Segmentation: 2012

Marianne M. Pelletier, CFRECornell UniversityMarch 20, 2012

Outline• RFM (Recency,

Frequency, and Monetary Value),

• ROI (Return on Investment)

• Understanding engagement

Wisdom from Kevin MacDonnell

• “Sometimes I employ a practice in our Phonathon program simply because my gut says it’s gotta work. “

• See: http://cooldata.wordpress.com/2011/10/03/data-1-gut-instinct-0/

RFMEasy to measure, fun to use

What Is RFM For?

• Uses 3 measures instead of 1 to segment donors.

• Builds a color chart of very top donors.• Builds a color chart of top donors in

categories.• Considers volume and time as well as

value.• Helps define methods that work.

RFM – A Powerful Segmentation Tool

Recency

within 6

months

6-18 mos

18-36 mos

3-4 years

4-5 years

5-6 years

6-10 years

Over 10

years

Grand Total

0%

5%

10%

15%

20%

25%

30%

35%

40%

$0

$20

$40

$60

$80

$100

$120

$140

$160

$150

$139

$49

$11

$11

Response Rate

Average Gift Size

•Recency is the best predictor of response rate, indicated by the greatest separation between highest and lowest segments. Those who had given within the past six months may have had a lower response rate because they possibly had JUST given.

•Frequency is predictive of both response rate and average gift size, but is not as strong a predictor as recency.

•Monetary is defined (in this example) as the average of giving over the prior five years and is the best predictor of average gift size, but less predictive of response rate.

Re

spo

nse

Ra

te

Ave

rag

e G

ift Size

Borrowed from Sally Boucher of WealthEngine, See: http://www.wealthengine.com/news-events/educational-webinars/fundraising-intelligence-actionable-strategies-growing-your-0

Recency

• How recently did the donor give?

• Can you go back again for another gift?

• Helps show LYBUNTS and SYBUNTS

Frequency

• Monthly or annual pledge payments?

• Givers every year• Finds infrequent but

high donors (5-year pledgers)

Monetary Value

Obvious!

Data Prep Considerations

• If you are measuring annual giving year by year, use one year’s worth of giving information.

• If you are measuring annual giving trends, use 3 or 5 years.

• If you are measuring lifetime value, use all giving.

How to score your file for RFM: 5-Year Giving Example

1. Rank all constituents by Recency (limit to five years of giving history). 2. Divide the total by 5 – this will give you the number of records to score in

each “quintile” or 5th of the file3. Assign the top 5th – those who have given most recently - the number “5”4. Continue assigning each 5th of the file a number until you get to the final

5th with the most distant gift date and assign these the number “1”5. Repeat these steps by ranking all records for Frequency (number of gifts

in a 5 year period – excluding pledge payments, monthly credit card payments and other anomalies)

6. Repeat these steps for Monetary represented by the total giving (again, over a five-year period).

This and the next 3 slides are also borrowed from Sally Boucher of WealthEngine. See: http://www.wealthengine.com/news-events/educational-webinars/fundraising-intelligence-actionable-strategies-growing-your-0

Three-Year RFM Analysis Example: Prep

3-Year RFM SampleValues

Row Labels Max of GIFT_DATE_SQL Count of GIFT_NO Sum of GIFT_AMOUNT1000057 4/11/2011 4 $70.001000058 2/2/2012 4 $155.001000061 6/8/2010 3 $1,550.001000067 9/29/2010 2 $120.001000069 6/28/2011 4 $3,000.001000076 11/29/2011 7 $750.00

Top 11/25/2011 4.00 1000.004th 5/27/2011 2.00 300.003rd 11/30/2010 1.00 100.002nd 12/3/2009 1.00 50.00Bottom Below 2nd Below 2nd Below 2nd

Top =PERCENTILE(B5:B94361,0.8) =PERCENTILE(C5:C94361,0.8) =PERCENTILE(D5:D94361,0.8)4th =PERCENTILE(B6:B94362,0.6) =PERCENTILE(C6:C94362,0.6) =PERCENTILE(D6:D94362,0.6)3rd =PERCENTILE(B7:B94363,0.4) =PERCENTILE(C7:C94363,0.4) =PERCENTILE(D7:D94363,0.4)2nd =PERCENTILE(B8:B94364,0.2) =PERCENTILE(C8:C94364,0.2) =PERCENTILE(D8:D94364,0.2)Bottom Below 2nd Below 2nd Below 2nd

Three-Year RFM Analysis Example: Prep

=IF(B4>=DATEVALUE("11/25/2011"),5,IF(B4>=DATEVALUE("5/27/2011"),4,IF(B4>=DATEVALUE("11/30/2010"),3,IF(B4>=DATEVALUE("12/3/2009"),2,1))))

Marking each record by its bin

=IF(C2>=4,5,IF(C2>=2,4,IF(C2>=1,3,1)))For frequency, bin 1,2 and 3 had the same starting value: 1, so all below a value of “2” are scored at the third bin.

=IF(D2>=1000,5,IF(D2>=300,4,IF(D2>=100,3,IF(D2>=50,2,1))))

For monetary, we also marked the records by the indicated bins.

How it Works

5Recency

Frequency

5

4

3

2

1

Money

4

5

3

2

1

4

3

2

1

4-3-4

125 Segments

Segment Based on RFM Scoring

5-5-5 5-5-4 5-5-3 5-5-2 5-5-1 5-4-1 5-4-2 5-3-1

5-5-3 5-4-4 5-4-3 5-3-4 5-3-2 4-5-1 4-5-2 4-4-1

4-5-5 4-5-4 4-4-5 4-4-4 4-5-2 3-5-1 3-5-2 3-3-1

3-3-5 3-3-4 3-2-5 3-2-4 3-3-3 3-2-2 3-2-3 3-2-1

3-1-5 3-1-4 2-4-5 2-4-4 2-3-1 2-4-1 2-4-2 2-4-3

2-3-5 2-3-4 2-2-5 2-2-4 2-3-3 2-3-2 2-2-2 2-2-1

Best Scorers: Upgrade at low cost and/or refer to major or planned giving departments. Steward thoughtfully.

High Money: Find new ways to engage face to face or through personalized events.

Frequent Givers: Upgrade or renew at low cost.

Middles: Increase frequency with monthly gift club? Reengage lapsed donors with targeted appeal.

Our 3-Year Sample Based on RFM

Putting the score together, use the ampersand: =E4&F4&G4.Pivot on the score.

Our 3-Year Sample

Not a whole lot of high frequency,high recency, low monetary scorers,which is good.

Monetary Score = 5

Recency Frequency 3 Frequency 4 Frequency 5 All 1 1495 494 71 20602 1038 1190 371 25993 599 1891 1208 36984 586 1428 3272 52865 368 1415 5633 7416

Count 4086 6418 10555 21059

Recency Frequency 3 Frequency 4 Frequency 5 Average All1 $25,644.54 $51,586.55 $2,736,593.76 $125,301.222 $31,090.32 $30,545.21 $107,953.84 $41,812.793 $25,553.28 $47,991.13 $131,177.77 $71,530.664 $30,420.92 $38,603.52 $85,583.49 $66,776.715 $24,443.90 $18,305.88 $138,017.21 $109,540.06

Overall Average $27,591.48 $36,399.57 $137,403.30 $85,314.74

Alternative Data Preparation

• Use 3 segments instead of 5 if your results are too granular.

• Use CHAID for finding the segment boundaries.

Alternative Frequency/Recency

• Last gift date is recency• Count of gifts (lifetime or time

that you measure) is frequency

• Or count of payments in one year if you are measuring only one year

Example: Small Alumni Base – Smaller Number of Bins

Using CHAID for Determining Segments

7 bins for freq.

6 bins for recency

Highest possible score is 6-7-5

CHAID Results: Frequency

• The more often they give, the higher the money

• Frequency of 1 or 2: date matters

CHAID Results: Recency

This result is not as linear.

ROI: RETURN ON INVESTMENT

Different Ways to Look at Results

Cost Per Dollar Raised: Renewals

Recognition Level DonorsResource Cost Per #Attempts #Reached Total Gifts Total Cost Cost Per $1Letter $0.03 490 490 $35,855.45 $14.70 $0.0004Envelope $0.03 490 490 $35,856.45 $14.70 $0.0004Postage $0.25 490 490 $35,857.45 $122.50 $0.0034BRE $0.04 490 490 $35,858.45 $19.60 $0.0005BRE Postage $0.44 490 189 $35,859.45 $83.16 $0.0023Total Cost Per Dollar Raised: $0.0071

LYBUNTS,SYBUNTS

Data is from 1999.

Resource Cost Per #Attempts #Reached Total Gifts Total Cost Cost Per $1Letter $0.03 7551 7551 $51,484.65 $226.53 $0.0044Envelope $0.03 7551 7551 $51,484.65 $226.53 $0.0044Postage $0.25 7551 7551 $51,484.65 $1,887.75 $0.0367BRE $0.04 7551 7551 $51,484.65 $302.04 $0.0059BRE Postage $0.44 7551 452 $51,484.65 $198.88 $0.0039Phone Call $0.53 7551 4384 $51,484.65 $2,323.52 $0.0451Caller Pay $1.74 7551 4384 $51,484.65 $7,628.16 $0.1482Reminder Envelope $0.03 7551 1805 $51,484.65 $54.15 $0.0011Reminder Postage $0.25 7551 1805 $51,484.65 $451.25 $0.0088Reminder BRE $0.09 7551 1805 $51,484.65 $162.45 $0.0032Reminder BRE Postage $0.44 7551 486 $51,484.65 $213.84 $0.0042Total Cost Per Dollar Raised: $0.2656

Cost Per Dollar Raised: New Donors

Resource Cost Per #Attempts #Reached Total Gifts Total Cost Cost Per $1Letter $0.03 7731 7731 $8,530.20 $231.93 $0.0272Envelope $0.03 7731 7731 $8,530.20 $231.93 $0.0272Postage $0.25 7731 7731 $8,530.20 $1,932.75 $0.2266BRE $0.04 7731 7731 $8,530.20 $309.24 $0.0363BRE Postage $0.44 7731 16 $8,530.20 $7.04 $0.0008Phone Call $0.53 7731 3700 $8,530.20 $1,961.00 $0.2299Caller Pay $1.74 7731 3700 $8,530.20 $6,438.00 $0.7547Reminder Envelope $0.03 7731 686 $8,530.20 $20.58 $0.0024Reminder Postage $0.25 7731 686 $8,530.20 $171.50 $0.0201Reminder BRE $0.09 7731 686 $8,530.20 $61.74 $0.0072Reminder BRE Postage $0.44 7731 408 $8,530.20 $179.52 $0.0210Total Cost Per Dollar Raised: $1.3535

Do we stop trying to acquire new donors?

Cost Per $1 Raise: Longer Sightedness

• 39% of recognition level donors renewed.• 12% of LYBUNTS/SYBUNTS renewed.• 5% of nondonors became donors.• Consider: 12% of new donors renew.

Cost Per Dollar Raised: Longer Sightedness

LYBUNTS/SYBUNT Pool 2nd Year 7975LYBUNTS/SYBUNT Renewals 957Average Gift $54.89Total Giving $52,527.52Total Cost (same ratio) $14,442.98Cost Per Dollar Raised $0.2750Two-Year Cost Per $1 Raised $0.81

Gifts Per System Hour

Description# of IDs in Pool

System Time Total $

Match Rate

Avg Total

PledgePledge

Rate

Credit Card Rate

Gifts Per

System Hour

General Non-Donors                

FY08 (all gen non-donor pools) 27391 720:40:00 $56,218.38 10.65% $117.37 17.99% 41.34% $1,872

FY07 19066 694:07:00 $45,749.19 9.72% $108.41 11.67% 30.81% $1,582

FY06 18409 458:11:04 $56,528.03 14.89% $92.52 17.78% 26.35% $2,961

FY05 24539   $68,381.76 8.84% $85.16 12.60% 19.43%  

Timeline: When do Most Gifts Come In?

9/9/2009Mailing date

Bulk of mail returns

30

8/29 phonathon starts

60 90 120 150 180 210 240

Bulk of phonathon returnsLast phonathon gift

1st phonathon gift

Last mail gift

1st mail gift

What could we have been doing here?

Timeline: Use the 95% Confidence Interval

95% Confidence Interval and Giving

• 95% of gifts come in within 53 days of mailing (e-mail) for this segment.

• Count percent of all gifts from this segment who gave within 53 days.

• This sample:

Gave later than 53 days

Gave within 53 days

ENGAGEMENT

Aren’t We the Engagement Makers?

• Annual giving programs are responsible for engaging new donors, donor renewal

• Can engagement indicators also be used for annual giving programs?

• What would that look like?

The Information Score

Prospects who tell you more about themselves are more likely to become donors.

Variables in the Equation

  B S.E. Wald df Sig. Exp(B)

Step 1a

MSFlag -.203 .038 29.243 1 .000 .816

BirthdateFlag -.135 .039 12.162 1 .000 .874

EmailFlag .885 .040 489.738 1 .000 2.423

CountofConstituency 3.116 .120 674.705 1 .000 22.549

CountofDegrees .275 .036 59.032 1 .000 1.316

SpecPrefixFlag .626 .081 59.422 1 .000 1.869

Constant -4.897 .134 1330.023 1 .000 .007

a. Variable(s) entered on step 1: MSFlag, BirthdateFlag, EmailFlag, CountofConstituency, CountofDegrees,

SpecPrefixFlag.

Triggers from Donors for Leadership Givers

• First gift amount: What is the average for your top donors? It’s usually higher than for other donors.

• Velocity: If a donor gives 2 times this year as the average of her prior 3 years’ giving, pay attention.

• UpOrDown: Increasing giving more often than decreasing – steward and ask.

Modeling Characteristics of High End Donors

1.Giving to funds outside of annual giving2.Presence of a special prefix3.Presence of an email address4.More than one designation assigned to

the prospect’s highest gift5.First gift amount – cultivate and steward

prospects whose first gift amount is $3,500 or more

Velocity

• Test velocity and reward high velocity donors with higher touch contact.

Page 40

YearseviousingAverageGiv

YearGivingLast

3Pr

Velocity: Pursue Donors with a Velocity of 2.0 or More

Score 1 or less

Score 1.1 to 2.9

Score 3 or more

UpOrDown Score

• Measure increase in giving over a prior year as 1.

• Measure decrease in giving over a prior year as -1.

• Measure repeated giving as 0.• Measure over 5 years’ changes.• Sum the scores.

UpOrDown Score: 2 or More

Why Am I Not Mentioning Events?

• Most organizations have difficulty tracking event attendance.

• However, prospects who refuse events tend to be donors more often than those who don’t bother.

• Event attendance and survey responses will become important over time.

• Social media are virtual events.

Social Media: At the Question Stage

• Can you track which of your prospects list you on their LinkedIn accounts?

• Are you using MeltWater.com to track tweets about you?

• Who likes you on Facebook? Donors? Large donors?

WRAP UP

Where Do I Begin?

• What does your program need to do?– Acquire donors– Retain donors– Upgrade donors

Pick a Method/Study You Understand

• If you’ve never heard of CHAID, learn about it before using it.

• Use a study that resonates with you.• Get results, implement the strategy, and

measure performance.• After that, learn something new.• Lather, rinse, repeat.

Questions?

• Marianne:– marianne@helenbrowngroup.com– mmp39@cornell.edu– Twitter: mpellet771