RMF Segmentation: Data-driven Fundraising
RFM analysis is a Marketing formula used to segment donors based on donations made. The idea is to segment donors based on when they donated in the past, how often they donated in a given period, and how much they’ve donated in total. It is different from other segmentation models because it is data-driven, highly accurate, and easily scales to any number of resulting segments.
The analysis of the RFM variables (Recency, Frequency, Monetary) leads us to the segmentation into groups or clusters that allows us to identify what type of donors an organization has. The default groups that you define are Active, Inactive, Silent or Lost Donors and within these parent groups you can further segment the database according to the values obtained from the RFM analysis. The communication or fundraising/marketing actions will be focused differently for each group of donors.
The Clusters
The central concept: Segment the donor database using a digital tool based on RFM analysis.
- You customize the parameters based on your historical information and goal expectations to classify your segmented groups.
- You can adjust the group names and terminology that fit your Development Department’s terminology. Some examples are: Best Customers, High-spending New Customers, Loyal, Whales, Rookies, Slipping, Churned Best Customers.
Once configured in CiviCRM the extension creates a scheduled job that creates the donor clusters on a daily basis. This automation is a major time saver so fundraisers can focus on their strategy and tactics rather than compiling data.
Benefits of Segmentation
Personalization
Organizations and in particular fundraising specialists understand the importance of “knowing your donor thoroughly”. By creating donor segments you will be able to create relevant and personalized campaigns and messages. Call to actions, communication strategies and fundraising actions will be targeted to each group. Do you need to nurture your more recent donors into onboarding opportunities? Do you have frequent donors at a lower monetary value that could be elevated if you understood what they really cared about?
Adjusting Strategy
By clearing reporting on each donor segment over time, your fundraising department has metrics on performance within various clusters of their overall donor pool. For example, if donor retention is a priority you can clearly target and assign staff and volunteers to this cluster. After you’ve been implementing your tactics, you can review the performance to see if your retention strategy is making a difference.
Allocation of Resources
All nonprofits have limited staff and volunteers to carry the weight of fundraising. Because of this, knowing what donors are fueling or have a higher giving potential is vital in focusing staff resources to communicating. Whether it is “Champions” that are high in all 3 RFM categories that you need to maintain close, personal contact with or new customers that need to be nurtured, focusing on areas that produce results is essential.
And on the other hand, knowing that a contact is truly a “Lost Donor” or has a low chance of reactivation is vital. You may dedicate a smaller portion of time to reactivating lower monetary and less recent donors. Avoiding the lower RFM scores saves time and effort. Essentially, your fundraising team can allocate their time each month to the various clusters accordingly. When you accumulate many contacts, it is essential to cluster your database to match groups with outreach techniques.
How it was Developed
Making CiviCRM a stronger fundraising platform was designed for Radio Maria World, who requested this functionality. Their fundraising director and CRM administrator Fabiola Occhiuto and Andrea Moccia from Asset Roma guided us through the requirements to shape this idea.
Contact us and we will schedule a demo on the powerful ways automated RFM segmentation can elevate your fundraising potential.