1. Analytics for Annual Fund Segmentation: 2012 Marianne M. Pelletier, CFRE Cornell University March 20, 2012

2. Outline RFM (Recency, Frequency, and Monetary Value), ROI (Return on Investment) Understanding engagement

3. 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/

4. RFM Easy to measure, fun to use

5. 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.

6. RFM – A Powerful Segmentation Tool Recency 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. Response Rate Average Gift Size Borrowed from Sally Boucher of WealthEngine, See: http://www.wealthengine.com/news- events/educational-webinars/fundraising- intelligence-actionable-strategies-growing-your-0http://www.wealthengine.com/news- events/educational-webinars/fundraising- intelligence-actionable-strategies-growing-your-0

7. Recency How recently did the donor give? Can you go back again for another gift? Helps show LYBUNTS and SYBUNTS

8. Frequency Monthly or annual pledge payments? Givers every year Finds infrequent but high donors (5-year pledgers)

9. Monetary Value Obvious!

10. 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.

11. 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 5 th of the file 3.Assign the top 5 th – those who have given most recently - the number “5” 4.Continue assigning each 5 th of the file a number until you get to the final 5 th 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 http://www.wealthengine.com/news-events/educational-webinars/fundraising-intelligence-actionable- strategies-growing-your-0

12. Three-Year RFM Analysis Example: Prep

13. =IF(B4>=DATEVALUE("11/25/2011"),5,I F(B4>=DATEVALUE("5/27/2011"),4,IF( B4>=DATEVALUE("11/30/2010"),3,IF(B 4>=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>=10 0,3,IF(D2>=50,2,1)))) For monetary, we also marked the records by the indicated bins.

14. How it Works 5 5 Recency Frequency 5 5 4 4 3 3 2 2 1 1 Money 4 4 5 5 3 3 2 2 1 1 4 4 3 3 2 2 1 1 4-3-4 125 Segments

15. Segment Based on RFM Scoring 5-5-55-5-45-5-35-5-25-5-15-4-15-4-25-3-1 5-5-35-4-45-4-35-3-45-3-24-5-14-5-24-4-1 4-5-54-5-44-4-54-4-44-5-23-5-13-5-23-3-1 3-3-53-3-43-2-53-2-43-3-33-2-23-2-33-2-1 3-1-53-1-42-4-52-4-42-3-12-4-12-4-22-4-3 2-3-52-3-42-2-52-2-42-3-32-3-22-2-22-2-1 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.

16. Our 3-Year Sample Based on RFM Putting the score together, use the ampersand: =E4&F4&G4. Pivot on the score.

17. Our 3-Year Sample Not a whole lot of high frequency, high recency, low monetary scorers, which is good.

18. Monetary Score = 5

19. Alternative Data Preparation Use 3 segments instead of 5 if your results are too granular. Use CHAID for finding the segment boundaries.

20. 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

21. Example: Small Alumni Base – Smaller Number of Bins

22. Using CHAID for Determining Segments 7 bins for freq. 6 bins for recency Highest possible score is 6-7-5

23. CHAID Results: Frequency The more often they give, the higher the money Frequency of 1 or 2: date matters

24. CHAID Results: Recency This result is not as linear.

25. ROI: RETURN ON INVESTMENT Different Ways to Look at Results

26. Cost Per Dollar Raised: Renewals Recognition Level Donors LYBUNTS, SYBUNTS Data is from 1999.

27. Cost Per Dollar Raised: New Donors Do we stop trying to acquire new donors?

28. 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.

29. Cost Per Dollar Raised: Longer Sightedness

30. Gifts Per System Hour Description # of IDs in Pool System TimeTotal $ Match Rate Avg Total Pledge Pledge Rate Credit Card Rate Gifts Per System Hour General Non- Donors FY08 (all gen non-donor pools)27391720:40:00$56,218.3810.65%$117.3717.99%41.34%$1,872 FY0719066694:07:00$45,749.199.72%$108.4111.67%30.81%$1,582 FY0618409458:11:04$56,528.0314.89%$92.5217.78%26.35%$2,961 FY0524539 $68,381.768.84%$85.1612.60%19.43%

31. Timeline: When do Most Gifts Come In? 9/9/2009 Mailing date Bulk of mail returns 30 8/29 phonathon starts 60 90 120 150 180 210 240 Bulk of phonathon returns Last phonathon gift 1 st phonathon gift Last mail gift 1 st mail gift What could we have been doing here?

32. Timeline: Use the 95% Confidence Interval

33. 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:

34. Gave later than 53 days Gave within 53 days

35. ENGAGEMENT

36. 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?

37. The Information Score Prospects who tell you more about themselves are more likely to become donors. Variables in the Equation BS.E.WalddfSig.Exp(B) Step 1 a MSFlag-.203.03829.2431.000.816 BirthdateFlag-.135.03912.1621.000.874 EmailFlag.885.040489.7381.0002.423 CountofConstituency3.116.120674.7051.00022.549 CountofDegrees.275.03659.0321.0001.316 SpecPrefixFlag.626.08159.4221.0001.869 Constant-4.897.1341330.0231.000.007 a. Variable(s) entered on step 1: MSFlag, BirthdateFlag, EmailFlag, CountofConstituency, CountofDegrees, SpecPrefixFlag.

38. 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.

39. Modeling Characteristics of High End Donors 1.Giving to funds outside of annual giving 2.Presence of a special prefix 3.Presence of an email address 4.More than one designation assigned to the prospect’s highest gift 5.First gift amount – cultivate and steward prospects whose first gift amount is $3,500 or more

40. Velocity Test velocity and reward high velocity donors with higher touch contact. Page 40

41. 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

42. 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.

43. UpOrDown Score: 2 or More

44. 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.

45. 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?

46. WRAP UP

47. Where Do I Begin? What does your program need to do? –Acquire donors –Retain donors –Upgrade donors

48. 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.

49. Questions? Marianne: –marianne@helenbrowngroup.commarianne@helenbrowngroup.com –mmp39@cornell.edummp39@cornell.edu –Twitter: mpellet771