Making RFM Work for You

Avatar

In fundraising circles, it’s not uncommon to hear people talking about RFM. But that doesn’t mean there’s always a lot of thought given to what it actually is and why it matters. In this post we’re going to break it down for you, piece by piece.

What is RFM?

RFM – which stands for Recency, Frequency, Monetary – is a helpful way to segment your donor file into different groups of givers based on their giving patterns. If this isn’t something you’ve done, ask yourself: who are our most profitable givers? If you don’t know how to answer that question – much less how to define “profitable” – you need to.

RFM is one basic way to track down that answer. So without further ado, let’s break it down, Sesame Street style.

  • R is for Recency. Recency measures how long it has been since someone has given to your charity. Depending on how your organization does things – including how you track giving, premium requests, “zero-dollar” responses, and other non-cash interactions – the figure you’re looking for is the date of the giver’s most recent contribution of any amount. In most cases, givers will be divided into 6- to 12-month segments (e.g., 0-6 months, 6-12 months, 12-18 months and so on).
  • F is for Frequency. Frequency measures the number of gifts from a person or family over a given timeframe, typically 12 months. In other words, how many gifts do your givers make each year? Gauging frequency on an individual level won’t be particularly helpful from a statistical standpoint, however. Most often, you’ll be interested in seeing frequency expressed as an average for a particular group of givers. So, for example, your “President’s Club” givers may contribute an average of 4.8 gifts per year, which tells you a lot about their level of engagement as a whole.
  • M is for Monetary. Monetary groupings can be calculated a few different ways. Most often, organizations create segments around givers’ lifetime average or median gift size. But you could just as easily look at the past 12 months, rather than the entire lifetime, for that calculation. You could look at the giver’s most recent gift, but that can vary so widely that you don’t get very accurate results or representative segments. My personal preference is to look at median gift size, since averages can be misleading in the event of a large one-time donation or if the donor has only given a handful of gifts.

Implementing RFM on Marketing Campaigns

Because no two organizations are alike, there’s no one-size-fits-all approach for segmenting a donor file. The segments you choose need to align with the unique makeup of your donor base.

Chances are, this will be a balancing act that will require some trial and error over the course of a few months. You don’t want your segments to be too large, and you definitely don’t want them to be too small. Given the choice between too small and too large, err on the side of going too large. Segments that aren’t comprised of enough givers will not end up being statistically significant and will lead you astray when it comes to reporting and coming to conclusions on segmentation results. As a general rule of thumb, no segment should be comprised of fewer than 100 donors.

No matter how granular you want to be with your breakdown of RFM, figuring out which segments to include in your communication is easy. I’ve created a very simple example matrix you can download in Google Sheets that “scores” each level within RFM, and then calculates a total value for the resulting segment. All of the cells have variable formatting to color the cell green, yellow, or red depending on whether it should be included or excluded from the communication.

If RFM isn’t one of the ways your charity has segmented marketing communications, I’d encourage you to give it a try. If you’re already segmenting your givers, feel free to comment with any tips and tricks you’ve learned along the way.

Take a tour of the Virtuous Platform

Learn more about how the Virtuous can help you save time and build better relationships with your donors.

Take a Product Tour