One of the fundamentals of fundraising is RFM modeling. Whether your organization is sending direct mail appeals, email campaigns or peer-to-peer fundraising enrollment campaigns, they can all be made stronger when considering the RFM score of each donor.
In order to understand exactly what RFM means to your efforts, and how to incorporate it into your responsive fundraising strategies, we’ve created a comprehensive guide. We’ve also added a resource to ensure that you can get to work on implementing strategies immediately. Download our RFM Matrix tool to calculate your donors’ RFM score instantly.
What is RFM: A Definition
The first question to address is what does RFM stand for? RFM is an acronym for recency, frequency and monetary. Combined, these three factors give you an idea of how connected your donors feel to your organization and what their giving capabilities are at any given moment. But before we get into why and how to do an RFM analysis, let’s explain exactly what recency, frequency and monetary mean.
Recency speaks to the time that has passed since a donor’s most recent donation. Responsive fundraisers understand that, like everything else, recency scores are personal to each donor. Some donors may actively participate in a monthly subscription program, while others dedicate themselves to giving on the anniversary of an important event.
When you’re creating the RFM model specific to your nonprofit, ensure that everyone is clear on what the definition of giving is. Remember, individuals can give in a variety of ways, including cash, volunteering, advocacy, and more. You don’t want to reduce an individual simply to their monetary gifts. Doing that will make your supporters feel like nothing more than an ATM. Your team can work to create a definition that works for most of your donors, or, you can create an RFM model for each of your donor personas. No matter which you choose, make sure that everyone on your team understands so that the RFM scores in your Matrix tool are consistent.
In most cases, you can start by segmenting donors based on 6 month increments. For example, donors who’ve given in the last 6 months receive a score of 3. Those who gave between 6 and 12 months ago get a score of 2. Anyone who gave between 12 and 18 months ago receives a 1 and everyone beyond 18 months gets a 0 on their recency score.
If that doesn’t work for your donor personas, feel free to create the RFM model that works best for you. Your RFM Matrix tool is easily customizable to fit the needs of each of your donor segments.
In RFM analysis, frequency explains how often a person gives to your organization. Most fundraisers feel the daily frustration of trying to inspire a second gift from the modern individual donor. When you’re filling out your RFM Matrix tool, don’t be discouraged if this is a low score for all donors. Over time, as you use responsive fundraising strategies, you’ll start to see this score increase.
As we mentioned with recency, frequency will not be a one-size-fits-all number for each of your donor personas. Different factors, including capacity, can affect how often a person can give. When considering your engagement and appeals strategies based on the frequency score, make sure that you are using the right donor segmentation. For example, those who give through a subscription won’t likely want to increase their frequency. They’re likely at capacity.
However, donors who give an average of 2 gifts a year can likely be nurtured by your fundraising teams to give 2.5 gifts a year. You may also need to consider other ways they’re giving before you calculate each donor persona’s final RFM score. While your team may only see 2 gifts, the donor knows that they attended an event, recruited 3 friends to your cause and had their employer match their donation. To them, that increases their average frequency to 5 gifts per year.
Responsive fundraisers understand that their RFM analysis needs to be donor-centric and not limited to the numbers they can see in their reporting. In Virtuous, we allow our customers to see the bigger picture of a single donor’s financial impact, to make this process easier. With features like relational connections, network giving and more, you can easily see the different ways each individual donor gives to your organization and how often.
Finally, monetary describes the amount of money a donor gave. Again, this can be calculated a few different ways, depending on what works best for your donors and your organization. Most often, nonprofits create RFM segmentation based around donors’ lifetime average or median gift size. For your organization, it might make more sense to calculate based on the median gift size over the last 12 months, or even their most recent gift.
Averages can be misleading, especially if your donor segments include major donors, or those donors gave a large one-time donation. Most often, it will be helpful to use median monetary information, as it will exclude the outliers and give you a clear picture of what most donors are giving within a given segment.
Of course, the goal of this RFM factor is to increase the monetary score for each donor segment. Responsive nonprofits know that some segments will be better suited to increase their median gifts than others. For example, alumni who graduated 20 years ago will likely be much more receptive to a bigger ask than the ones who only graduated last year. As with recency and frequency, make sure your entire team is clear on how you’re calculating monetary scores so you can make the best strategies based on consistent RFM analysis.
Calculate an RFM Score for Your Donors
The RFM formula will look different for each nonprofit based on how you raise money and what you’re hoping to do with the information. While our RFM Matrix tool will do the hard work for you, it’s important to understand the basics for how to measure RFM so you can set up each formula based on your specific goals.
Essentially, you’ll assign a value based on parameters set for each donor segment. For each RFM factor, pick a range and assign a value to that range 1-5. For example, let’s say any gift that occurred in the last 6 months gets a score of 5, each donor segment that has donated more than 5 times in the last 12 months gets a score of 5, and each segment that gave more than $100,000 gets a 5. Your team would then need to work backwards from 5 to 0, assigning a range to each numerical value.
As we mentioned, the ranges and scores will vary based on your individual goals, the most critical part of your calculations is to ensure everyone is using the same definitions. Use our free RFM Matrix tool to establish your current standard and revisit it regularly to ensure that you know how the RFM score is evolving for each segment.
What RFM Analysis Will Tell You About Donor Relationships
As with all fundraising strategies we try to help with, the work you do with RFM modeling should make you more responsive to your donors’ experiences. There are certainly more complex and comprehensive ways to understand what your donors care about most, and how you can inspire more generosity from them. However, an RFM score is a quick, high-level formula that is easily understood by all stakeholders and can illuminate any major problems.
For example, if a particular donor segment has not seen an increase in their monetary score in the last 12 months, it’s likely that you’re not using responsive gift arrays. You’re leaving money on the table by not encouraging donors to add an extra $5 to their gift. Conversely, maybe another donor segment has seen a steady increase in monetary donations. Examine the ways your team is engaging with those donors. What communications are working to bring donors closer to your cause and inspiring bigger gifts?
To ensure that you remain responsive to your donors interests and passions, you should revisit your RFM reporting regularly. Look at it as a single score and in context of other important key performance indicators (KPIs). The more comprehensive story you can create around donor experiences, the better your responsive fundraising strategies will be.
RFM is just one of many ways to understand donor behavior
RFM is a tried and true way to segment your donors for outreach, but it is only the beginning. In today’s hyper-connected world, many other important data points (arguably more important, in fact) exist for understanding donor behavior: social media, peer-to-peer networks, wealth data, interactions with your website, location, and more. All of these signals can provide a much more three dimensional picture of what your donor is interested in, and when—and how—they’ll likely take the next action with your nonprofit.
The donor journey is fundamentally personal, which means your analysis of donor behavior must take personalization into account, too.
In short, RFM is a key starting point for analyzing giving trends at a macro level, but it leaves a gap in visibility on the donor-level. This means you need not only to be aware of a donor’s monetary history, but also keep in mind other important signals, like their role, social influence, network, key interactions with your nonprofit over time, and their location (especially as it relates to others in your database who are also located nearby). When you factor all of these together, you can create much more personal engagements with your donors than RFM alone would allow.
How To Use RFM Segmentation to Increase Revenue
Each nonprofit will use their RFM data differently, based on what they hope to accomplish. If your most immediate need is to increase revenue using RFM modeling, start by identifying the ideal score for each donor segment.
Look at the kinds of communications that ideal segment got throughout their entire donor journey. Analyze which engagements were the most effective and which did not move the needle in any measurable way. Look for patterns that indicate how many touches a donor segment needed before they gave. Try to find content themes that they seemed most inspired by in the moments before they gave.
You can use your nonprofit CRM for most of this data, but to be most successful, you’ll need an all-in-one nonprofit CRM and marketing automation tool, like Virtuous, which do much more than a CRM on its own. You’ll be able to take donor generosity history and leverage tracking pixel data, social media information and engagement data from email, direct mail and events. All of these insights work together to tell the complete story of the donor experience for that segment. With all the relevant information, you can begin creating an optimized donor journey for the segments with less than ideal RFM scores.
Get the Essential Tool to Improve RFM Scores in Your Donors
To get started with RFM modeling, download our RFM Matrix tool. You’ll get instant access to our completely customizable guide that you can share with your team. Available now by filling out the form.