Practical ways to use your data to drive up

results

Exploring SegmentationFiona McPheePareto Fundraising

Segmentation as your starting point

Targeting, testing & analysis as the goal

I’ve had to make a few about what you already know and do so we have time for the good bits

Assumptions

Bothering has a discernable benefit You have buy in, why is understood and it’s used consistently so it’s not:

We Agree That You Have To Bother With Segmentation

Underutilised Tossed Aside Disliked by users

Communicating with everyone, every time is not effective

fundraising• Not everyone is the same• Not everyone wants the same thing

We agree that:

Understand how your supporters

behave

Make informed decisions

We agree that implementing some form of segmentation will benefit your fundraising program by

primarily helping you to:

We acknowledge segments of One is the goal?Tailored to

the individual

Right ask, right time,

right channel

Best ROI possible

(short-term / long-term)

Acknowledge segments of One groups is the reality?

Major Donor Program

Middle Donor ProgramCor

e Program

Gran

ular

ity o

f seg

men

tatio

n

Use Segmentation To Consistently Target & Measure

Who What When Outcome Inform next move

Use Segmentation To Consistently Measure

•Increase gross / net income•Increase response rates•Increase average gift

Program / Strategy

•Measure / Improve effectiveness of every dollar you spend – ROI•Measure / Improve revenue generating efficiency of every dollar you spend - CPRCampaign

•Increase Life-Time-Value•Increase retention / Decrease attrition•Increase gifts per donor•Increase multi-interaction (cross-sell)

Donor Base / Donor Type

Use to create fairly homogenous

groups which are likely to respond in similar ways to our

strategies

Use to prioritise these groups in

order to target and understand their

behaviour

I used segmentation primarily by

Recency, Frequency, Value (RFV). RFV is a tactic – there are

other options

My starting point for segmentation

Psychographic Segmentation• Powerful potential – the goal of many Marketing &

Fundraising teams• Often revealed by qualitative research

• e.g. personal experience of services offered by charity• Data very hard (expensive) to capture and maintain at an individual

donor level (and nearly always an additional cost to standard database stored information such as transactions)

• Psychology is more complex than a data point or two (e.g. people change their minds) and so even psychologists find it hard to determine practical marketing psychographic segments that can be effectively used for targeting.

• May be easier to use psychographic segments to inform creative treatment only

Demographic Segmentation• Social and economic information is fairly

commonly available data (internally or externally) and therefore somewhat practical

• Age can be a useful additional overlay• Widowers with absence of grandchildren

correlates strongly with bequest realisation• Not a reliable predictor of behaviour - no

obvious practical value for a targeted communications programme

• Helps us to know who is in our segments

Geographic Segmentation• Basic and obvious insights

• Affluent areas/ higher donor penetration areas• Proximity to Charity service areas if relevant

(e.g. a Hospital)

• No obvious practical value for a targeted warm communications programme

• Can be helpful for acquisition targeting• Might be useful for local level prospect

targeting/ broadcast media/ door-drops

Behavioural Segmentation• The product of psychographics and

geodemographics

• A charity’s (your) supporters are already a highly niche, homogenous market segment (why swaps work)

• RFV is the most common behavioural segmentation • Adapting for fundraising & your program / donors

and your activity is key

Common Fundraising RFV

Recency Frequency Value

0-12 months >1 a$1000+

13-24 1 b$500-$999.99

25-36 c$250-$499.99

37-48 d$100-$249.99

49-60 e$50-$99.99

61-72 f$25-$49.99

73-84 g$10-$24.99

85+ h$0.01-$9.99

Likelihood of transacting again

Potential value of the

transaction

Donor Type

RFV

Tailoring

Cash Donor Lottery In Memoriam Other Event 0%

2%

4%

6%

8%

10%

12%

14%

16%

Response Rate by Supporter Type Re

spon

se R

ate

Group lower

volume for

ease

Regular Givers Cash Donors Campaigners Lottery

Players

Event Attendees

In Memoriam

In Celebration

Peer-to-Peer Fundraisers

Peer-to-Peer Sponsors Members Virtual Gift

Purchasers

Regular Givers

Regular Givers Only

Regular Givers & Cash

Donors

Regular Givers &

Members

Member & Cash

Donor

Cash Donors

Members Only

Virtual Gift Purchaser Other

Lottery Players

Event Attendees

In Memoriam

In Celebration

Cash Appeal

Cash Donors

Members Only

Member & Cash Donor

Virtual Gift Purchaser Other

Lottery Players

Regular Giving Conversion

Practical Applications To Improve Results

Use segmentation to manage tactics and testing to increase response rates and net income

The question “How much of our warm donor base is optimum to mail (or phone, offer lottery)?” is often asked of a data set. The best way to answer this is via a segmentation model which will help identify not only those donors that will respond to appeals, but the value of the responses.

0-12 13-24 25-36 37-48 49-60 61-72 73-84 85+0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Typical effect of Recency on Response

Recency (months since last gift)

Resp

onse

More recent supporters respond better than those donors who haven’t transacted for some time.

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 580%

5%

10%

15%

20%

25%

30%

Typical effect of Recency on Response

Recency (months since last gift)

Resp

onse

Those who did it recently are the most likely to do it again

The purest way of considering frequency in a RFV model is to look at the giving interval.

<3 3-5 6-8 9-11 12-14 15-17 18-20 21-23 24-26 27-29 30-32 33-36 >360%

5%

10%

15%

20%

25%

30%

35%

Typical effect of giving interval on response - Multi Donors

Cash giving interval

Resp

onse

Rat

e

Split by 12 month intervals – highly predictive, but more so for 0-12 donors than the 13+ that may be unprofitable

<12 12-23 24-36 >360%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Typical effect of giving interval on response - Multi Donors

Cash giving interval

Resp

onse

Rat

e

Resting (not giving a chance to do it again)

will affect response in short-term

An alternative, and simpler to implement, way of looking at frequency is simply to look at the number of gifts a donor has made.

1 2 3 4 5 6 7 8 9 10+0%

5%

10%

15%

20%

25%

Typical Effect of frequency on response 0-12 recency

Cash Gifts

Resp

onse

Rat

e

Jump in response once

a donor has made 3 or more

gifts

When we look at the 13+ recency donors, the jump in responsiveness comes at the 2nd gift

1 2 3 4 5 6 7 8 9 10+0%

1%

2%

3%

4%

5%

6%

7%

Typical effect of frequency on response13+ Recency

Cash Gifts

Resp

onse

Rat

e

The more gifts given in the

past the more likely they are to give, useful

for reactivation

In response to the original question, who are profitable to mail, then this becomes a question of focusing on the lapsed donors to eliminate those that are not profitable. For practical reasons, splitting by single and multi donors provides good distinction in for these lapsed donors.

1 >10%

2%

4%

6%

8%

10%

12%

14%

16%

Typical Effect of frequency on response

Cash Gifts

Resp

onse

Rat

e

“How much of our warm donor base is optimum to mail?” • Those who gave more recently• Giving interval /number of gifts predictive of

response– More gifts = better (for both recent and lapsing/lapsed)

Summary

When we look at the value, we have several options to consider. Total giving, Value of last gift, Average gift or Highest Gift. The total giving is usually excluded because it effectively combines the frequency and value.

$0$30$60

Typical effect of Value on IncomeHighest Gift

Value (Highest Gift)

Inco

me

per d

onor

mai

led

$0$40$80

Typical effect of Value on IncomeLast Gift

Value (Last Gift)

Inco

me

per d

onor

mai

led

$0$30$60

Typical effect of Value on IncomeAverage Gift

Value (Average Gift)

Inco

me

per d

onor

mai

led

PotentialActual

© Pareto Fundraising 2013

TargetingExample Charity

© Pareto Fundraising 2013

Targeting

Donor type

Example Charity

© Pareto Fundraising 2013

Targeting

RFV

Example Charity

© Pareto Fundraising 2013

Targeting

Strategy

Example Charity

© Pareto Fundraising 2013

Targeting

Counts

Example Charity

© Pareto Fundraising 2013

Targeting

Strategy

Example Charity

Active Regular

Giver

F2F

Recency of recruitment

Upgrader (Y/N)

Phone

Recency of recruitment

Upgrader (Y/N)

Regular giving example

• System (Database)• Expertise (staff expertise)• Capacity (staff resource)• Size of program (what level of granularity is

worth it)

Behavioural / RFV Challenges

SCORING

Another application of segmentation analysis is to take the significant variables, and create a scoring model that combines response and value predictors.

• Good for the phone (lottery, RG, cash, BQ) as the fixed costs are limited but the marginal costs are high / cost per contact is high therefore you need a more precise view of the return per donor– With the mail for example the marginal costs are low and hard to calculate, lot more

fixed costs– Requires significant variables (impacting response/desired outcome) to be identified

(and validated and refined over time) which are determined by initial analysis which should be refreshed and assessed for accuracy/changes over time

– Example of use: higher scored donors would be called more frequently• Mail programs tend not have the frequency fluctuations but say 12 x per year your mail saings may be

good

What about scoring?

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

0%

10%

20%

30%

40%

50%

60%

70%

80%

Response & Income by score

Actual Resp Income per donor

RFV Bequest Prospect

Bequest Scoring

Demographic indicators

Bequest Prospect

Donor Attribute Score

Loyal Donor (RFV driven)

Number of gifts (e.g. 10+, 5+)

Length of giving (e.g. 10+ years)

Donor Type (e.g. RG & Cash, Cash Only)

Gift value band (RFV driven)

Payment type(s)

Age (</>)

Has children / grandchildren

Proximity to cause

Responded to survey

Changed details

RFV Scoring Overalys

Bequest Score

Bequest Scoring

SEGMENTATION WITHIN SEGMENTATION

Segmentation within Segmentation

• Analysis to identify your value band / profile

• E.g. $1k - $5k active multi, new $1k - $5k

Middle Donor Progra

m

Some form of direct response Age Longevity

Upgrade Other channel usage e.g. SMS

Response to a declined payment

communication

Mailing F2F Recruits – What overlays may indicate potential?

OTHER IDEAS

Topic of Acquisition

Premium Type / Value

Premium vs. non-Premium

recruits

Recruited via a swap

Have been swapped

Subjective list then analyse

Other overlays to consider

Number of touch points

2nd Gift rate by contact type segments & recruitment type

0

200

400

600

800

1,000

1,200

1,400

0%

10%

20%

30%

40%

50%

60%

70%

80%

Addr

1

Addr

1 Em

ail

Addr

1 Em

ail L

andl

ine

Addr

1 Em

ail L

andl

ine

Mob

ile

Addr

1 Em

ail M

obile

Addr

1 La

ndlin

e

Emai

l

Addr

1

Addr

1 Em

ail

Addr

1 Em

ail L

andl

ine

Addr

1 Em

ail M

obile

Addr

1 La

ndlin

e

Addr

1

Addr

1 Em

ail

Addr

1 Em

ail L

andl

ine

Addr

1 Em

ail L

andl

ine

Mob

ile

Addr

1 Em

ail M

obile

Addr

1 La

ndlin

e

Addr

1 M

obile

Emai

l

Emai

l Mob

ile

Addr

1

Addr

1 Em

ail

Addr

1 Em

ail L

andl

ine

Addr

1 Em

ail L

andl

ine

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ile

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ail M

obile

Addr

1 La

ndlin

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obile

Emai

l

Cash Recruit Virtual Gift Recruit Emergency Recruit Disaster Recruit

2nd Gift Rate (Year 1) RecruitsBase: 2009 - 2014 Recruits

The more info provided = better second gift rate

2nd Gift rate by simplified contact type

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Addr

1

Addr

1+

Emai

l

Emai

l Lan

dlin

e

Emai

l Mob

ile

Land

line

Mob

ile

Addr

1

Addr

1+

Emai

l

Emai

l Lan

dlin

e

Emai

l Lan

dlin

e M

obile

Emai

l Mob

ile

Land

line

Mob

ile

Addr

1

Addr

1+

Emai

l

Emai

l Lan

dlin

e

Emai

l Mob

ile

Land

line

Land

line

Mob

ile

Mob

ile

Cash Recruit Emergency Recruit Disaster Recruit

2nd Gift Rate (Year 1) RecruitsBase: 2009 - 2014 Recruits

Simplified view of the contact segments shows us that Address plus something

else or just address are best 2nd gift opportunity.

Donor Base / Donor Type Tracking

1 2 3 4 5 $-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Net Income All & ROI All

Series1 Series2

1 2 3 4 5 $-

$50,000 $100,000 $150,000 $200,000 $250,000

- 0.50 1.00 1.50 2.00 2.50 3.00

Net Income Newsletters & ROI Newslet -ters

Series1 Series2

1 2 3 4 5 $-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

- 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00

Net Income Appeals & ROI Appeals

Series1 Series2

Donor Type Tracking

Donor satisfaction with the quality of service provided by the fundraising team is the single biggest driver of loyalty towards the organisation

Satisfaction Levels

Commitment Level

Motivational Segmentation

Right thing to do

Environmental issue

Rights issue Its all three

Advocacy

Education

Basic Needs

FIONA MCPHEEFIONA.MCPHEE@PARETOFUNDRAISING.COM TWITTER: FIMCPHEEPHONE: +6421 336 905WEB: WWW.PARETOFUNDRAISING.COM