Giving to Your Organization
For-profit marketers have known the value of a loyal customer for decades. A repeat purchaser is much more profitable than a first-time buyer. According to a study by ClickZ, the profit margin on a repeat sale to an existing customer is 133% higher, mainly because there are no acquisition or start-up costs.
It’s the same thing for nonprofits: a donor who gives a significant gift to you regularly has much more value to your organization than someone who gives one gift after weeks or months of development efforts, and then never gives again. For-profit businesses calculate Customer Lifetime Value (CLV) to understand the true worth of a loyal customer. Nonprofits have a similar measure called RFM.
RFM analyzes three key components to pinpoint the most loyal and valuable donors:
Recency, or how recently a particular donor has given to an organization
Frequency, which is how often a donor gives
Money, which is how much a donor has given in total RFM calculations compare each donor to an organization’s entire donor base, not to any other organizations.
For example, if using a 100-point scale, a donor who’d given more to your organization than any of your other donors would score 100. How much that donor has given to other organizations, or how much the top donor has given to other organizations, wouldn’t be considered. Why Previous Giving is Important Previous giving to an organization, as measured by RFM, is an extremely valuable tool for development offices for three reasons:
- It is the best predictor, by far, of future giving
- When analyzed in combination with other key data, such as wealth/capacity to give, it pinpoints the donors that development officers should pursue
- It is one of the best predictors of planned giving That last point is particularly important. Many planned giving donors do not rank highly using traditional wealth markers, and thus are overlooked by many gift/development officers.
If you would like to have your Donors rated for their RFM score the NPOAuthority would gladly arrange a test file screening of your donors.