RFM!

Quite some time ago, I promised to explain how to do a simple RFM scoring project. Here we go.

RFM stands for Recency, Frequency and Monetary. It is a method used by retailers to determine their best customers. This concept can be applied in the fundraising world to determine our best annual fund givers, which can help us prioritize upgrade and retention efforts.

Recency -- How recent was the last gift given to you?
(Database field: last gift date)

Frequency -- How frequently does the donor give to you?
(Database field: total number of gifts)

Monetary -- How much money has the donor given to you?
(Database field: cumulative giving total)

Creating the score is simple. Export an Excel list of your prospects including the three database fields listed above.

For each variable (Recency, Frequency, Monetary), divide the list into fifths, and score each fifth 1 - 5, with 5 being the high score. So, first, sort your list by last gift date, descending order (so the top of your list is the most recent last gift date). Create a column called "Recency." Assign a 5 to the first fifth of the list, 4 to second fifth, 3 for the middle fifth, and so on.

Do the same for Monetary and Frequency. When you have three columns (Recency, Frequency, Monetary), then name a column "RFM Score," and add up the individual scores from the R, F and M columns. This is your RFM Score.

Once you nail the basic concept, you can tweak the formula in lots of ways. An easy way to tweak it is weighting -- giving more points to certain factors. I often weight for recency and frequency, because I want to know who my up-and-coming prospects are. To weight, simply multiply one or more of the variables by a set value. I like to multiply recency x 3, and frequency x 2.

You can also play around with the variables. Use last gift amount instead of cumulative giving for Monetary. Look at number of gifts in the last five years for Frequency.