This article originally appeared in Canadian FundRaiser

The primary objective of relationship marketing is to increase the lifetime value of your donor base by increasing both the number of times and the amount that each donor gives to your organization. RFM Analysis, on the other hand, is a powerful tool you can use to lower your costs and increase your response rate.

RFM refers to the trinity of direct marketing analysis – examining your donor base by the Recency, Frequency, and Monetary support you have received.

Some of the donors who have supported your organization in the past may have given just last week; some will have given five years ago; and most will have given somewhere in between. This is known as the recency of the gift, important to know for one simple reason: the more recently a donor has given, the more likely they are to give again. Don’t believe it? Then try this experiment on your own donor base: determine how many donor you have who last gave a year ago, and how many last gave three years ago. Now, take a look at how both of these groups responded to the most recent solicitation that they both received. There should be a significant difference between the two response rates.

Frequency refers to the number of times a donor has contributed to your organization. If someone has contributed just once, then they are less likely to respond again than someone who has given in each of the last five years. Again, you can try the experiment on your donor base by comparing the results from the two groups.

The monetary part of this analysis deals with the amount that the individual has given in the past. It stands to reason that a donor who has contributed $20 will likely contribute in and around that amount the next time; and a donor who has given $200 is likely to give in and around that amount the next time as well.

Much of this is common sense. But how are you using this information to help your organization? For example, if you know that someone who’s only contributed once, a four years ago, at the level of $10, are you still mailing them every single solicitation, or are you reducing costs by cutting back the number of requests they receive?

Are you analyzing your donor base in the first place to look for these trends? While there are many very sophisticated ways to slice and dice your donor base, by far the most important is the RFM analysis. Most organizations, with a bit of time, some query or report programs, and a desire to improve their results, can learn a lot by examining the Recency, Frequency and Monetary patterns within their donor base.

Tony Lovell is President of Lovell & Company Inc, a company helping its clients achieve exceptional results through effective Direct Marketing programs. His company assesses programs, develops strategy, and provides a full range of creative and production services. He can be reached by calling (416) 763-7173.