RFM— What is it? And how does it help nonprofits?

Back when I built and ran global support teams, an acronym that was frequently bounced around in the support world was RTFM or the more polite variant, RTM. If you don’t know the term, I’d suggest looking it up.  

Today, however, we are not discussing RTFM, but rather my thoughts on RFM. It's a minor feature of Salesforce’s Nonprofit Cloud treated as an afterthought rather than getting the due diligence it deserves. 

I may be suffering a bit from recency bias, as I’ve seen a handful of emails touching on the subject in the past week. Yes— I am on a lot of nonprofit mailing lists. Clicking through one of the emails led to a good article that provided a free RFM excel template. I found it a little odd that a CRM vendor would go through the trouble of blogging about RFM and even creating a template though they haven’t included the feature in their product. I can’t imagine too many people will download their entire donor history and munge it into the template for a one time score. 

I turned on RFM for a client this past week and like a kid waiting for Christmas or an adult expecting an amazon package waited for the Data Processing Engine to run the RFM job at the scheduled time. I even set a calendar reminder to go look in the org after the DPE ran. What I saw was amazing! All 60K person accounts and business accounts (yes this is a Nonprofit Cloud customer) had their RFM composite scores calculated.

To me this is a big deal as you now have an algorithmic way to wade through hundreds of thousands of donations and provide a score. The score allows you to segment your donor population based on the commercial world’s approach to purchases. 

In the commercial world’s jargon, Recency, frequency, monetary value (RFM) is an analysis tool that businesses use to group customers based on how recently they made a purchase, how often they buy, and how much they spend. Companies score each customer in these areas, helping them spot the most valuable ones. RFM was developed in the 1990s and has proven to be an effective customer behavior and marketing guide that helps increase sales. It also supports the 80/20 rule, which shows that most business comes from a small group of top customers.

So what does this mean for nonprofits? 

RFM scores can be used to help you  identify your most valuable donors based on their donation behavior. The Recency score reflects how recently a constituent has made a donation. The Frequency score measures how often they donate, and the Monetary Value score represents the total amount they have contributed. The fields and objects used to calculate these scores, along with the weighting of each attribute, are defined during setup. These individual scores are then combined to produce a single, overall RFM score. 

These scores can help you distinguish between first-time and repeat donors, identify constituents who are most likely to donate again, determine appropriate gift amounts for donation requests and identify lapsed donors and re-engage them to strengthen relationships

Back to my customer’s RFM composite scores. The potential is there but the default values I put into the algorithm scored donors who made small donations in the last month higher than a generous donor who only gives once a year. No worries, the algorithm is completely exposed, behind 3 layers of configuration screens. By default, the score is calculated as follows: 

RFM Composite Score = Recency x 100 + Frequency x 10 + Monetary