“Wait!”, I hear you cry.  “You preach on cause and effect and past behavior does predict future behavior.  How is that not strategic?”

We’ll stipulate:

• A person will tend to give the amounts that they have given in the past
• A current donor is more likely to give than a lapsed donor
• A donor who has given multiple gifts is more likely to give than someone who has given only one gift

So, by all means, include transactional information when you set your ask string and when you decide who is in/out for a given communication or campaign.

But… somewhere along the line, we confused transactional analysis like RFM as merely useful and elevated it to a position of  primacy.  Sometimes, we even confuse being primary with being the only.

This is wrong.

Transactional analysis should not be the only segmentation you do nor should it even be the first.

Transactional analysis focuses on the wrong question:  “what people does my organization want to send this communication to?”  Rather, the first question you should ask is “what people will want to receive this communication?” or “how can I make this communication something these people want to get?”

This order is important.  You want the variables that make the most difference at the beginning of your decision tree so you can create different versions or include/exclude audiences based on the most important information.

Let’s take a trivial,simple example. The most important factor in determining if someone will respond to a communication is whether they are alive.  If they are, they can respond.  If they aren’t, they can’t.

If you were segmenting based on RFM + are they dead, it would make no sense to create 64 different variants of RFM, then apply the “are they dead” filter to every one of those 64 segments.  Rather, you first remove the dearly departed, then do the rest of the segmentation.

There are a few of these gatekeeper questions (e.g., “did they opt out of this channel? No”, “are they on the seed list? Yes”) that are the most important things.  They come first.

What comes next?  What makes the most difference in both who will get a communication and what it contains?  It’s not RFM segmentation.

Yes?  You in the back of the room?  Channel?

Yes, that’s better.  If you are sending a mail piece, you are going to send it to a far greater proportion of mail donors than of online donors.  Channel is usually very predictive of response and it is a tactic-based answer to “which people will want to get this communication?”

But it doesn’t address why someone gives to an organization.  This is the central point on which all messaging pivots (and thus segmentation should pivot).  Until you segment by donor identity, you will always have more difference among people in the segmentation bucket than between buckets.

We said channel beats RFM in predictive power; how does donor identity do versus channel?

Here’s an example from a health charity (some numbers tweaked for anonymity):

Pretty thin gruel here. What you might learn is that mail donors are a bit more valuable and that people tend to stay with their own channel.  But when writing the appeal, you have no idea what to say for the mail group that is different from digital.

Now let’s look at this same audience. This time let’s view it from the perspective of  whether they were a direct beneficiary of services, indirect beneficiary, or no connection:

Now we have some insights that are actionable.  Direct beneficiaries are the most valuable and most committed by a significant margin — there’s far more differentiation here than by channel.  They are also more likely to attend your events.  Each of these donors has a mailbox, email box, and phone number and it’s just a matter of their preference by which they give.

In fact, when we dug into the details behind these groups, we found the most important factor (60%) in creating the donor’s relationship with the organization was patient care services.  If they hadn’t been or loved a patient, they didn’t care about patient care services at all.

With identity segmentation you know which group is most valuable and responsive. You also know what to say to them.  Then… if you do RFM segmentation after segmentation-by-identity, you can go deeper into the file of those with a direct connection than those with no connection (with entirely different messaging).

This is segmentation at its best – a segmentation focused on the recipient.

Kevin

P.S. You can have business process that gets Identity data (and Commitment data) for everybody if you bake it into acquisition.  This is especially true of event, F2F, TM and online.   If they can give you their bank details, they can give you their Identity and they’ll derive more value in sharing the latter.

P.P.S. Your biggest problem is Year One.  Start with new donors.  Collect the missing data you need to do strategic segmentation and let the other, still important, tactical segmenting follow.