Top tips on the Recency Frequency Value (RFV) technique – ensuring RFV is used correctly to improve response rates (and ROI?) and measure trendsSteven White, Director of Operations30th November 2010 RFV Model
RFV – two common uses Campaign Selections Are you hard Coding or using sorts to establish RFV cells of equal size and then test? www.dbmarketing.com (RFV for Windows) Purpose of RFV here is deciding who NOT to mail Minimum RFV test cell size = 4 / BE resp rate Read Chapter 5 of Strategic Database Marketing by Arthur Hughes! • Migration analysis • Useful to track supporter migration over time • Some interesting papers on how to set this up e.g. • Recency=2 if last Qtr, 1 if 2nd last Qtr etc • RFV score multiplies R * F * V • This dilutes Recency and favours Value • Create Deciles • Migration patterns using Cluster Analysis • RFV can be a valuable and cheaper segmentation tool • Identify differences between the RFV groups and provide clear course of action • Migration analysis tends to make recency less important • Your supporters income and volume increasing year-on-year? But what is the truth about the quality of your base over time?
RFV – Some variations to try out Value = M / R Values a supporter in terms of historic giving amount (M) over time interval (R) A cash supporter who donates £30 with R=2 (years?) has same Value as a supporter who gave £15 in last year Move beyond pure RFV e.g. Try R + V + A (Age) A good High Value Donor segmentation is V + A (Affinity) + Affluence (A)
The Economics of RFV RFV is relatively simple (A Director of FR can do it!). But you shouldn’t ignore the argument that modelling is almost always better than RFV (for response) But is RFV or a Statistical Model more profitable? Evaluate the economics – it’s a crime if you haven’t done this already! For a low volume donor base, RFV is likely to yield the higher net income However for larger charities, produce the business case and if the economics stack up, then hire an outside expert to build a predictive model
Questions: Has your charity ... • correctly applied RFV in campaign selections ? • calculated the economics of a RFV approach Vs a Statistical Model? • provided the Fundraising Director with a RFV migration report? • balanced the need to focus on short term measures (RFV responses and ROI) with the longer term loyalty measure of LTV?