Will Predictive Modeling Replace RFM Segmentation?

by Max Bunch

Predictive Modeling Image 240 px wideBefore answering this question let’s think back to just two years ago when people were saying that email was going to replace direct mail.  In fact every year for the last three years many people have been saying “direct mail is dead.” Well direct mail is definitely not dead but it is changing and that, I believe, is the answer to the predictive modeling question and RFM.

RFM is getting more and more refined every day. Fundraisers are adding phases to the segmentation selects that make the RFM process more complicated and the RFM results more precise.  But predictive modeling still has promise and potential for improved performance.

We recently used a predictive model to improve the selection process of a major appeal for a client. Approximately 85% of the names selected by the new improved RFM segmentation and the predictive model were the same.  This gave us comfort about both our model and our improved RFM.  But the 15% of the names that the two methodologies didn’t have in common show startling differences.  Names we would never mail the model says “mail.”  And names we feel certain we should mail, the models says “don’t bother.”  I’ll let you know the results in a future blog, but in either case this is where you need to be careful about modeling.

Modeling is a great way to find more and better candidates to whom you can make an appeal.  But using a model to continually mail fewer and fewer people is game that doesn’t end well.  Repeatedly using a model for short term production saving to increase net revenue will ultimately plow under a significant number of valuable donors.

If you’ve tried modeling and failed or modeled with great success share your thoughts with me in the Comments area below. We’re all in this boat together and the more we all know the better we will all perform.  And if you’d like to know were can you use predictive modeling  aggressively without fear, check out my next blog topic, “Modeling for continuous giving, planned gifts and online potential – a fundraising bonanza.”

– Max Bunch, Senior Vice President, STRATMARK

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  • cloraVorp

    Dec. 12, 2009

    I’m often searching for recent articles in the net about this topic. Thx!

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