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Sorting your lists into useful bits
Your list of active patrons, attendees, or ticket buyers shouldn't be an all-or-nothing communication tool.
“Far better an approximate answer to the right question, which is often vague, than an exact answer to the wrong question, which can always be made precise.”
John W. Tukey, from “The Future of Data Analysis”
If your arts organization has been in business for any period of time, you have a list, or many lists, of the people who have given you money. These lists of ticket buyers, attendees, members, customers, or donors include people who have cared about your work, and have demonstrated that care through financial action.
Some of them are highly likely to buy or donate again. Some are unlikely. Some will respond to one kind of invitation. Some will respond to another. The trick – when you’re deciding how to spend your limited time, money, and attention – is knowing (or productively guessing) the difference.
Market Segmentation is the practice of bundling patrons into groups with common needs and similar responses to marketing action. Rather than communicating the same way to every human or household in your database, market segmentation allows for more focused and responsive messaging to encourage desired results.
You can segment your list in a bunch of different ways, depending on the data you have on hand or are willing to pay for.
Demographic segments are based on objective qualities such as age, income, education, or occupation.
Geographic segments are defined by physical location of home or work (often based on ZIP code or ZIP-plus-four).
Behavioral segmentation is based on observable or documented actions or patterns of behavior, often purchase, donation, or attendance records.
Psychographic segmentation strives to cluster people based on their lifestyle, personality, opinions, and interests. These are often constructed out of billions of data points from the previous three categories in complex and creepy ways, and then given catchy names like “Connected Bohemians” or “Country Casuals.”
You can pay lots of money and spend lots of time building complex segmentation strategies – and if they generate additional revenue that justifies (and covers) that expense, go for it. But most arts organizations already have the information and analytical ability necessary to make a basic but powerful first sort.
A good place to start is the Recency Frequency Monetary (RFM) framework, which draws on behavioral data you likely have at hand. A mainstay of the direct mail industry over the past 50 years, RFM still matters in the digital age since it focuses your messaging time, money, and attention in strategic ways.
The conventional approach to RFM has you adding three ratings (5 is highest and 1 is lowest) to each individual or household record in your list:
Recency: Sort your list by most recent donation or purchase, split the sorted list into five equal segments (quintiles), rank the most recent segment as “5,” the next most recent segment as “4,” and so on, down to “1”.
Frequency: Sort your list by the number of donations or purchases in a preferred period (regardless of size), split the sorted list into five equal segments, rank the most frequent segment as “5,” and rank the remaining segments accordingly.
Monetary Value: Sort your list by the total value of all donations or purchases in a preferred period, split the sorted list into five equal segments, rank the highest monetary value group as “5",” and rank the remaining segments accordingly.
You will now have a three-digit segment code for every individual record on your list or in your database – 555, 554, 553, and so on, 125 segment codes in all. And you can start to experiment with and make choices about when, how, and what you communicate based on these segments.
It is radically important that you not make untested assumptions about these segments – for example, assuming that the 555 segment is “best” and worthy of all of your attention while the 111 segment should be ignored. Rather, thoughtful and continual experimentation will reveal tendencies and qualities of these segments over time.
It’s also essential to remember that any segment is a temporary grouping used for a particular purpose, not a fact or durable reality to define an individual human. All the biases and assumptions of your team and your organization shape these segments, just as much as the individual behaviors of your patrons.
In the digital age, it can be easy to assume that the cost of communicating with 100 people is essentially the same as communicating with 10,000. But that’s a deep misunderstanding of “cost.” Your time, attention, energy, focus, impact, resonance, and reputation are all on the line with every message you send.
Segmenting your lists into useful bundles can help mitigate those risks.
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From the ArtsManaged Field Guide
Function of the Week: Sales
Sales involves designing, deriving, and capturing inbound revenue from goods, services, or access.
Framework of the Week: Recency Frequency Monetary (RFM)
RFM is a simple but powerful framework for segmenting a customer, audience, or donor list according to transaction patterns – focusing on how long ago they were active (recency), how often they were active (frequency), and how much they spent or contributed in total (monetary value).
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