Donor Segmentation Analysis Using the RFM Model and K-Means Clustering to Optimize Fundraising Strategies

Abstract

This study aims to segment donors using the Recency, Frequency, Monetary (RFM) model and the K-Means algorithm to optimize fundraising strategies. The RFM model is used to measure donor engagement through three dimensions: Recency (the last time a donation was made), Frequency (the frequency of donations), and Monetary (the amount of donations). By utilizing RFM scores, donors are then grouped using the K-means algorithm to generate more specific donor segments. This study was conducted using donation data from a non-profit organization, focusing on strategies to improve donor loyalty and donation frequency. The segmentation results identified several key segments, including Loyal Donors, New Donors, Potential Donors, and Low-Priority Donors. Each segment exhibits different donation behavior characteristics and requires a different strategic approach. The implementation of these segmentation results is expected to help the organization design more effective communication strategies and donation programs, as well as improve donor retention and lifetime value. Additionally, this study identifies the potential for enhancing the analytical model for broader applications in the future. This research contributes to non-profit organizations by offering a more efficient approach to managing donor relationships.

Keywords

• clustering
• elbow method
• k-means algorithm
• recency frequency monetary