Dependent Variables In Action

In data mining, we frequently choose the dependent variable that is easiest to acquire from our primary databases. Most often, we start with the prospect’s lifetime giving (I admit that I teach that as well). However, we want to be careful when thinking about which giving variable is going to actually answer the question we have, and we have to make the best choice among all of our giving values, including single gifts and totals, to get the information that we need to make strategic decisions. Let’s take a look at some of these and how we might use them in visualizations, modeling, and mining.

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Lifetime Giving measures only lifetime customer value. In addition, it is often directly related to the length of time a prospect has been involved with your organization, especially for consistent givers. So, lifetime giving values tend to favor older donors.
 
Giving per Year in System reduces the effect of length of time in your database by dividing lifetime giving by number of years in your system. For instance, a prospect became a member of your organization 10 years ago and her giving is $10,000. So, her giving is an average of $1,000 per year for her lifetime ($10,000/10 years). You are still measuring lifetime customer value, but removing the effect of age/length of involvement with your organization.
 
Highest Gift/Pledge measures a donor’s single highest gift or pledge. Note that major gifts tend to be multi-year pledges, so it is best to measure pledges for this variable. This is my favorite variable for modeling major gifts prospects.
 
Velocity or Consistency measures a donor’s recent behavior, whether she is escalating her giving or whether she is giving consistently. I use these variables for annual giving studies. Velocity is calculated as the last full year’s giving divided by the average of the previous 3 years giving.
 
Distances help measure the amount of required cultivation for different level gifts. Measure the distance from first to first major gift (major gifts), from entry date to first gift (annual giving), or from lowest gift to highest gift (major gifts or high-end annual giving) – hoping that the lowest gift came first.
 
I hope some of these ideas help you gain new insights into your donors’ behavior. Choosing well is key, and experimenting a lot is better. You can do this.

If you have questions or comments, tweet us @Staupell, email us at marianne@staupell.com or leave a comment below.