How to Create a Wealth Model of Your Best Prospects
When it comes to fundraising and marketing, acquisition costs can be measured not only in dollar value but also in time. It is important to spend time and dollars on the right kind of prospects. Wealth models can guide fundraisers and marketers to focus their time and efforts.
What is a wealth model?
A wealth model is a statistical model or an algorithm. It is based on a mathematical formula. Data scientists create these formulas to identify common traits among your customers, donors, and prospects. They have the capability to even convert certain qualitative attributes into quantitative scores.
Instinct usually determines the most predictive characteristics of top prospects. Wealth models help validate your instincts by quantifying and measuring data. This means that as a fundraiser or marketer your educated guesses can now be data-driven decisions.
How does wealth modeling work?
The idea is simple. A wealth model helps you answer a specific question. Wealth modeling is like perfecting a recipe. Data scientists take different ingredients in exact proportions to create the perfect model. Correlations between data points help you find your next best prospects. These correlations are much more reliable than any one single attribute.
For instance, let’s look at building a major gifts model for a university. The model must answer a specific question. Let’s say that the query is to find donors with a gift capacity of over $25,000 out of a list of 100,000 people. The wealth model first considers past behavior. Everyone that has made a contribution of $25,000 or higher will be included in the results.
WealthEngine’s models establish a sample size of 200 or more. This means the machine learning in the model will look for donors with high gift capacity. It also means that the algorithm will go a step further to redefine the gift capacity or metric until a reliable sample size is established.
In the previous instance, if there are over 200 people that have donated over $50,000 the model can recommend this as a benchmark. Conversely, if it is only possible to find over 200 people who have donated $22,000 and more then the model can reset the benchmark accordingly.
How to use a Wealth Model
The quality of data determines the strength of wealth modeling. Therefore, modeling with reliable data gets you closer to your next best prospects. Wealth models can help segment your database based on capacity and propensity.
Raw scores generated by the algorithm help rank prospects. You can then start to segment top prospects. Refined segmentation helps you personalize offers and nurture prospects.
The benefit for marketers and fundraisers here is that the model brings you to the right neighborhood of prospects. You can prospect with confidence as your decisions are backed by data. The wealth model helps keep the right people and removes ones don’t meet your goal.
You can also customize wealth modeling to your industry and organization. Instead of looking at benchmarks that may not apply to you, you can focus on attributes that truly affect your business.
For instance, if two competing luxury goods companies run wealth models they might find different patterns within the same database. Company A might find that the correlation between zip code and number of cars owned is important. Whereas, company B might find the correlation between age and interest in travel are most important for them.
In this case, companies A and B would not benefit from a generic model for luxury goods companies.
Additionally, wealth modeling can also help you calculate donor lifetime value. This can act as an indicator of major gifts and recurring donations. It can also reduce donor churn and acquisition costs.
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How WealthEngine Builds Wealth Models
What makes WealthEngine’s analytics unique is that we build custom models for your industry and organization. This means they truly reflect patterns in data that are relevant for you.
WealthEngine’s wealth modeling goes beyond the industry standard of analyzing 70% of any data set. In fact, we use 90% of your data file and use the rest of the 10% to validate the file up to 10 times.
Our models generate raw scores to help you prioritize. Further, they create 10 deciles so that data is pre-segmented to show you the top 10% of prospects. You could then choose to target the top 20%, 30% and so on.
Our process uses standard econometrics and tree-based modeling to show you where your top prospects are clustered in a continuum.
Enterprise models give you unlimited opportunities to answer fundraising or marketing questions. You can input every attribute in your database into different wealth models. Each model addresses a specific need. These are custom built for your organization so they highlight patterns that are most relevant to you.
Custom models give you the option to input 6 key attributes into our analytics solution. This is an affordable way to generate more controlled models that are still specific to your organization.
Both types of models are capable of accepting numeric and categorical variables.
Find out which model delivers the best results for your organization. Get insights now.
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