Tuesday, September 27, 2011

BIG’s Blog: Moneyball

Moneyball, the recently released movie starring Brad Pitt, is based on the 2003 best selling book by Michael Lewis. The story line is about the Oakland Athletics and their general manager Billy Beane using analytical sabermetrics to assemble a competitive baseball team, despite having less than half the revenues of other major league baseball franchises for player personnel. In other words, he had to get the biggest bang for his bucks with the players he chose in the draft and in trades. Beane used sabermetric analysis to improve his odds.

Wikipedia offers a great synopsis of Moneyball to thoroughly understand the story of the Oakland A’s, but suffice it to say that there is a key correlation between what Billy Beane was using statistics for and what nonprofit direct marketing fund raisers should be using statistics for. Both have limited resources and need competitive advantage.

As a professional commercial direct marketer coming into the nonprofit world, I have long known that nonprofit fund raisers are not using analytics at anywhere near the level of their commercial counterparts. We all have heard the terms analysis and data mining, but I have yet to find a nonprofit fund raising group with a statistician on staff.

As the Moneyball story explains, the essence of analytics is a new idea of how you manage using statistics. Direct marketers, including nonprofit direct marketers have long used RFM; which stands for Recency of a gift, Frequency of giving a gift and the Monetary value of the gift as the key selection components for segmenting and selecting prospect lists. Analytics goes so far beyond RFM analysis that it is like the Wright brothers airplane at Kitty Hawk versus the Space Shuttle. Using analytic methodologies, you drill into hundreds or thousands of cross-referenced data points to detect patterns or discrimination between variables that could lead to discernable patterns that can be statistically significant.

What this means for nonprofit direct marketing fund raisers that use analytic methodologies, you mail 40%, 50% or 60% of a list that you would otherwise mail 100% of and still get essentially the same number of responses. This can be huge savings for direct mail fund raisers.

It’s bang for the buck. It’s Moneyball.

Go see the movie!


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