A Nifty Guide to Donor Segmentation
Best ways to segment your donor population

It’s time to stop thinking your nonprofit can address all people in a similar fashion. Donor segmentation allows you to provide the kind of specific, personal communications that satisfy donors and lead to more donations.

What is donor segmentation?

A donor segment is a group of donors or prospects who require similar fundraising communications according to the information that categorizes them.

Communications can be similar in information, method, or other means, and many donors may fall into one or many segments, depending on how your nonprofit chooses to group people.

Donors come from various places, give different amounts of money, and donate on all sorts of schedules. They also have similarities among these categories, and others, that beg them to be grouped together.

Every nonprofit will segment differently, as museum fundraising differs from fundraising for summer camps.

Grouping similar donors together will take time, but the hard work should pay off, as donor segmentation can help with the organization of fundraising materials, specificity of communications with donors, and how much it will cost to cultivate any given prospect.

Is there an opportunity to improve your organization’s fundraising? Download our ultimate fundraising checklist to find out! 

Why segment donors?

Imagine I’m the nonprofit and you are the donor. You wouldn’t like to receive an email that looks like this:

To Whom It May Concern,

Blah, blah, blah, lots of things that could be said to anyone. Oh, and, by the way, please donate! Because we care about you! Whoever you are…

Sincerely,

Your Supposed Favorite Nonprofit

What you want is something like:

Dear Maxime,

So glad you could join us at the annual 5k! It was a great success, and you did a great job helping out at the finish line. We hope you’ll join us for another event soon.

The letter goes on and works it’s way to a donation ask, but this time the reader might actually pay it some serious attention because the nonprofit showed how much they care for the effort she volunteered.

Love,

Your New Favorite Nonprofit

Donor segmentation allows nonprofits to send personalized communications, which are what donors want.

It might seem like a hassle to craft multiple solicitation letters, but the numbers show that organizations that take the time to personalize donation asks receive more gifts, bigger gifts, and more frequent gifts.

Manage your donor database.

You’ve got all these donors who need to be asked for all sorts of different things, and you need your information available at a moment’s notice. It’s much easier to retrieve a single file from an organized binder than to find a needle in a haystack.

You might think that segmenting takes you from an overwhelming amount of donors to an overwhelming number of groups, but multiple groups are better than one big group.

When you organize your groups according to calculated, defined criteria, you end up with donor clusters that you understand and for which you can form specific communications strategies. 

It’s also important to have an organized donor database. Segments organize donors into searchable categories, which helps in two ways.

  • First, fundraisers can more easily search the database and find certain kinds of donors, such as major gift donors or donors who prefer their solicitations through direct mail.
  • Second, when a fundraiser is looking at a specific donor profile, she can quickly identify what kind of donor this is, such as an annual donor versus a lapsed donor, and how to contact this donor according to his designated preference.

A database organized according to segments makes fundraising more efficient, saving time that fundraisers can dedicate to actually talking to donors.

Know what to ask for.

Different donors require different ask strategies, and you shouldn’t be trying to hit a grand slam with everyone.

But before you start sending donors their personalized asks, consider the difference between donors and records:

  • Donors — People who have previously donated to your organization.
  • Records — The individual files you have on donors, volunteers, and others associated with your nonprofit.

Records also don’t necessarily equate to donors. They’re people who your organization has somehow come into contact with and acquired information from.

Some records are for donors, while others are for people who have merely signed up for your online newsletter.

The difference between records and donors highlights how segmentation improves ask strategies. Some people are annual donors, some major gift donors, and others have never even considered giving to your nonprofit.

Donor segmentation helps you to group people according to the type of donation that you should ask for.

For example, a person who your nonprofit only knows because she signed up for your online newsletter doesn’t require a major gift appeal. Any gift she gives would make her a first time donor, so you want to ask for an appropriate amount.

Moreover, people might not be interested in your nonprofit’s main objectives. Some people may only donate at certain events or to certain programs.

Knowing what to ask for doesn’t just entail money, but recognizing that some donors are interested in some of what you do, but not all that you do.

I cannot stress enough how important it is to personalize communications to satisfy each segment of donors. Make sure you’re always giving them the information they need in order to avoid donor attrition.

Ask for the right amount.

So, your donor gives a large gift twice a year, but how much should you ask for this time around? Ask for too little and you won’t get as much as you could. Ask for too much and you might offend the donor.

It’s all about hitting that sweet spot, which can be aided by good donor segmentation.

Prospect research can help to reveal how much donors have given in the past and, if they’ve given multiple gifts, how much they’ve increased their donations by with each gift.

Also look to other donors who used to give the same amount to check how various ask strategies worked with them. All of this information can be easily stored and accessed when you have an organized donor database.

When you can break up donors according to how much to ask for, updating communications can be as simple as pasting a new ask amount into a solicitation letter or remembering to request a certain amount during your next phone call. It’s about paying attention to what donors have and respecting how much of that they’d like to give at present.

Is there an opportunity to improve your organization’s fundraising? Download our ultimate fundraising checklist to find out! 

Schedule location-specific outreach or events.

Some of your nonprofit’s events take place in your local community. Sometimes you branch out and host events in new cities in an attempt to spread your mission to more people. Other events take place exclusively online.

It’s important to know whether your donors live a few blocks away or way out in cyberspace. People require different outreach according to where they are in physical relation to your event.

For example, people who live close by could be met for coffee, while people who live far away may only be able to speak by phone.

Alternatively, people who live close can volunteer at events, on top of donating, while people who live far away may only be able to help out through monetary gifts. Those are two very different conversations.

Segmentation helps you know which donors need to be reached out to for an event held in a specific location. Not every donor will give at every event, so you want to be able to find the ones who will give for the event you have in mind.

How do you segment?

Segmenting a mass of donors into manageable groups requires a systematic approach:

  1. Start with grouping donors according to the giving category that matters most to your organization. Perhaps that’s how often people donate, how recently a donation was made, or either the average gift amount from the donor or how much the donor has given in total lifetime gifts.
  2. Form new groups within these groups according to your second most important donor trait, and so on and so forth until you’ve segmented donors to your satisfaction.
  3. You could, and should, end up with a lot of segmentation. That’s okay!

How donors are segmented will vary according to what is most important to any one nonprofit. Here are a few ideas to help your organization get started…

Recency, frequency, money (RFM)

Donation data matters, whether that’s helping you to solicit new donors or identifying people who have given multiple gifts over the course of many years.

RFM refers to three things:

  • Recency — When was the last time this person donated? Yesterday? Three years ago? Never?
  • Frequency — How often are donations made? Once a year? Once a month? Has this person never donated before?
  • Money Donated — What is the total amount donated to your nonprofit from all gifts given by this donor?

While many nonprofits use RFM to score prospects according to quality, it’s also a way to segment donors. Segments can be made according to how recently people donated and the amounts of their donations. People who gave $25 a year ago require different solicitation than donors who donated $500 three months ago.

Donors who are known to give more frequently, such as every couple of months, should be contacted more often than donors who have been giving once a year for multiple years.

Communication frequency matters, as sending too many emails or calling too often can irritate donors. People are more likely to accept communications when they come at the right times.

Nonprofits trying to acquire donors need to send new donors different amounts of communications at varying intervals. This communication strategy differs from the tactics used both to retain annual donors and to encourage lapsed donors to give again.

Communication method

I love receiving letters, but other people prefer email due to its speed and the paper it saves. For me, a direct mail solicitation could do a lot, while email works for others.

Communication methods vary, and knowing what donors prefer can go a long way towards landing donations:

  • Email
  • Direct mail
  • Phone
  • In person
  • Online chat
  • Social media
  • Other

One type of communication might not be enough. Some donors will be receptive to and require both phone calls and in person conversations. Communication strategies can be mixed and matched as needed. Success hinges on knowing what your donors want and what they respond to best in any given situation.

Desired Information

The information that people want and that will lead to donations differs according to who people are and their affiliation with your nonprofit.

Aside from donation information, your nonprofit can also share updates about special events, programs, the impact of your organization, and other topics.

In fact, many donors will want this information, as opposed to straight asks for money. Donation requests can be made in tandem with other information. 

People who want communications devoid of solicitations are fine. Just because someone does not want to donate today does not mean that he or she won’t want to give tomorrow.

Acquiring donors can be a long process. If you’re patient, give prospects what they want, and teach them about the parts of your organization that they care about most, then you stand a good chance of turning these non-donors into donors.

Demographics

The specific details of donors vary according to many categories, many of which are simply general grouping categories:

  • Age
  • Gender
  • Income level
  • Location

It may also help to group donors according to their generational designations.

For instance, it’s well documented that fundraisers need to employ different strategies to get through to millennials than they do to land donations from baby boomers.

There are also demographic categories that are more specific to nonprofits. These pertain to a donor or prospect’s level of involvement with your organization:

  • Staff member
  • Volunteer
  • Board member
  • Donor
  • Adviser
  • Relation or friend of one of the above
  • Other

The length of your relationships matters, as everything comes back to information being relative to the donor.

A person who has been involved with your nonprofit for a longer time requires different communications than someone who just volunteered for the first time.

Segmentation can be a lot to think through, but never forget that personalization is the key to a donor’s heart.

Preferred giving channel

Once you get prospects to commit to donations, you need to offer them their preferred ways of donating. People want to know that transactions are safe and that their money is being put to its intended use.

Allowing donors to give in the ways that please them can help set any worries at ease.

Giving methods include:

  • Checks through the mail
  • Checks delivered in person
  • Online donations via credit card
  • Credit card donations by phone
  • Cash donations
  • Other

If a donor suggests a way to give money that you can accommodate then you should take that route.

Keep track of how donors like to give, as they’ll likely wish to give that way every time. Previous donors can teach you which donation methods are the most popular, so you can assure new donors that you likely offer the donation methods that they’ll want to use.

How donations come in may depend on the type of entity making the donation. Nonprofits more commonly receive donations from individuals, but donations can also come from companies or through grants. How companies will want to give their money versus how grant money might be transferred could differ.

Knowing the donors’ preferred giving channels is one thing, and actually offering those channels in order to receive as many gifts as possible is quite another.

What is the biggest barrier to donor segmentation?

There is an enemy lurking, patiently waiting to destroy all your hard work, and that villain is data integrity.

Data is no good if it’s not accurate. Inaccuracies can occur due to obtaining information via poor methods, using unreliable sources, or failing to track information as it’s learned.

The other side to data integrity is actually being able to use information. Data needs to be useable and available to all of your staff who needs it.

Making fundraising appeals without important data, such as giving histories and key demographics, can put fundraisers at a disadvantage.

Fortunately, there’s technology available to make data integrity a breeze. A CRM, such as NonProfitEasy, can help you store, share, and use accurate data to increase the efficiency of your fundraising efforts.

Donor segmentation is not so much about forming groups as it is about making it easier to understand donors. The groups are how you take a mass of donors and categorize them according to definable traits that help make fundraising easier than ever.

Click here to download our free fundraising software checklist.