Donor Segmentation: What Your Nonprofit Needs to Know

Your nonprofit already knows that each of your donors is an individual, with unique passions and interests. So why would you communicate with your donor population like they’re all the same? While sending each individual donor their own letter or email every time you reach out is an impossible dream, it’s not impossible to target your communications more effectively.

Donor segmentation allows you to provide the kind of specific, personal communications that satisfy donors and lead to more donations. Instead of trying to connect with your whole donor population with one generic and uninspiring email campaign or letter, segment, or split, your donors into smaller, more homogeneous groups.

When you separate your donors into groups based on similarities, you can tailor your communications to their interests and preferences, which inspires them to get more involved. This may seem like a difficult undertaking, but it doesn’t have to! We’ve created this guide for you to learn about donor segmentation and apply it to your own nonprofit. Keep reading to get started, or use this table of contents to jump to the most important section for you:

  1. What is donor segmentation?
  2. Why segment our donors?
  3. How should we segment our donors?
  4. What are the biggest barriers to donor segmentation?

If you’re ready to learn more about donor segmentation and how it can help your nonprofit, read on!

What is donor segmentation?

Donor segmentation is a strategy through which a nonprofit splits its donor population into smaller groups, or segments, based on similarities in giving preferences, communication preferences, or other commonalities.

Donors come from various places, give different amounts of money, and donate on all sorts of schedules. These segments are influenced by their location, generational grouping, gender, race, education level, and more.

You may segment your donors by communication preference, and then find that there are more similarities among those who prefer to be emailed like retirement status and giving method preferences.

Every nonprofit will segment differently, as art museum fundraising differs from fundraising for summer camps, but segmentation is useful for everyone. Grouping similar donors together will take time, but the hard work should pay off. Your communication efforts will be more successful when the recipients of your efforts feel as though you’ve taken the time to get to know them.

Why should we use donor segmentation?

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

 To Whom It May Concern,

It makes you feel like the nonprofit doesn’t care about you, only your wallet. Instead, imagine getting a letter that starts like this:

Dear Maxime,

Even just using a donor’s preferred name goes a long way towards building a strong relationship and increasing donor engagement.

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.

Before we get into creating the actual segments, let’s break down some best practices of donor outreach and donor data management.

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 that’s not true.

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 they are, 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.
 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. In a donor’s profile, you should keep track of which campaigns they give to, so that you know what issues inspire them to give.

Personalizing communications satisfies each segment of donors. Make sure you’re always giving them the information they need in order to avoid donor drop-off.

Ask for the right amount.

It’s time to send out your annual fund solicitations, 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 they’d like to give at present.

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 across the state. 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 should be invited to attend an event held in a specific location. Not every donor will attend or give at every event, so you want to be able to find the ones who are mostly likely to be interested in the event you have in mind.

How do you do donor segmentation?

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?

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, because sending too many emails or calling too often can irritate donors and cause them to pull away from your organization. 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

Some people love receiving letters, but other people prefer email due to its speed and convenience. Still more prefer an easy text message, while others enjoy speaking on the phone.

Communication methods vary, and knowing what donors prefer can go a long way towards landing donations. Consider segmenting your donors by the following communication preferences:

  • Email
  • Direct mail
  • Phone
  • In-person asks
  • 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 need from your organization to convince them to donate differs according to what inspires people and what their affiliation with your nonprofit is.

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 in addition to your solicitations. Donation requests can be made in tandem with communications. 

Sometimes people want communications devoid of solicitations, and that’s okay! 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 inform them about the parts of your organization that they care about most, then you stand a good chance of turning these supporters into donors.

Demographics

The specific details of donors vary according to many categories, many of which are simply general demographic 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 members
  • Volunteers
  • Board members
  • Donors
  • Advisers
  • Relation or friend of one of the above

The length of your relationship with the donor, as well as their level of engagement with your organization, matter to your segmentation strategy.

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 secure 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 or eCheck
  • Credit card donations by phone
  • Cash donations

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 is learned.

If you don’t have the correct data about your donors, you risk making serious missteps with them and hurting your relationship. If you don’t have the right address, and they only respond to direct mail, you’ve lost contact with that donor. If you call a donor by the wrong name, or spell it wrong, they will think that your organization does not care about them.

The other side to data integrity is actually being able to use information. Data needs to be usable 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.

Donor segmentation is not so much about forming groups as it is about making it easier to understand donors. Understanding your donors, especially as your donor population grows, can become more and more difficult without a donor data strategy in place. To help you manage your donor data, we’ve compiled our three favorite donor databases. Every nonprofit has different needs, so check out the specific features and functionality of each database to choose the right one for you.

Fundly CRM

Fundly, primarily known for its crowdfunding capabilities, also offers a CRM for nonprofits. A CRM is a constituent relationship manager, which can organize all of your donor data into easily comprehensible donor profiles. Fundly CRMoffers the best donor segmentation features for all nonprofits. With easy reporting capabilities, you’ll be able to compile and analyze your donor data to create a stronger fundraising strategy in no time.

ClearView CRM

ClearView CRM is by and away the best CRM provider for multi-chapter organizations. Their donor database, event management, and online fundraising software are all built into one seriously useful system, with options for analyzing data by office, chapter, or entire organization. Their donor profiles are customizable, and the software is built with major gift fundraising in mind, so that your nonprofit can step up its major gifts strategy in no time.

Bloomerang

Bloomerang is our favorite donor database for small nonprofits. With features like interactive dashboards, giving summaries, constituent timelines, and website integration, your nonprofit will be able to improve its fundraising and communication strategies all with one smart software solution. You can even use their social listening tools to see what people are saying about your organization on different social media platforms!

Donor segmentation, while important, is only one piece in the donor engagement puzzle. For more information on connecting with donors and improving your fundraising strategy overall, check out a few of our favorite additional resources:

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