Donor segmentation is one of the most effective strategies for increasing your fundraising efficiency. If you’ve been feeling like your fundraising is in a rut as you keep sending out mass mailings that produce tiny response rates, using segmentation can help streamline costs and produce higher returns.
The key to segmenting your donors lies in your fundraising data. We’ll unpack how to segment donors using your data in just a moment. But first, let’s be clear on why donor segmentation is so vital for nonprofits.
Benefits of Donor Segmentation
While we could spend a long time on this, to keep things moving let’s just highlight the top three benefits of segmenting your donors.
1. Send More Relevant Donor Communications
With segmentation, you can speak more personally to the people on your mailing and email lists.
For instance, with a segment of donors who are over 65, you can incorporate topics like retirement, grandchildren, legacy, medical issues, and other things relevant to people who are older into your fundraising communications.
Relevance plays a huge role in engagement and response, because when people relate to what you’re saying, they will lean in and pay closer attention.
2. Reduce Your Marketing Expenses
Without segmentation, you basically have to send communications out to your entire list. For snail mail, that can get costly.
Suppose you have a list with 10,000 addresses. If you could break that into segments with 500 to 1000 people per segment, you can now spend a lot less money sending out mailings that will be more engaging because of the greater relevance.
3. Get a Higher Return
Because of greater relevance, your segmented fundraising marketing will also generate more donation revenue. Even a 1% increase in revenue makes a big difference when you can earn it consistently while also reducing costs.
Methods for Segmenting Donors
If you’re just getting started with donor segmentation, we’re going to give you a few of the simplest and most effective strategies that you can begin using today. If you’ve already done some segmentation but are looking for ways to increase your use of it, you’ll probably find a few ideas here that you haven’t tried yet.
1. Surveys
It takes a fair amount of work to use surveys effectively, so this isn’t something to just jump into without some proper planning. MarketSmart, our parent company, has perfected the use of AI and other tools to create hyper-relevant, well-timed, responsive donor surveys as part of their major donor cultivation software service.
But with surveys, you can segment donors by all sorts of categories. Here are a few:
- Demographics of all sorts – more on this in a bit
- Interests in aspects of your mission
- Personal connection to your organization
- Inspiration for wanting to give or get involved
- Interest in volunteering
With insights like these, do you see how much you can increase the quality and relevance of your communications?
“You know what it’s like to be in need like the people we serve, because you have been a recipient of our services.”
“As a volunteer, you’ve seen how much of a difference one person can make.”
“Not everyone has a story like yours, where a person like [the person who inspired them] made such a difference in your life that caused you to want to do the same for others.”
This sort of language makes it feel more like a real letter. They feel known, heard, valued, understood, and respected.
However, be careful with this tool. MarketSmart has analyzed data among organizations conducting surveys with and without follow-up cultivation and found that the ones that survey donors and fail to follow-up actually lose those supporters. Why? Because they feel unheard. That depletes trust and drives defection. If you don’t truly care about what your supporters say, don’t survey them. And if you do care, be sure to follow-up with every single survey respondent regularly to prove that you heard and understand them.
2. Previous Donations – Giving Amounts
The more fundraising you do and the more donors you talk with, you realize that you don’t speak to someone who gives $5000 the same as with someone who gives $20. While the reasons vary for why people give, and you can’t definitively discern a person’s wealth based on the size of their gift, the amount of the gift speaks to a level of commitment.
That’s why the Fundraising Report Card breaks down annual giving data into five giving levels:
- Under $100
- $100 to $250
- $250 to $1000
- $1000 to $5000
- Above $5000
With just three categories of your donor database uploaded to the Fundraising Report Card, you can immediately segment all your donors into these five giving levels.
You’ll have five segments in just minutes! Segmentation doesn’t get any easier than that.
Upload your data to the Fundraising Report Card
How Using Giving Levels Saves Tons of Money
And the advantages of using giving level segments extend far beyond just improving the relevance of your donor communications. This is also one of the fastest ways to reduce costs and increase fundraising efficiency.
Why?
Because low level donors, especially those in the under $100 segment, also have a very low lifetime donor value. Many of those donors are one-time donors. They also tend to make up a sizable chunk of your donor database.
So if you have a new campaign to run, you can save a pile of money by not mailing anything to the lowest two giving segments. By only sending to the highest three, you’ll cut costs while still bringing in nearly all the revenue you would have brought in anyway.
This is probably the single most impactful strategy for donor segmentation, and we believe every organization should be using it. Upload your data to segment your donors into five giving levels.
3. Monthly Recurring Donors
This is the other easy segment to start using immediately, because you probably already have it. If you have any recurring donors, these make up their own segment of donors.
A monthly donor is a unique individual. This is a person who has made a clear and strong commitment to your organization. No matter how much they’re giving per month, they have chosen to make their gift to you a monthly expense.
That means, they want a relationship with you. And that makes this segment one of the easiest ones to nurture. They’re already sending you money every month, so send them something in return to sustain and deepen their sense of connection and impact. You can do this in a number of ways:
- Try to call each recurring donor at least once per year
- Send occasional thank you cards
- Send holiday cards, giving anniversaries, and other personalized notes
- Send consistent updates – ideally printed as well as email – that communicate impact and gratitude
You can also send additional fundraising communications to this segment, such as for specialized fundraising or capital campaigns, and make sure to speak to them as recurring donors, using the language that fits the level of commitment these people have made.
4. Length of Relationship with Your Organization
Whether monthly or just long-time donors who have given faithfully for many years, you can turn this into a segment too. Pick all donors who have given over a period of five, ten, or twenty years – whatever will generate a sizable and meaningful segment.
With this segment, you can comfortably engage with them as you would a long-time friend. You have been a part of their lives for many years, and this gives you a firm confidence to reach out for any reason, and expect the majority of them to read and respond.
This is another high-response, high-efficiency donor segment.
5. Media Channel
Another segment that’s easy to utilize but is often overlooked are your media channel segments.
Some people prefer to engage through social media and the related messaging apps. Others prefer email, others text, and others direct mail. If you can figure out which of your supporters prefer certain channels and don’t respond at all to others, you can focus your efforts on each channel, and speak to them in ways that work well in that channel.
In other words, if you have a donor who opens and clicks on many of your emails, but has never once responded to a direct mail piece, you may be able to reduce the amount of letters you mail them, with no effect on their giving.
Only, be careful about this, because multi-channel marketing is also a proven strategy. A donor may see and engage with the mailed letter, but then respond on email. And by removing the mailed letter, you’ll reduce their ability to engage as much as they did before, and may reduce response as well.
6. Demographics
This last category of segments includes numerous possibilities, well more than we can cover here. You can learn some of these through surveys. You can learn others just by altering how you collect data about your donors, such as asking for birthdays or whether they have kids.
Demographics can include things like race, economic status, age, marital status, housing status, education level, and many others. Some of these will be more relevant for some organizations than others. Find the ones that might have significance for your donor base or that relate to your mission in some way, and begin collecting that data.
Visual Tools to Illustrate the Impact of Donor Segmentation
How do you know if your donor segmentation efforts are working?
Using tools like the Fundraising Report Card makes it much easier for certain segments.
By tracking giving levels, you’ll be able to see any increases or decreases for various fundraising metrics for different types of donors. Our system tracks metrics like donation amounts, recurring donors, lapsed donors, lifetime value, and many others – across the five giving levels.
And you can get graphs of all this data in seconds, tracked across as many years as you want, so you can see the short and long-term effects of your segmentation efforts.
You can also track donor upgrades. This refers to donors who were giving at one giving level, but increased their giving enough to move up to a higher one. For example, a donor giving $50 per month gives $600 per year, putting them in the middle of the five levels. If your outreach motivates them to increase it to $100 per month, now they’re giving $1200 per year and are in the second highest tier.
You can keep track of all this – and get the visuals to tell the story to your board – in seconds, using the Fundraising Report Card.
