Donor Segmentation: Your Guide to Understanding and Executing A Great Strategy
The power of personalization for nonprofits cannot be overstated. Personalization provides donors with a unique experience of your nonprofit, based on their interests, behaviors and needs. With the right strategies, personalization can help increase generosity in donors, both in single donations and in lifetime donations. It can also help improve donor relationships by making each engagement intentional and relevant. But before you can start personalizing your donor communications, you must understand donor segmentation.
Donor segmentation is the first step to developing strategies for personalization. It’s how you understand your donor base and get to the heart of what is most important to them. But before you can create incredible personalization communications, you have to find the segmentation strategy that will work best for your nonprofit. Here are a few that we think are worth considering.
What is Donor Segmentation?
Donor segmentation is intentionally separating your donor base into smaller groups based on related characteristics. This is different than “donor organization,” though. For example, you might organize your donors alphabetically by last name. This would help you search through your names efficiently, but because the donors don’t share any meaningful characteristics, you wouldn’t be able to learn much from them.
Donor segmentation, on the other hand, separates donors with the singular purpose of targeting donors with the messages they care most about. Segments should be based on behaviors, interests, networks and other information that might not be included in a standard data management system. A good way to check if you’re creating a useful donor segment, or simply reorganizing your donors, is to ask yourself whether you can run a successful A/B test on the group.
For example, if you segmented a group of donors by interest in your relief efforts in Africa and sent them the newest impact statistics, they should have higher open rates and click through rates than the rest of your donors who haven’t mentioned a specific interest. You’ve delivered information they want in the way they’re most likely to engage. Conversely, if you sent a message to everyone on your donor list with a last name that starts with B, there is no reason to believe their engagement rates will be any different than the rest of your donors if you sent a standard email newsletter.
When you think about donor segmentation, think about what you want to learn about them. That way, you’ll know you’re making an important segment.
4 Ways to Segment Donors
Perhaps this is your first time implementing a donor segmentation strategy. First things first, you’re not alone. Many nonprofits (and for-profits, for that matter) are ignoring it, too. But it’s much easier than you think. Here are 4 of the most powerful, simple ways to segment your donor list to start sending personalized, engaging communications.
RFM is a model that segments donors based on their giving behavior. R stands for recency, meaning how long has it been since their last donation. F stands for frequency — that is, how often do they give throughout a single year. M stands for monetary value, or what their average donation size is.
You could create a sophisticated system that considers all three metrics, assigns each of your donors a single RFM score and segment donors that way. But the easier way — and the way we recommend if you’re just getting started — is to segment your donors based on each of these three categories. And then, create a strategy for nurturing each segment.
For example, if you’re reaching out to donors based on recency, your message might be around urgency. Donors who have given in the last 3 months might get a message that explains the impact your nonprofit was able to make in the last month. But the donors who haven’t given in 9 months would get a different message, explaining the goals you’re trying to reach, but need help to accomplish.
During the next quarter, message donors based on frequency segments and monetary value the following quarter. After testing all 3 segments, your data will not only show which segment produces the most engagement overall, but also what messages connect best in each individual segment. Armed with those insights, you can improve your overall efficiency and increase giving during your end of the year push.
Donor Journey Stages
Another common way to segment contacts is by their stage in your donor journey. This strategy is a little more practical for smaller nonprofits that wouldn’t have many donors to separate by RFM. Instead, separate your contacts by whether they are in the investigator, donor or advocate phase.
People who are in the investigator phase have likely subscribed to your email newsletter or liked one of your social channels, for example. They haven’t given their first gift, yet, but they are interested in the work you do and could be convinced to donate.
People who are in the donor phase have given their first gift, but have not donated a second time. These people are engaged with your nonprofit, but they likely know all of your high-level information. And finally, advocates are those who donate often and champion the work your nonprofit does to their network of friends and family.
Because there is such a vast knowledge gap between these segments, communications will look much different between each of them. Messages for your advocates will need to be much deeper and more personalized than your investigators.
The reason we like this donor segmentation strategy is each segment teaches you how to be most efficient as time goes on. The more you learn about how to turn an investigator into a donor, the faster you can move people through your funnel. And you’ll be learning what connects with advocates simultaneously, so you can convert those new donors into advocates much faster.
When you think about donor segmentation based on location, your first thought is probably your major gifts donors. It’s a common strategy that makes it easier for your team to visit major donors without having to criss cross around the country. But, nonprofits focused on relief efforts are also primed to succeed with location-based donor segmentation.
In an emergency, you will likely have donors in the affected area who you don’t want to ask for donations. But, people who live close to the affected area will probably want to give their goods and time to help your cause. Then, you’ll have the other donors who are far away but what to help as much as possible.
Each of these groups will need personalized messaging to get them activated. If you send a single blast to everyone, you’ll get mixed reactions that put your repeat generosity at risk. But by sending specific messages based on location, you will increase your chances of increased generosity and connection to your donors.
Finally, a common, and effective strategy is segmenting your donors based on their networks. Because this strategy requires a sophisticated CRM or donor management system, it works best at mature nonprofits. However, young nonprofits can start building your data by noting your donors’ social networks and influence. Owning that historical data when you grow into a mature nonprofit will provide immense value.
Segmenting donors by their networks is helpful to learn the fastest ways to turn a donor into an advocate. If you can quantify a donor’s social influence, you can send communications asking them to talk about the work your nonprofit does. Provide them with materials they can share digitally and in person. As donors start engaging and sharing on your behalf, you’ll understand the messages they find most important. You can then use that information to create campaigns that reach your larger audiences.
How to Tell if Donor Segmentation Is Working
Donor segmentation is intended to help you learn what your donors prefer and respond to. If you’ve sent a few messages based on a segmentation strategy but don’t feel any closer to understanding your donors’ needs, you likely need to go back to the data. Pay close attention to their behaviors, comments and personal information. And anything you’re unclear about, just ask them.
You can always run a few donor segmentation strategies at once. Don’t be scared to send a single donor a couple different messages. The variety will keep your nonprofit fresh in their minds. They will show you what messages they like most with their engagement behavior. Most importantly, report on all your tests and organize your data in a single place. Monthly metrics are great, but trends over time will reveal what your donors, potential donors and advocates really want.
If you’re interested in other digital fundraising strategies for your nonprofit, check out our ebook. You’ll find useful tips for increasing web traffic, conversions and high performing email strategies.