Let’s talk about donors. By now we know that not all donors are created equal, and one of the issues that a lot of nonprofit fundraisers deal with is that, often times, they’re all treated the same, especially in smaller nonprofits. So how do we fix it?
Hey everyone, I’m Ian Campbell, CEO of Mission Suite. Before we jump into today’s video, do me a favor and hit the subscribe button and ring the bell so that you’re notified whenever we post new videos.
Over the past 20 years, I’ve worked with a lot of nonprofits – some small, some big, and quite a few of them in between. In that time, I’ve seen that successful fundraising organizations in nonprofits are highly skilled at donor segmentation.
Why? Because, as I mentioned before, not all donors are created equal. Some donors give everything they can possibly give to your organization at a level of $500/yr. Others are giving a small fraction of their overall annual giving at $50,000 per year. Still others are donating millions to capital campaigns.
The challenge that I’ve seen smaller nonprofits go through is that they just don’t feel like they have the resources to effectively segment their donors and still get everything else that they need done, so a lot of them just blast out a common message to everyone.
The good news here, though, is that it doesn’t have to be that challenging, so let’s take a deeper look at donor segmentation.
What is Donor Segmentation?
Donor segmentation is the act of categorizing an existing donor base into sub-groups based on things they have in common. The purpose is to personalize communications that will bring in donations and make donors feel seen and appreciated.
Why Practice Donor Segmentation?
Imagine that you are a donor to an organization committed to a cause you care about greatly. You have given a generous gift of $5000 to support their work. You receive a generic thank you letter with messaging that talks to you the same way as someone who gave five dollars or never gave before.
Do you feel seen and appreciated or invisible? Probably invisible. Does the messaging stay with you? Maybe, maybe not. Do you feel inspired to give again? Probably not.
Now imagine receiving a letter that acknowledges your amazing gift, expresses gratitude for your support, tells you how your hard-earned dollars will impact the organization’s cause, and provides you an opportunity to make that difference again. Are you a little or a lot more inspired to give? Probably so.
Herein lies the power of Donor Segmentation. Donor Segmentation is a great tool for getting to know your donors and communicating with each of them in a highly personalized way that will inspire them to continue giving to your organization.
How Can Small Organizations Utilize Donor Segmentation?
The answer here is that you can . . . and you must.
Many, if not most, non-profit organizations operate with stretched or limited resources and feel they are lucky to get one message crafted and distributed, much less multiple versions of communication that will target specific audiences. Non-profits cannot function without donations, though, and must put whatever resources they can into fundraising efforts to build a sustainable revenue stream.
Donor Segmentation can be carried out to a lesser or greater extent depending on an organization’s resources, but it must be done for effective fundraising. The more you can segment your donor base, the greater your donations will be. A great CRM like Mission Suite can help your organization get set up for success.
How is Donor Segmentation Done?
Whether a non-profit is small or large, fundraisers use tracking systems to compile information about their donors. This is usually done in a spreadsheet or database, which is where the segmentation process begins.
Organizations can increase their segmentation powers by developing a tracking system that contains as much information about a donor as a fundraiser can find. So, what kinds of information should be included in a donor tracking system? Here are a few examples:
General information is the easy stuff. It is as simple as the contact information of a donor and, ideally, will include a first name, last name, address, city, state, zip code, phone number, and email address.
Limited Donor Segmentation can be conducted with as little information as a zip code or email address. For example, a zip code can tell a fundraiser something about the affluence of a donor, allowing you to customize a message appropriate to them. If you only have an email address for someone, you will only communicate via email to them.
Donor history is perhaps the single most important cornerstone of Donor Segmentation. Donor history tells a lot about a donor or potential donor: Have they given before, once, or multiple times? Was their gift big, small, volunteer, or material in nature? Was the donation made via cash, check, or credit card, or volunteer hours worked? What was the value of an item donated? Was the donation made by a person or entity? How frequently does this person or entity donate?
Answering these types of questions is how you begin the donor segmentation process. The more information you can gather, the better you will be able to put donor contacts into specific categories and ensure they receive a specific kind of communication.
Essentially, any information about your donor that will influence your communication to them should be tracked in your database.
Once you have assembled all of the information you can about your donor base, you can begin the process of segmentation by creating subgroups. A great place to begin is the donation amount. Did the donor give under $100, $100-499, $500-$999, and $1000 plus, and you can examine what they have given over a lifetime? Breaking down your donor list allows you to customize communications to each group. For example, you might send a letter to the under $100 category saying that if they give a gift of $100 or more, they will receive an incentive gift of some kind, like a t-shirt. Obviously, you wouldn’t send that letter to someone who has donated thousands of dollars over their giving history.
Depending on your organization, you might need to generate anywhere from 5 or 20 different letters to send to as many different categories.
Subgroups Within Subgroups
Creating subgroups within subgroups is a common practice of effective fundraisers when segmenting their donor base. This is also where good fundraisers get creative. Subgroups of each group should be made by further examining your information. Did the donor respond to an email campaign, direct mail, a social media ad or a link in a newsletter?
Knowing this information will allow you to create subgroups to communicate more effectively with your donors.
Some General Guidelines for Segmenting Your List
This will be different for every agency, but you can follow some general guidelines to get started.
A great starting point for most non-profits is to divide their donor list into Past Donors – those who have given before, and Qualified Donor Prospects – those who have expressed an interest in your agency but have yet to give. You now have lists from which to create subgroups.
One segment of your donor base is likely dropped donors, and these are donors who gave last year but did not give in the current year. Break this list down further to reflect subgroups such as less than $100, between $100-$249, between $250 and $999, etc.
Now break down the group of people who have given to your organization. For example, ‘has given in the last year,’ ‘gave the year before,’ ‘gave the year before,’ ‘haven’t given in the past five years,’ etc. Break them down further into further subgroups such as Major Donor, Business or Entity, Board Member, or Volunteer.
Donor details can often offer clues as to how to communicate with a donor. For example, if you know your donors’ age (or approximate age), you may communicate with them differently. Boomers and older are more likely to respond to direct mail, and Millennials and others typically respond better to digital communications.
Ability to Give
Wealth plays an important role in a person’s ability to give. A person eeking out a living at a low-paying job will be able to give in an entirely different way than a wealthy family living on trust funds or a corporation. Know how to make an appropriate ask of your donor.
Reasons for Giving
Depending on your organization and donor base, there are likely dozens or hundreds of ways to segment your donor base. People give for a lot of reasons: psychological, emotional, and practical. Determining what drives your donors will help you to create effective messaging.
Now Begin on Your Messaging
Once you have established every subgroup you can think of, you are now able to craft specific and personal communications to that group or subset of that group.
Know how you will communicate with your subgroup
Knowing how you will communicate with someone is another aspect of donor segmentation. The important thing is to capture as much information about any donor or donor prospect as you can.
Set the Tone
Good fundraisers get to know their donors. This helps them to understand the tone that resonates with that individual. Are they empathetic sentimental types that respond to heartfelt stories, or do they require communications that uplift and inspire them?
Obviously, you can’t know everything about every donor, but when you can, it is helpful to pay attention to details and note them in your tracking system to apply them during an ask. What kind of communications have inspired them to give before? Did they previously respond to a sad, happy, inspirational request, or/none of the above? If something has worked before, it will likely work again. The same is true for something that hasn’t worked before – it likely won’t work the second time around. You have to know what kind of tone your donors respond to and create messaging that speaks to that.
There are so many types of donors, and they must be segmented accordingly. A corporate donor can usually give a much bigger donation than an individual. They can also be encouraged to include your organization in their matching gifts and volunteer programs. You must speak to corporate responsibility and make it enticing for businesses. If they see the same letter as a donor, it’s not going to work.
In summary, a good fundraiser prioritizes knowing its donor base and finding creative ways to turn segmenting into a science. Generic communications don’t make anyone feel special or appreciated. One of the main reasons people give is to make themselves feel better – to feel like they are doing something special that makes a difference to someone in the world and that someone sees and appreciates what they are doing. Donor segmentation and personalized communications are the best way to make donors feel like part of your organization.
Make a personal connection
Once you have fully segmented your donor list, it’s time to create messaging for that particular group and subgroup and get personal with the information you have. You’ll create your ask request based on criteria such as age, location, areas of interest, education, income, giving history or any other categories you have identified – again, every organization will be different. The goal is to get as personal as possible.
If you have kept notes in your donor tracker, you will have made many notes that you can refer to in your correspondence specific to that donor. For example, you may send a donor a letter specific to those who have made a recent donation of over $5000. The person signing the letter can handwrite a brief note, such as, “Thanks so much for your generous donation. Hope you had a great time on your recent trip to the Caribbean!”
A brief note with a personal detail speaks volumes to your donor. It says, these people know and appreciate me.
The more you know about your donors, the more relaxed the relationship becomes and the easier it is to make an ask.
Sometimes a donor may appear on multiple segmenting lists. For example, a donor once gave over $1000 for a special program, making them a major gift donor, and then made another small donations of $100 later in the year. This person should not receive two communications, nor should they receive the same letter as others who have made a $100 donation. They should receive a communication addressing their total giving over a year.
Sometimes certain communications will need customization. For example, a donor gave money but also contributed many hours as a volunteer. Should they receive multiple letters? The answer is NO! These donors should be identified and have customized communications that address that they make a difference in many different ways. A letter appreciating their past giving and their service to your organization will speak a lot louder than two generic letters.
What else should you know about Donor Segmentation?
Segmentation is a lot of work, but the more you dial it in, the better it works. As you become more comfortable with segmentation techniques, there are ways to produce great results even further into the process. A great CRM like Mission Suite can help you learn best Donor Segmentation practices for your agency, so reach out if you’d like to explore how we can help your non-profit optimize its fundraising efforts.
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