In the early days of starting a charity or nonprofit when you only have a few dozen supporters, it is easy to have more personalized communication with each one of them. But as your nonprofit grows over the months and years and your donors increase in numbers, personalized communication can become challenging.
And yet, personalized communication with your database is exactly what you need to increase your revenue and continue to have loyal supporters who care about your mission. Segmentation allows your charity to tailor your communications strategy to match the values of your donors and in turn, makes them connect with your charity at a deeper level.
In this article, you will learn about donor segmentation, its benefits, and how you can use it to achieve your fundraising goals.
What is donor segmentation?
Donor segmentation is the simple process of categorizing donors based on similar characteristics. These could include geographic location, demographics, interests, and more. It provides a more effective donor management strategy by identifying demographic subgroups and allows you to tailor your communications to speak directly to these groups.
Benefits of donor segmentation
Personalization plays a crucial role in gaining donor support. When you tailor your communications to suit specific groups within your donor community, you help foster connection and loyalty. Here are some important benefits of donor segmentation:
- Ability to build more meaningful fundraising campaigns;
- Improved engagement levels among the donor community;
- Increased donor retention; and
- Attract advocates to promote your cause.
Common types of donor segments
As you plan your donor segments, sit with your team and think about the donor subgroups that are most relevant to your cause. Here are some of the more common types that you can include.
1. New donors
As per The Nonprofit Recurring Giving Benchmark Study, the average retention rate for new donors is around 20%. But when it comes to repeat donors, the retention rates go as high as 60%. For monthly recurring donations, the retention rates are even higher at 90%. It means that the fastest way to increase your overall retention rate is to retain your first-time donors. You can do this by giving them special treatment—and it all begins with a communications strategy tailored to the new donor segment so you can lead them into their second donation.
2. Monthly donors
When your donors sign up for recurring monthly donations, they should be nurtured with care. These donors help your charity or nonprofit have a dependable revenue stream. You get at least 12 opportunities to interact with monthly donors via thank you emails. So, get creative and find new ways to thank them each month.
For example, show them how their funding is making a difference in someone’s life, or send them little trinkets as tokens of appreciation such as keychains or physical thank you notes, etc. Find new and engaging ways to get them interested in your nonprofit’s activities.
3. Lapsed donors
Maintaining a 100% donor retention rate is nearly impossible. Several factors come into play that may be out of your control. This includes donors who may move away, might not be able to afford giving more regularly, or may just want to donate once only.
This is also an important segment to create for your donor database. When you reach out to them, you may find that a lot of these donors still feel connected to your cause and may simply have become too busy. Hence, it is always a good idea to reach out to this group with targeted messaging and ask them to give.
Conducting fundraisers through online charitable gaming with 50/50 raffles and lotteries is also an excellent way to garner interest and up the engagement from this segment of donors.
4. Gift amount and giving history
You should know typical donor contribution limits to determine how much you should ask them in your next campaign. To make sure your ask is appropriate to each donor, and not too high or low, you can segment donors by their gift size.
Also, notice their giving frequency. For example, see if they are a one-time donor, a first-time donor, a major donor, a recurring one, or if they only contribute towards the end of the year. Understanding the giving history of a donor is a great way to determine the best way to communicate with them.
5. Mode of acquisition
It is important to know the channels through which your donors found your charity. Segmenting donors based on mode of acquisition helps you understand where you should focus most of your marketing efforts. Some of the most common ways charities and nonprofits acquire their donors are through the official website, social media, print, television, digital, and radio advertising, volunteers turned into donors, in-person networking, direct mail, and peer-to-peer fundraising.
6. Communication preferences
When it comes to communicating with your donors, you need to have a clear understanding of two things:
- How do your donors like to hear from you?
- How often do they like to hear from you?
Segmenting your donor database with this approach will ensure that you are using the right medium to reach them. This strategy is known to increase the overall donor response rate. You can segment via various channels such as email, direct mail, phone, social media, and in-person.
Some people would prefer staying in the loop as your organization grows, while others don’t want to hear from you all the time. The easiest way to find that sweet spot is to ask your donors through a quick digital/email survey or an interactive poll on social media. Additionally, when sending out a pledge request next time, you can also include a couple of options about the kind of information your donor would like to receive, and their preferred frequency.
Demographics is another key segmentation method that will help you understand which fundraising technique is most likely to elicit the most response.
For example, research indicates that baby boomers respond best to direct mail while millennials are more receptive to crowdfunding, etc.
Therefore demographics like age, gender, location, and income levels can offer valuable insights into the lives of your donors. This allows you to customize communications and create campaigns that prime each subgroup accordingly.
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Tips for donor segmentation
Here are some valuable tips to make it easy for your nonprofit to maximize the opportunities that donor segmentation presents:
1. Create communication strategies based on donor segments
The first thing after you divide your community into smaller groups based on characteristics is to develop an effective communications strategy for each segment.
Looking at your donors’ preferences, you can send personalized invitations to people with a history of attending events, and send requests for donations via direct mail with pre-stamped return envelopes to those who prefer donating through the mail. Consider what inspired certain segments of your database to donate and then personalize asks to emphasize different aspects of your programs to garner higher interest.
2. Ensure your donor database is clean and well-maintained
Updating your database regularly and making sure it’s error-free is a continuous and ongoing process. It has two main aspects:
- An initial clean-up: Start by auditing your database and removing nonstandard, incorrect, incomplete, or duplicate entries from the system.
- Creating standards for data management: Having an effective database means your charity or nonprofit needs to have a system in place so your entire team can follow established procedures for data entry and management. You will also need to create rules to address errors.
3. Regularly revisit and update your segments
Just as maintaining a clean and effective database is a continuous process, so is donor segmentation. To ensure they help you get the results your charity desires, here are a few questions that can help you reassess your donor segments:
- Are these segments in alignment with the charity’s long-term goals?
- Are these segments being regularly updated?
- Is the nonprofit engaging each segment in the most effective way possible?
Reviewing and revisiting both your segments and the strategies your charity is employing to engage these subgroups is essential if you want to regularly reach your financial goals.
Over time, you will be able to recognize valuable areas of overlap. For example, you may notice that major donors are of a certain age group, or that recurring supporters offer larger gifts as a result of strategy A versus strategy B. Insights like these will allow you to fine-tune or completely revamp your communication strategy to suit those specific donors for maximum impact.
4. Leverage donor segments to build a pipeline
Segmentation allows you to quantitatively analyze your donors and find new and creative ways to prime them. By keeping track of donation amounts and frequency, you can target certain segments to increase their giving amounts. Even marginal increases over a large and active database can mean a big jump in your revenue and allow you to build a pipeline for future endeavors.
Typically, segmentation shows immediate results compared to a mass communication strategy. Remember, growing your donations via segmentation means you should never be satisfied with existing results and continue to strive for improvement.