Nonprofits looking to step into the world of fundraising data analysis often begin with donor segmentation. Segmenting donor data enables nonprofits to understand their audiences on a deeper level and form more meaningful relationships.

This guide will cover what you need to know to get started with donor segmentation, from common segmentation strategies to software tools that help streamline the process.

What is Donor Segmentation?

87% of businesses say at least some customers expect personalized content. However, developing personalized content for every single one of your supporters would be a major drain on time and resources, especially for large or growing nonprofits.

Donor segmentation is the process of grouping your nonprofit’s donors based on characteristics they have in common. Using segmentation, your nonprofit can develop personalized communications for specific audiences, rather than specific individuals. This can save time while still delivering the personalized experience today’s supporters are looking for.

Strategies for Segmenting Donors

You can group donors in any number of ways, but some categories are more helpful than others for your nonprofit’s strategic decision-making.

For example, recency, frequency, and monetary value (RFM) segmentation is a common tactic. RFM segmentation is a great place to start if you’re looking to explore ways to improve your fundraising outreach because it breaks donors down into categories based on their giving habits.

With this segmentation strategy, you’ll group donors based on the following donation criteria:

• Recency: Recent or lapsed donors
• Frequency: Monthly, quarterly, annually, sporadic, etc.
• Monetary value: Small, mid-tier, or major donors

Of course, RFM segments aren’t the only donor groupings you could create. You may also choose other segmentation strategies, such as dividing donors according to their:

• Donation type: In-kind or monetary donations
• Preferred communication platform: Email, direct mail, social media, text, phone calls, or face-to-face meetings
• Reason for giving: Experience as a volunteer or beneficiary, a family connection to your mission, having a job within the same field as your nonprofit, etc.
• Preferred program or campaign type to support: Peer-to-peer fundraising, volunteer program, or other specific programs
• Demographics: Age, gender, location, profession, etc.

 

Develop your segmentation strategy based on your fundraising goals. For example, if you want to increase donor retention, segmenting donors by recency can be a great way to identify those who are likely to be retained and those who are at risk of lapsing. Furthermore, if you want to develop personalized outreach ahead of a capital campaign, grouping donors by reason for giving will allow you to craft impactful messaging to drive your campaign.

What Kind of Tools Do You Need for Donor Segmentation?

You’ll need two things to start segmenting your donors: accurate data, and the tools needed to gather it. Let’s explore some common data-gathering tools and the types of information you can collect using these solutions.

Fundraising and Nonprofit CRM Software

Your fundraising platform and nonprofit CRM system can work together to gather information about donors’ giving patterns. Your fundraising tools are the solutions you use to accept online donations, such as your donation form or peer-to-peer fundraising pages. Your nonprofit CRM, also known as donor management software, is the platform you use to store donor data.

According to Bloomerang’s fundraising software guide, these software platforms help streamline the fundraising process by “[managing] all fundraising campaigns, communications, and reporting from one central system.” With these tools, you can collect data such as:

• Average donation amount
• Date of last donation
• Donation type
• Donation frequency
• Past involvement in peer-to-peer fundraising
• Past volunteer experience

Using this data, you can segment donors by donation amount, recency, frequency, and past involvement.

Wealth Screening Tools

Wealth screening solutions are tools or services that analyze donor data to pinpoint supporters who reflect the characteristics of a major donor. These solutions can help identify the following wealth and warmth indicators:

• Giving capacity
• Past donations to other organizations
• Profession
• Business affiliations

Wealth screening data will allow you to build a detailed profile of who your major donors are. This can help determine the best communication channels and strategies to use to recruit more major donors.

Donor Surveys

Donor surveys are an effective way to gather any data that is difficult to collect automatically using your software solutions. These surveys allow you to ask donors questions to fill any gaps in your database. With the help of donor surveys, you can gather data such as:

• Demographics, including age, gender, geographic location, and level of education
• Preferred communication platform
• Giving motivations

Donor surveys can help provide more context and background information on each of your segments, helping you understand donors on a more individualized level.

To create donor segments, filter the data in your CRM based on your chosen criteria, and then save each grouping as a unique segment. Once you have several groupings, you can easily reach out to each segment using different marketing channels, like email, direct mail, or phone calls.

Tips to Make the Most of Donor Segmentation

Segmenting donors is just the first step of a larger data analytics process. After developing segments, you can leverage them in multiple ways to further your marketing and fundraising efforts. Use the following tips to make the most of your segmentation:

Create user personas

Personas are fictionalized representations of different segments within your donor base. As you build donor personas, you’ll give each one a unique name, overarching characteristics, unique motivations, and recommendations for how to engage with them.

Here’s a brief example of a persona for an environmental nonprofit that uses tech to mitigate the negative impacts of climate change:

• Name: Daniel Vega
• Age: 38 years old
• Location: Seattle, Washington
• Level of Education: Master’s Degree in Computer Science
• Job: Senior Developer at a Tech Agency
• Lifestyle: Daniel is a working professional with a deep interest in technology as well as the outdoors. He enjoys outdoor activities like hiking, mountain biking, and photography.
• Reason for giving: Daniel wants to support organizations that use innovative tech solutions to solve environmental issues. He also wants to give to organizations that he knows for sure will make good use of his donation.
• Communication preferences: As a tech-savvy individual, Daniel prefers digital communication platforms like email and social media over other platforms like phone calls or in-person meetings.

The purpose of developing personas is to make them as realistic and specific as possible. Develop between three and five personas to ensure you’re targeting your core audience groups.

Develop personalized messaging

Take your personas a step further by designing personalized messaging for each segment. Expanding on the previous example, here are a few types of messages that might resonate with Daniel:

• Impact stories: Daniel wants to ensure his donation will be put to good use. Impact stories that include data and success stories from beneficiaries will be useful for showing Daniel that his gift made a real difference.
• News about innovations: Daniel is also interested in advancements in the environmental tech sector. Sharing recent studies or innovative technology our nonprofit is using will pique his interest and show how our organization is on the cutting edge.
• Opportunities to engage: As a tech professional himself, Daniel may be interested in using his skills to support your mission. Invite Daniel to engage more deeply with volunteer opportunities, pro-bono work opportunities, and educational events like webinars.

No matter which persona you’re communicating to, remember that compelling true stories tend to be the most impactful messages. According to nonprofit statistics gathered by NPOInfo, 42% of donors said personal stories from a nonprofit’s beneficiaries influenced their decision to give.

Use your donor research to determine the types of stories that will resonate with each segment. For example, monthly donors may be interested in how their regular donations help keep your volunteer program going, while major donors want to know how you used their gift to refurbish your volunteer supply room.

Update segments regularly

As your audience grows and changes over time, regularly update your audience segments to ensure they reflect your donor base. Review your segments at regular intervals, such as once a year, to check in and update personas as needed.

Use this time to ensure you’re following data management best practices to ensure that your segments are based on accurate, reliable data. Incorporate data hygiene measures like:

• Regularly auditing your data
• Identifying duplicate, outdated, or inaccurate information
• Eliminating or merging data securely

Also, check in with your data collection tools, like your donation form or donor surveys, to verify they’re gathering only useful data. Too much information can clog up your database, so streamline these forms as much as possible by just asking the necessary questions. For example, knowing donors’ favorite local restaurants isn’t as essential as knowing their contact information, favorite program to support, and preferred payment method.

Track engagement metrics across segments

Review key metrics to understand the effectiveness of your segmentation and personalization efforts. For example, you can track relevant engagement metrics like:

• Email open rate
• Donation page conversion rate
• Donor retention rate
• Average gift size
• New donor acquisition rate
• Donor upgrade rate (how often donors increase their giving amount)

Analyzing these metrics will help you adjust your strategy over time to continue connecting with donors in ways that resonate. For instance, if you notice a drop in your email open rate, you can refresh your personas and targeted marketing messages to ensure your communications are tailored to your audience’s interests.

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With the right tools and data strategy, donor segmentation can be a lot more straightforward than you might think. All you have to do is develop a smooth transition from your data collection tools to your nonprofit database and segmentation filters. Then, you can start grouping donors based on shared traits and reaching out to them on a more personal level to address their unique needs and motivations.