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A Quick Guide to Donor Segmentation for Nonprofits

Last updated:  February 13, 2023

iWave Blog   

Effective communication with donors is an ongoing process for nonprofit organizations.

Your donors aren’t all the same, yet maintaining personalized communication can be a major challenge, especially as your list of supporters grows. You know that “one size” doesn’t fit all – different supporters will have different reactions to campaigns, and not all will be a good fit.

What can you do? Send personal communication to each and every person on your list? While this may be a strategy in some cases, it’s not sustainable across a large number of supporters. You’d need huge staffing resources to make it happen.

Donor segmentation is a solution to better personalize your communications without having to pen one-on-one letters to each supporter. Here’s our quick guide to how it works, and how to effectively use segmentation in your organization:

What is donor segmentation?

Donor segmentation is a method of splitting your donors into groups based on some sort of similarities. The commonalities form a basis for decisions on how to communicate with each segment, or what sorts of campaigns to share with them. It’s a way for organizations to be more targeted and relevant with their communications without resorting to one-on-one messages.

Consider how you address different audiences, even in your personal life. You don’t communicate the same way with everyone, you naturally adjust your messaging and tone. For example, think about how you talk to a family member versus how you address a new donor whom you’ve just met. This is the principle at work when you segment your donors, too.

There are almost endless ways to segment your audience. In the nonprofit sector, some common segments include; high-value donors, the channel through which the donor was acquired, and engagement level, or participation in certain events.

Why segment your donors?

There are some distinct benefits to segmenting your donors, including:

1. To give donors a better experience of your organization. People want to receive more personalized, relevant communications. Data from the business sector found that 80% of people preferred to do business with brands that personalize their experience, and it’s easy to see how this can be extrapolated into nonprofit organizations.
2. To allow you as an organization to better understand different segments. When you create segments, you can craft profiles of those segments that help serve as a guide for your campaigns and communications.
3. To improve audience engagement. Hubspot noted that marketers who used segmentation saw up to a 760% increase in revenue. People are more likely to open emails or generally respond to campaigns that resonate with them.
4. To make administration and management of communications easier for your organization. It’s easier to craft effective messaging for a key segment rather than trying to make it fit everyone. It’s also much easier to do this than to try to reach out to everyone personally!

How to segment your donors

There are many ways to segment your donors, so let’s look at a few ideas that are typically used by nonprofits:

1. Segment by affinity for a cause, topic, or event. For example, “people who are interested in saving the wetlands” is a group with shared affinity. iWave’s software offers multi-lens modeling, which can help identify affinity groups, among other segments.
2. Segment by demographics. This covers a range of possible segments, including age, generational designation (e.g. Baby Boomers, Gen X, Millennials, etc.), gender, income level, involvement with your organization (volunteers, staff members, donors…), and location.
3. Segment by actions or behaviors. For example, this might include how the person was acquired as a donor, or by participation in specific events. It could also include their engagement with certain campaigns.
4. Segment by size of gift. Over time, fundraisers may work to try to increase regular gifts, for example. Organizations will often extend different types of communications to high-value donors, too. For example, you’re much more likely to personally call someone who has made a particularly large contribution.
5. Segment by donation frequency. You might have annual givers, monthly givers, first-time donors, returning donors…
6. Segment by interests. Donors may express different interests related to what you do as an organization. For example; people who’d like to volunteer, people who are interested in education about what you do, people interested in particular aspects of your mission…
7. Segment by communication preferences. This is a basic way to segment your donors and can be achieved simply by asking them. Do they prefer email, direct mail, phone, text, online chat, or in-person communication?

How to effectively use donor segments

How can your organization use donor segmentation to get effective results? Here are some ideas:

Ensure your segments are meaningful

There are so many potential ways to segment donors, so it’s worth spending some time deciding which segments will be truly meaningful for your organization first. The idea is that segmentation should make your task easier and generate better engagement.

A meaningful segment tends to be one that is large enough to get results, but not so broad that you miss the chance to engage directly with individuals. Different nonprofits will have different segments that make more sense to them, including making easy, searchable categories.

Target your “ask” appropriately

Effective use of segments means targeting your “ask” so that it is most likely to be possible or valid for the person receiving it. For example, if you’re looking for large year-end donations, young college students probably aren’t an appropriate target group. However, those students may be willing to give a small amount of money on a monthly basis.

At the same time, you can use your segments to plan out your major gift requests. You can identify who among your donors may be in a position to make a major donation, then hone your campaign to appeal to them.

Improve your donor stewardship

You could choose to target donor groups that show increased loyalty and retention with recognition for their impact. For example, you might acknowledge them publicly, or send out thank you letters. You could also keep them updated on topics they’ve shown a particular interest in, such as progress on an aspect of your mission.

Analyze engagement by donor segment

Segmentation is an opportunity for nonprofit organizations to conduct a deeper analysis of their donors and make adjustments to their approach in the future. For example, you might have an initial idea of what your most meaningful segments will be, but will those ideas work out?

Analysis by donor segment allows you to gather data such as engagement information. You might find that a certain segment has little engagement, whereas others are highly engaged. This information allows you to hone your efforts in the future and focus on segments that are more active.

Targeted email automations

Automated email sequences are an efficient way for nonprofits to reach people without having to “reinvent the wheel” each time. In order for those emails to gain traction, they need to be well-targeted to the audience.

You can take the personas and interests of each segment and use those to craft messaging that is more likely to resonate with the target audience. Email automation software can help you to track and target appropriate segments, while fundraising intelligence software can help you to create those segments in the first place.

Conclusion

Donor segmentation is a strategy for splitting your donors into logical groups, helping you to communicate more effectively, in a way that resonates with each group. It’s an important piece to the fundraising challenge as it can help nonprofits to more easily reach people at scale.

Fundraising intelligence software can play an important role in helping nonprofits to discover logical donor segments. iWave is here to help, with features such as multi-lens modeling and in-depth analytics – get your free demo here today.