Who Exactly Are Your Donors?
Who are my donors, and how have they engaged in the past? Most will answer this question in one of two ways. First, by quoting recency, frequency, monetary (RFM) segments, complete with highest previous contribution and timing of the most recent gift. Second, by describing donor demographics/wealth with off-the-shelf segments (e.g. Prizm) or with their homegrown analysis.
Challenges With Current Segmentation Views
While the above approaches add value, they provide a narrow view of donors and their engagement with the organization.
While RFM can effectively target your direct marketing program, it considers only financial engagement and, typically, through a single-channel view. These limitations can alienate donors by ignoring their broader relationship and suppress financial growth with ask strings focused exclusively on history and optimize short-term returns.
Demographics and wealth are helpful in picturing the donor and buying traditional media (e.g. TV, print). However, they have a limited ability to drive actionable program decisions and can only describe a portion of the population. Most donor files are demographically similar (mostly older, mostly women). Traditional wealth data is flawed; it describes who has money, but not who is willing to give it to you.
New Approach to Segmentation
A more effective approach is multi-dimensional segmentation. Multi-dimensional segmentation combines donor actions (both financial and non-financial) with third-party data like demographics, wealth, consumer behavior, donations to other organizations, etc. Combining these multiple data sources via a cluster or decision tree analysis can provide crisp, actionable segments.
Tips for Effective Multi-Dimensional Segmentation
While the name sounds complicated, multi-dimensional segmentation can be created with solid analytics.
1. Use all the available data.
Including the right data is the most critical decision you will make. The flaw in most segmentations is their singular view of the world. Ideally, include every financial transaction across every channel, all non-financial engagements and all the third-party data you can get.
2. Actionable versus descriptive.
Ensure the segments cover the vast majority of your donors and do not become overly complicated. I recommend building four to six segments. Limiting scale allows a clear vision of the message and distinct approach for each segment.
3. Enable migration planning.
A good segmentation schema allows donors to “move up” through the segments. The pyramid view is too simplistic, but we want to see donors increasing engagement, giving more and building affinity to your organization. The best segmentations are a tool for targeting and a KPI for measuring file health.
The Role of Good Segmentation
Your segmentation should enable strategic focus on and shift budget toward your most engaged donors. Integrating this segmentation with your acquisition programs enables you to acquire the prospects most likely to grow into your most engaged segments. After creating the right budget, your segmentation can target the message and demonstrate a deeper understanding of the donor. The right case, message and understanding lead to donor affinity and loyalty.
Ultimately, your segmentation is the first step in building a journey focused on the donor vs. slotting donors into your prescribed campaigns. Continue with me for the next step where I will discuss how to understand your donor’s giving motivations at an individual level.
At Merkle, Chris is a senior leader in the Quantitative Marketing Group and leads a team of talented analysts leveraging advanced predictive techniques to drive net revenue and build donor pipelines for some of the leading nonprofits in the country. He strives to drive insight into donor data across all fundraising programs, use this knowledge to build constituent engagement that maximizes long-term donor value and ensure his partners thrive today while building a foundation to advance their mission over the long term.
Chris brings to Merkle over 10 years of experience in nonprofit marketing, analytics, and thought leadership, having previously served on the executive committee at the leader in higher education marketing. Chris has had the opportunity to partner with some of the largest and most recognizable institutions in the country to leverage personalized marketing to achieve their enrollment and advancement goals. Prior to his time in higher education, Chris held various analytic positions in financial services. Chris holds a BS in Systems Engineering from the University of Virginia and an MBA from the Darden School of Business.