New Strategies for Segmentation
For nonprofits involved in fundraising, segmentation is nothing new. But in the current economic climate, every activity requires review and analysis. Reviewing your segmentation strategy provides opportunity to not only increase ROI now, but to position your organization to prosper when the economy turns around.
Demographics and transactions
Data segmentation traditionally is divided between two broad categories: demographics and transactions. Demographics typically combine standard data elements such as age, gender, geographic location and job function with data elements specific to your organization. Together these elements create a donor profile that tells you who your donor is, and likely governs the tone and content of your messaging to that donor.
Transactional data typically encompasses the recency, frequency and amount of donations, and also might include related data such as event registrations or product sales. This information provides a profile of what your donor gives, and likely governs the frequency and type of your gift requests.
Most nonprofits segment their donor lists and build campaigns around the demographic and transactional profiles, but there are additional levels of data segmentation that can have a significant impact on ROI.
Nontransactional activity data
Consider mining nontransactional activity data, such as online community participation, e-mail forwards, downloads, or other Web-based metrics that provide insight into the interests and passions of your donors. Often, this type of data might overlap your transactional data, but in the case of online community activity, it can be distinctly different.
In addition to tracking this data to determine topics or areas of interest, this is also good information to combine with giving habits to identify power donors — a group that can be engaged in peer-to-peer fundraising, otherwise known as "friendraising." Friendraising opens new doors for data segmentation and is a great way to not only raise money, but also to acquire new donors.
Channel, or communication, preference often refers to how donors wish to be contacted. Many nonprofits ask their donors whether they prefer to be contacted by direct mail, e-mail or other channels. This information also can be determined by analyzing response rates to different channels.
The benefits to adding a channel-preference segmentation are cost savings and response improvement. It can be especially valuable when using high-value channels such as telemarketing but is still relevant to direct mail and even e-mail, considering the need to stretch every dollar in the current economic climate.
In essence, a channel-preference segmentation allows you to focus dollars on a particular channel and target the audience most likely to respond to that channel. Instead of mailing, e-mailing and calling every donor, you can spend money to punch up direct mail and e-mail for a subset of your target audience and put more calls toward each donor in your telemarketing campaign.
Different people are motivated in different ways. When it comes to charitable giving, some donors are motivated by shock messaging, some by sympathy, some by an intellectual argument and so on. Conversely, donors might be put off by certain styles of creative. Over time, it should be possible for you to establish a pattern — at donor level — of what works and what doesn't work for your donors.
You might be able to revisit past appeals and retrospectively code them with the styles of creative used. Then by analyzing the responses, or lack of them, you should be able to identify what style of creative appeals to each donor. This helps you communicate with donors in the styles that work for them, with the benefit that appeals can be even more precisely targeted and ROI can be enhanced.
Piecing it together
The devil in the details with donor segmentation is data collection and storage. If you can't easily access demographic, transactional, activity, channel-preference and motivational data, you obviously will have a hard time using this data for segmentation purposes. If the technologies you use for managing your donor database and Web site and performing e-marketing are disparate point solutions that don't integrate well, you might need to consider a business-intelligence tool that can extract, combine and store data from these separate solutions to provide you with comprehensive information.
Another alternative is to consider an enterprise solution that provides your organization with donor management, Web site management and e-marketing capabilities based on one database. The functionality you might give up going from a specific point solution to a more general enterprise solution often is a trade-off for getting a more accurate and comprehensive donor picture.
Whichever route you choose, it's important to remember that good segmentation begins with thorough data collection. FS