The Importance of Donor Segmentation, Personalization

When it comes to our communications, we all have good intentions, don’t we? But sometimes, that’s as far as we get. You think to yourself, “We’re going to send out three appeals a year, four newsletters, a weekly e-newsletter, a foundation report letter—oh, and we’re going to get our thank-you letters out within 24 hours!”

And then that thing intervenes. You know, life. We realize that maybe we were too ambitious, too soon.

Your program director lands in the hospital with a health scare. One of your board members comes in with a grant “opportunity” and wants you to drop everything to spend the next few days drafting a proposal. You struggle to get everyone in your organization on the same page, in the here and now. Your attention is sidetracked by bright and shiny new ideas.

You know you aren't communicating with your donors often enough, and you’re probably right. You aren’t using direct mail to its full potential. Identifying your problem is the first step. Figuring out how to solve it, though, ultimately will be an ongoing endeavor. You need to start now.

If your direct-mail frequency is spotty, your relationships with your donors won’t be able to reach their full potential, and, as a result, your fundraising revenue only will be a fraction of what it could be. If you’re communicating with your donors this infrequently, it’s either because you’ve been told, erroneously, that you’ll burn out your donors, or you think that you can’t afford to maintain consistent communication. Know this: Smart fundraisers think long term.

And really, how many planned gifts do you think will come your way by way of email?

Is that all? Is communicating more often the sole answer?

No. In their landmark book, “Keep Your Donors: The Guide to Better Communication and Stronger Relationships,” Tom Ahern and Simon Joyaux note that, “Hidden inside any database are opportunities to raise more money, if only you could dig them out. Segmentation is your pick and shovel.” Indeed. In my second fundraising job, I increased individual giving by 30 percent in one year, without an acquisition budget, through effectively segmenting our tiny database (less than 500 donors and interested parties) into eight different segments.

One of my Simple Development Systems’ members reported on the changes they’re making:

“Segmentation: This is the biggest change for us. We used to send out just one blanket direct mail to everyone on our list. Been giving to us for 20 years? Well, sorry—you get the same letter as the law firm partner who just attended one of our trainings one month ago. Well, this is the year we are stopping that!

We are heavily segmenting our list—so that we actually will be sending out six different variations on our direct-mail letter—which then feeds directly into goal No. 2 above.

If we know that you are interested in legal assistance for children and youth—and that is the fund that you gave to last year—well, we're making sure that the letter you receive this year thanks you very specifically for that gift, reflects that interest and invites you to contribute again this year in order to help kids.”

How Are You Segmenting Your Appeals?
While your organization’s appeal letter might read “Dear Friend,” your donor will read it as “Dear Anonymous Stranger.” After all, what is more impersonal than a “Dear Friend” letter? Speaking from my own personal experience as a donor, I swiftly relegate impersonal communications to the trash pile. Harsh, but true. How would you like to be spoken to?

The sole purpose of segmentation is to help you personalize your organization’s appeal to each and every one of your donors. Even the smallest nonprofit organization with the most antiquated computer system can (and should!) produce personalized letters to its friends and donors—no exceptions!

At its most basic level, donor segmentation consists of breaking up your donor database (also called your “house list”) into the following segments:

• Possible Upgrades: People you’re inviting to give at a higher level than they have in the past. This would include your loyal donors, who may have been giving $25, $50 or $150 every year for three to five years or more. Consider adding a spring monthly giving appeal targeted just to those donors.
• Renewals: Those donors you’re asking to make a contribution equal to their last gifts. (Why aren’t you trying to move them up?)
• Lapsed Donors: Those donors who have given one or more gifts in the past but did not give to your last appeal.
• Prospective Donors: Individuals who have never contributed. These are people who board members may have been referred, or they may be names from a rented or purchased list.

Additionally, depending upon your organization, you might want to include segmentation for:

• Your Vendors: Businesses that you transact with may welcome the opportunity to contribute to your organization.
• Volunteers: Some organizations believe that their volunteers already contribute through their time, and they shy away from soliciting them. Your volunteers already have demonstrated their commitment to your organization, so why not offer them the opportunity to contribute financially as well?
• Local Businesses: If your organization is regional and you have connections within the community, begin to build a business listing. Are you connected with your local Rotary Club, Kiwanis or Chamber of Commerce?
• Former Board Members: Have you forgotten all about your former board members? They haven’t dropped off the planet! Now is the time to reconnect. Make it count by making it personal.
• Memorial-Gift Donors: When one of my dearest friends lost her 6-year-old son to a pediatric brain stem tumor, I made a gift every year in his memory to a foundation dedicated to eradicating that particular form of cancer. Yet organizations often tuck memorial donors away in their databases, never to touch them again. Depending upon the situation, donors who contribute in memory of a friend or family member might contribute again—if your organization makes a point of handling the gift with grace.
• Former Beneficiaries of Your Organization: For example, an organization such as Teach for America might track and target its former students or student teachers, since former university students are its biggest supporters.
• Event Ticket Buyers/Attendees: Without a solid system in place of stewarding event attendees, events are a losing proposition for many nonprofits. Have you created your follow-up system for event attendees?
• By Interests or Program: Specificity is key. So not only is creating options for donors to give to a particular program or interest a great idea, but segmenting your list along these lines makes a lot of sense.
• By Venue: Additionally, you may also want to segment your donor base by venue: online vs. direct mail. Think about your purpose for segmentation. Do you want to recruit new donors? Do you want to increase the gift size or gift frequency? Or do you want to mine your “acres of diamonds” and reach out to your former supporters?

Really, you’re only limited by your imagination when you’re thinking in terms of segmenting your own database. In one development-director position I held years ago, our organization sold donated items via eBay Inc. and surprisingly (or not so surprisingly), several of our customers actually transitioned over to being long-term donors.

But most importantly? Think beyond the amounts. At the heart of it all, your donors are individual people with their own interests, passions, quirks, habits and reasons for giving—not ATM machines.