Why donor segmentation is an effective strategy

Donor segmentation can help nonprofits build a stronger path forward.
Date Published
12/16/2013

In order to understand their donors better, nonprofit groups need to have a strategic plan in place for strong donor management. In many cases, nonprofit groups don’t have the understanding or resources to effectively target their existing and prospective donors.

As technology has progressed, organizations have an increasingly strong opportunity to understand their donors and better utilize the data that contributors provide throughout their giving lifecycle. In short, philanthropic and charitable enterprises have the capability to gain insights into their donors’ behavior that will lead to enhanced communication and hopefully stronger fundraising campaigns. The key here is accurate and effective donor segmentation.

Better research, more accurate segmentation
However, before nonprofit groups can actually segment their list of donors or prospective contributors, they first need to understand them, which requires research and keeping their ears open to them via any communication channels that they may operate.

  • For example, social media is one of the most effective ways for nonprofit organizations to listen to their donors and interact with them so that they may get a better understanding of their wants and needs.

A recent blog post on The NonProfit Times recommended nonprofit leaders reach out to their donors through social media networks, such as Facebook or Twitter, to identify which methods of communication are working and which ones are not. Many organizations likely recognize that not all donors appreciate receiving direct mail or email delivery in the same way, meaning they don’t want to be flooded with emails during a given time; nor will others want to be waiting for snail mail to arrive. The Times indicated one organization utilized Facebook by opening a group site on the social media platform, asking their donors how they felt about the number of emails the individuals received. Accordingly, donors responded that they felt they were getting too many emails, and this didn’t match the expectations of the organization, which helped shed light on a problem the organization recognized but didn’t understand.

Smarter budgeting
As a result, individuals on the site actually recommended the nonprofit group segment the donors on the list and give them the choices and opportunities to choose which topics would be most applicable or interesting to them. By providing a more open forum for donors to provide information, organizations can avoid the pitfall of only asking for the information they believe is important. In this way, nonprofit groups can avoid spending too much of their budget on one specific channel.

  • For instance, if an organization devotes half of its marketing budget to email communications and distributes them at a frequency that their donors don’t appreciate, then it’s likely wasting time and money. 

Every donor has a specific preference, want and need when it comes to communication with nonprofit group, so smart organizations will realize this and cater to them. A recent npENGAGE article looked at the way Weinstein Hospice used donor segmentation to drive more strategic fundraising initiatives. Like many organizations, the nonprofit recognized it had limited financial resources for marketing and needed to use them more wisely. Segmentation is also useful for fundraising practices too. When an organization understands donors’ specific preferences when it comes to contributing, they can better target them during campaigns. With Weinstein Hospice, marketing and fundraising leaders have used donor data to identify which group will likely lead to sustained giving and possible endowments.

At the root of donor management is understanding the people who contribute to an organization. Without this knowledge, organizations are presumably using their resources not as effectively as they could.

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