The Good News and Bad News About Segmenting Donors

Segmenting donors into specific categories is a common practice used by nonprofits as a way to organize, strategize, and economize their funding campaigns.

It assists in targeting those specific groups that are most likely to respond to the message they want to deliver. It’s a good strategy if executed correctly, but there is a downside to a system that relies on a “divide and conquer” mentality.

Why We Segment

The benefits of segmenting donors extend into different areas of a nonprofit. Major donors who give regularly have a different relationship with your organization than those who choose to give sporadically, in smaller amounts, or have given only once. Each type requires a different level of engagement and request for future funding—one size does not fit all. Grouping them into categories acts as the “fast pass” to finding those that will respond to different approaches, making the entire process easier on the back-end.

This approach to managing donor lists also provides an archive with built-in descriptions that will be available years after their initial contribution. This can be of immense value if a nonprofit decides to take a different approach to the work, make an administrative change, or revamp their policy or management style. Each of these changes can threaten to upend relationships with donors. A segmented donor list can identify groups of contributors that could be vulnerable to objections to such changes and point the way to a smoother transition and appropriate communication where needed as the changes are put into place.

High-level donors typically expect, and rightly so, more communication than the general contributor base. Segmenting donors into groups that pinpoint addresses, income levels, and business types allows a nonprofit to isolate and target specific groups for the type of communication they desire. Campaigns focused specifically on high-level donors can be tailor-made for them, making a request for major funding contributions more likely to be effective.

The least effective argument for segmenting donors is the fact that it’s “business as usual” for many organizations. Successful nonprofits make continual adjustments to their operations to stay abreast of current trends and to seek out new methods and tactics that will help them to become more efficient and lower their overall administrative costs. Sticking to a tactic of segmenting donors may have worked in the past but taking a second look at the many emerging options to approach donors may unearth better ways to uncover donor groups.

For more information about test-giving check out Greater Giving’s webinar “Donor vs. Dollars, How to Win in the Long Run” with Alpenglow Benefits. Guest presenter and Alpenglow Benefits President Ailie Byers discusses the motivations and conclusions a test-gift provides your nonprofit and your donors.

 Where Segmenting Fails

Segmenting donors creates avenues into groups of like-minded donors, but that practice can also lead to a dead end for a variety of reasons. Generalizing a large group of donors through the practice of segmenting risks the possibility you may miss important details about the individuals included in that group. This could disrupt your relationship with a donor or donors and may even put your future relationship with them in jeopardy.

The assumption that a donor can easily fit into a category is misleading from its very foundation. Each donor gives for different reasons based on their personal experience or knowledge about your nonprofit. When you assume to know where their connection to your organization lies you are missing key information. There could be a personal connection to your organization or they may have a past experience with your nonprofit that will tell you more about their giving capabilities. Segmenting them into only the most obvious groups will leave you blind to these opportunities.

It’s a well-known fact that many first-time donors tend to give much smaller amounts to test the nonprofit’s response. They are investigating whether or not they receive their expected level of attention and if they are presented with evidence of real progress in the work being done. If donors who initially give small gifts are generalized and categorized based on their first contribution you will be missing their potential to give more as the relationship develops.

All nonprofits strive for a long-term relationship with each and every one of their donors. They want to capitalize on the potential donors have to increase their funding over the long haul. When people first enter the workforce, they begin to explore the nonprofits that move them. As their careers grow, so does their potential for contributing larger amounts. If you have already decided for them where they belong in your segmented lists, you will not see their ability to contribute more.

Just as the potential for giving changes over a donor’s lifetime, so does their interest in your nonprofit. Basing all your knowledge about any one donor on the information you’ve collected when you first established a relationship will keep you from understanding their changing motivations for giving. Don’t let your initial impressions about their giving potential cloud their future opportunities to give.

Segmenting donors may sound like a great way to target and streamline your fundraising campaigns, but keep in mind that every donor is different and grouping them into restrictive segments will leave you blind to the intricacies of their motivations to give.

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