The Power of Donor Segmentation

One of the basic fundraising tools that is often neglected is the process of segmenting your donor and prospect universe. This neglect will lead to philanthropic underperformance and consequently, to your organization’s inability to fully deliver on its mission.  The term “segmentation” can conjure up images of complicated mathematical equations and the need for reams of donor research, but we simply define segmentation as the strategic organization of your prospect universe to optimize giving. Segmentation plays out differently in the context of annual fundraising versus major capital campaigns. 

For annual fundraising, the process of segmentation begins with two key questions.  First, who are your donors that give at the end of the calendar year and who are your donors that give at the end of the fiscal year (since these annual cycles are often different)?  Understanding and respecting a donor’s giving pattern will lead to a better relationship and better results.

Second, who are the donors and prospects with the most potential to significantly increase their year over year support, based on their relationship with your organization?  Identifying this group is an essential first step in planning your annual fund each year.  Personal face-to-face fundraising remains the most effective means of generating increased annual support. Since there is a natural limit in every organization to the quantity of personal calls that can be effectively completed in the course of the year, it is vital to focus your in-person fundraising resources, both staff and volunteers, on those prospects with the greatest potential for growth. This simple segmentation will provide you with the best opportunity to maximize annual support and help to ensure the health of your organization. 

Note that there’s an additional valuable segmentation step as you identify your high-potential growth prospects. This second step is to segment donors who enjoy more personal attention, a “high touch renewal”, from the donors that can be solicited using broad-based techniques such as direct mail and email messages. These segmentation tools provide the operational framework for the year’s annual fundraising. 

In the context of a major capital campaign, the process of segmentation begins by determining your overall universe of prospects. If the capital campaign is being undertaken with the need to protect annual giving, it is wise to determine a minimum gift amount you will be seeking (based on the goal of the campaign), and use this as a criterion for the inclusion or exclusion of donors in your prospect universe. Once the universe of prospects is determined, the most important aspect of the segmentation process is sequencing. You cannot - and should not - ask every potential donor at once. Instead, you should sequence the solicitations so that a fledgling campaign can swiftly become a credible campaign, gaining and sustaining momentum. In general, good sequencing for a capital campaign starts with the solicitation of those who are closest to the organization and then works outward from there. 

The art of fundraising has many elements.  Don’t forget the importance of segmentation.  It can be the difference between striking gold and striking kryptonite.