Donor Segmentation: How it Helps You Raise More

This guest post was written by Jack Showers, a nonprofit research analyst at KIT, an AI-powered insights and reporting toolkit. When he isn’t cheering for the Raptors or watching an 80s action movie, he’s studying the social sector and he is especially passionate about helping fundraisers raise more for their causes.

All donors have unique reasons for giving. However, there are always common themes that link certain donor groups together. In your effort to provide each donor with a personalized experience at scale, uncovering these common themes can be very helpful. 

By discovering these themes and creating donor segments, you can group donors and engage each donor in a more personalized way. In other words, donor segmentation can help you build better relationships with your donors and help you raise more for your cause. 

Let’s take a look at three methods you can use to segment donors: RFM, geography, and cause area. These methods can help you get started uncovering groupings of donors and maximize your organization’s impact.  

RFM Segmentation

The RFM segmentation model scores donors across three categories; the recency, frequency, and monetary value of their donations. Within each category, donors receive a score from one to five, with five being the highest score. 

By measuring donations across these categories, you understand someone’s giving behaviour, allowing you to send targeted appeals to donor segments with similar giving patterns. 

Recency of donations

The recency category measures the time passed since a donor’s last gift. To create a scoring system for this category, you must determine your organization’s definition of “recent.” 

It’s common practice to consider a “recent” gift as one made in the past six months. So, someone who gave a gift under six months ago would receive a score of five, and, for example, someone who gave a gift over two years ago would receive a low score of one.

Frequency of donations

To understand donor giving patterns, you also need to consider how frequently they give. For example, if a donor gave $50 every six months for the last five years, they’re obviously more engaged than a donor who gave the same amount for the first time a month ago.

Establishing a timeframe for donations will allow you to rank giving patterns. For example, to receive a score of five, a donor would have to contribute five or more gifts over the last five years. Choosing a five-year period allows you to work with a large sample size without including unrepresentative donations from too long ago. 

Monetary value of donations

“How recently?” and “how frequently?” are interesting questions. But, “how much?” is the question we really want to ask. Understanding the average monetary value of someone’s donations can give you insight into the relationship they have with your cause. 

Similar to the frequency category, it’s best to calculate someone’s average gift size within a five-year period to work with a decent sample size of donations. Then, you have to determine how you’ll score your donation sizes. For example, donors who give over $250 on average would receive a score of five, and those who give under $30 would receive a score of one.

Create your donor segments

Once you’ve established your scoring criteria, rank your donors across each category. For example, a donor who gave $250 for the first time last month would receive a score of 5-1-5. While they’ve given quite recently and a relatively large amount, they would receive a score of one in the frequency category.

Once you’ve scored each donor, you can create segments by grouping donors with similar giving histories. For example, you could send a personalized impact report to the donors that scored 5-1-5 or 5-1-4 (donors who’ve recently given a large amount) to encourage them to continue their generous support. 

Geographic Segmentation

Establishing a sense of community is vital to encouraging donations and other forms of support. Often, a nonprofit is supported by communities defined by a geographic area. 

In fact, nonprofit researchers have discovered the neighborhood effect: a psychological phenomenon where donors give more to those who live in a similar national or local geographic area. 

Taking this theory one step further, contacts in your database who live in your community would also be more interested in donating, volunteering, attending events, or even being peer-to-peer fundraisers. 

So, fundraisers can create a segment of nearby contacts and send them frequent nonprofit communications that offer ways to get involved in the organization’s community initiatives. Create this segment by defining what postal codes fall within your communities borders. 

Donors in your local community present a unique opportunity: proximity to your organization. Make full use of this opportunity by offering special engagement opportunities: 

  • Site visits
  • In-person volunteer opportunities 
  • Local fundraisers
  • Thank you events like galas, BBQs, or park meetups
  • In-person meetings with high-value donors

Geography can also help you segment donors who aren’t close to your nonprofit. If there’s a concentration of donors somewhere else in your country, you can still bring that segment together. For example, you could organize a fundraiser or a meetup in their area. This helps to foster satellite communities of donors and increase overall engagement. 

Cause Area Segmentation

One of the main reasons donors give is because they’re passionate about your cause and specific program areas. This means that you can better engage your supporters by sending them more information on the parts of your organization they care about most. 

And how do you do this? Well, segmentation, of course. 

You can create these segments by first recording the program areas or campaigns donors have given to in the past. Then, create specific messaging that updates donors on program or campaign progress and more opportunities to get involved.

Sending each donor tailored communications makes their experience more personal and will make them feel valued. Here are some examples of communications you can send to cause area segments: 

  • Cause area impact reports: You know that these donors are interested in a particular program. So, you can provide them with an in-depth impact or annual report that covers the progress of their favorite cause or program. You can even include a thank you note to your donors in the report. 
  • An invitation to get involved: A great way to increase donor engagement is to get donors involved in more than just giving. Inviting them to do a site visit or volunteer with their favorite program can increase donor engagement and motivate future donations. 
  • Tailored fundraising messaging: Directly relate your asks to the cause that donors are most interested in. For example, include a story from a beneficiary of a relevant program or an example of how a donation would impact that specific cause. 

Tapping into a donor’s motivation to give through a cause area they’re interested in is a great way to personalize their experience and encourage future gifts.

The more donors your nonprofit acquires, the more strategic you’ll need to be in how you can provide a personalized donor experience at scale. Donor segmentation is an effective tool to help you do this.

RFM, geographic location, and cause area are just three donor segments you can use to get started. So keep on segmenting and find the perfect way to engage your supporters.