Every Donor Counts
Embracing Behavior-Based Segmentation
For years, nonprofits have sliced and diced their donor lists and built fundraising strategy based on one core data point: gift amount. Sure, it's straightforward. But in today's information-rich world, does it really give us the full picture? And does it really help us build an inclusive donor community?
The truth is, this old-school approach leaves money on the table, and it reinforces structural injustice. It's time to shake things up and look at our donors in a new light.
In this blog, we're going to explore a solution that marries increased sustainability and effectiveness in fundraising with a more equitable and inclusive lens: behavior-based donor segmentation. We'll cover:
Why traditional gift amount-based segmentation is falling short
A fresh approach that focuses on donor behavior, not just dollars
Practical tips for implementing this new strategy in your organization
How this shift can supercharge your fundraising and donor relationships
Join us as we explore how to create more meaningful connections with supporters, invite the whole community to the table, and build a more robust, sustainable fundraising program.
The Evolution and Limitations of Gift Amount-Based Segmentation
For decades, nonprofit organizations have relied on gift amounts as the basis of donor segmentation. This approach seems logical, but it’s deeply rooted in a historical context for fundraising that no longer applies. Let's explore why this method became so prevalent:
Assumptions about Giving Potential: Traditionally, fundraisers assumed that a donor's current or cumulative giving accurately reflected their capacity and affinity. This led to a focus on cultivating those with larger gifts, potentially overlooking supporters with untapped potential.
Limited Data and Technology: In the past, organizations lacked sophisticated tools to track donor behaviors and engagement at scale. Gift amounts were often the only reliable data point available, making it the default basis for segmentation.
Cost-Driven Engagement: Historically, donor outreach relied heavily on mail and in-person events, both costly to execute at scale. This economic reality pushed organizations to focus their limited resources on high-dollar donors, often neglecting those below certain giving thresholds.
The Shifting Landscape: Why Gift Amount-Based Segmentation Doesn’t Cut It Anymore
For a long time, gift amount-based segmentation was the rarely-questioned golden rule in fundraising. But especially in the last decade, several factors have collided to shake up this long-standing practice.
The Digital Revolution
The digital acceleration of the past 20 years, especially the last decade, has been a game-changer. Nonprofits can now easily segment donors, communicate personally with them at scale, evaluate their efforts, and iterate quickly. This has unlocked the potential of grassroots fundraising strategies for smaller organizations, allowing them to engage a high volume of donors effectively. A flood of recent research shows the long-term impact of fundraising that isn't solely focused on major donors. The playing field has leveled, allowing almost any nonprofit to affordably participate in these strategies.
Equity in Philanthropy
There is an emerging collective understanding in the nonprofit sector that when we only focus on inviting wealthy people to the table to help solve social problems, we reinforce structural injustice and perpetuate harm. Every voice matters in addressing complex social issues, regardless of financial capacity. A $20 donor might have insights just as valuable – if not more so – than a $20,000 donor when it comes to understanding community needs or innovative solutions.
By broadening our engagement beyond just major donors, we not only create a more equitable approach to fundraising, but we enrich and equalize the conversation around how to tackle society's biggest challenges.
Many organizations now embrace this more inclusive approach, finding ways to value participation and input from supporters at all levels. It's a move that not only democratizes philanthropy but also leads to more effective, community-driven solutions.
Let's break down why gift amount-based segmentation is strategically flawed:
The Affinity Assumption: A donor's current or cumulative giving doesn't always reflect their true affinity or potential. A $50 donor might have more genuine passion for your cause than a $5,000 donor.
The Capacity Misconception: A small gift doesn't necessarily mean limited capacity. It might indicate that you haven't yet earned a larger share of their giving compared to other organizations they support.
The Future Major Donor Oversight: Many of your future major donors are likely already in your mid-level and grassroots segments. The future opportunity costs of not effectively nurturing your broad base of donors could be enormous.
The Behavior Blind Spot: Gift amounts tell us little about what motivates giving or how to encourage repeat donations. This approach doesn't help us understand or effectively prompt giving behaviors.
Behavior-Based Segmentation: A More Inclusive Approach
In today's digital age, we have powerful tools at our fingertips that allow us to communicate efficiently with donors at scale. So why are we still leaving some supporters out of the loop? There's no good reason to exclude lower-dollar donors from our engagement efforts - and there are plenty of equity-related reasons to bring them into the fold.
That's where behavior-based segmentation comes in.
Behavior-based segmentation doesn't play favorites based on gift size. Instead, it looks at what donors actually do - their actions and behaviors. This approach allows us to:
Understand what catalyzes giving behaviors, so we can repeat those activities
Engage all donors, regardless of gift amount
Recognize supporters based on their unique interactions with our organization
Communicate gratitude and impact more inclusively and personally
The benefits?:
Improved donor retention: When everyone feels valued and seen, they're more likely to stick around.
Better major donor prospect cultivation: Your next big supporter might be a part of your current smaller-dollar donor pool.
Healthier donor pipeline: A diverse, engaged donor base is key for long-term fundraising growth.
Improved fundraising ROI: When we understand what works, we can adjust how we spend our resources to focus on the right strategies.
By focusing on behavior rather than just dollars, we create a more equitable and effective fundraising strategy. It's not about replacing gift-based segmentation entirely, but about enriching our approach to create a more comprehensive view of our supporters.
Key Factors in Implementing Behavior-Based Segmentation
When implementing behavior-based segmentation, consider these key factors:
Gift Mechanism: Identify the events, campaigns, or interactions that sparked donations. Understanding these can help you refine strategies for donor acquisition and retention.
Frequency: Track how often donors give, including both recurring and non-recurring contributions.
Multiplicity: Note whether donors give multiple times throughout the year.
Recency: Consider how recently a donor has given to your organization.
Longevity: Recognize how long someone has been a supporter of your cause.
Behavior-Based Segmentation In Practice
Theory is great - but what does behavior-based segmentation look like in practice? Some examples from our client base can illuminate the practical applications of this approach.
In a recent project with a large social services agency, an analysis of the different giving mechanisms led to an important shift in the approach to its two annual public fundraising campaigns. We discovered significant overlap in the donor base for the spring and end-of-year campaigns, and a pattern of acquisition during the end-of-year campaign and second gifts in the spring. We also discovered that single-gift, non-recurring donors who gave to both campaigns had astonishingly high retention rates year-over-year, and that many of these donors eventually became recurring donors.
For an acquisition-heavy organization that needed to improve donor retention, this led to a clear and immediate recommendation to intentionally develop a feeder system between the two seasonal campaigns and the recurring giving program. The new plan involved engaging the behavior-based segment of new donors acquired through the EOY campaign - regardless of gift amount - towards a second gift the following spring, followed by strategically timed recurring gift conversion efforts. It also involved a full-court press of engagement towards recurring giving from non-new returning donors who gave to both campaigns, with additional resources devoted to converting them to monthly donors.
Another example comes from a much smaller nonprofit regional summer camp that used collective outdoor experiences to help its young participants develop their creativity, critical thinking, communication, and collaboration skills for decades. When we conducted an audience survey and analyzed their donor data through a behavior-based lens, it became clear that families with multi-generational participation had much higher rates of participation in giving, as did campers who later went on to become camp staffers and counselors when they aged out of participation. This catalyzed the creation of higher-ROI-specific engagement and solicitation strategies for these easily-identifiable segments that they could sustain, even with limited development staff capacity.
Conclusion
As we've explored throughout this blog, the landscape of donor segmentation is evolving rapidly. The traditional approach of categorizing donors solely by gift amount is no longer sufficient in today's dynamic fundraising environment. By embracing behavior-based segmentation, nonprofits can unlock new potential in their donor relationships and fundraising strategies.
The shift to behavior-based segmentation isn't just about improving fundraising metrics – it's about creating a more equitable and inclusive approach to philanthropy. By valuing and engaging all supporters, regardless of gift size, we open the door to diverse perspectives.
Are you ready to revolutionize your donor engagement strategy? The future of fundraising is behavior-based, and it starts with you. Take the first step today towards a more insightful, inclusive, and impactful approach to donor segmentation by applying Behavior-Based Segmentation practices to your donor base. Book a free 30-minute consultation with Common Great!
This blog post was authored by Common Great CEO and Founder, Ariel Glassman. Learn more about Ariel here and click here to book a Power Session with her. A Power Session with Ariel is a 90-minute, on-demand meeting that can be used to address your nonprofit’s priorities, ask questions, discuss barriers, and more.