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Database Segmentation Creates Relationships, Communities
Sue Browning, Copybook Consulting
Database segmentation allows organizations understand donors as individuals and helps develop meaningful relationships. Careful segmentation facilitates the prioritization and personalization of fundraising approaches that meet the unique needs of each segment while maximizing giving and the organization’s investment. In addition, the lessons learned from donor segmentation can be translated to prospecting efforts by the modeling of productive and nonproductive segments.
Use Segmentation to Create Community
The technology driving custom publishing, direct mail and electronic communication continues to reinvent itself. Data segmentation has become the tool organizations use to take advantage of that innovation. In print, the potential for personalizing every copy of a house publication appears limitless when database segmentation is combined with advanced print technology that can accommodate personalized inserts or messages. On the electronic side, the revolution in social media tools, such as Twitter and Facebook, have resulted in an amazing communication opportunity. Rather than traditional “push” communication (material is “pushed” to the individual on the organization’s timeline), organizations are seeing many opportunities in “pull” communications. With “pull” communications, donors and prospects seek information on their own timeline. Signing up as a fan on Facebook, following an organization on Twitter or being a blogger on a cause’s website are examples of “pull” communication.
One Size Fits All Doesn’t Fit Any
The old adage “one size fits all doesn’t fit any” is especially true when sending messages to donors. Even though many people may support the same charity, they usually have very different reasons for doing so. In an ideal world, there would be separate fundraising programs for each individual. But, in the real world where time is limited and costs matter, segmentation allows organizations to define small groups of donors and communicate with them meaningful ways. For example, one nonprofit used segmentation to divide major donors into small groups based on giving interests and type of contact they wanted from the organization. This segmentation allowed development to communicate more efficiently with those major donors which led to more time for major donor prospecting. Another nonprofit used segmentation to cut nonproductive segments from fundraising efforts. This had a direct effect on Return on Investment (ROI) because of the immediate reduction in campaign costs.
Segmenting your database has the potential to yield enormous profits—but, there are endless ways to do it. Here are some of the most common:
Geographic data: city, state, county, region, district, rural versus global, etc.
Demographic data: age, gender, income, education, etc.
Psychographic data: social class, lifestyle, interests, personality, etc.
Behavioral data: giving history, associations, loyalty, degree of interest, etc.
Behavioral data is especially valuable when measuring two very important aspects of donor behavior, Recency, Frequency and Monetary value (RFM) and Life Time Value (LTV). RFM shows how individuals performed in the past by looking at the most recent gift, size of last gift, how often they have given, and gift value. RFM monitoring allows an organization to analyze the behavior of donor segments over time.
LTV is the contribution to overhead and profit made by an individual during their total relationship with the organization. Unlike RFM which looks at historical data, segmentation based on LTV is used to define the future financial value of donors. LTV is often used to calculate ROI.
As your organization evaluates how best to use segmentation, don’t be afraid to think big. Consider how various segments in your database might relate to complimentary external organizations and events. Creative use of segmentation can help your organization take advantage of relationship opportunities whenever they present themselves.
For help with data analysis, segmentation or in developing a comprehensive plan that strengthens the relationship between you and your donors, contact Copybook Consulting at 703-839-3879 or email Sue Browning, at sue_browning@me.com or follow her on Twitter at DataDiscipline.