Donor Segmentation

By | August 16, 2017

When you need to raise large amounts of money, it is useful to do something called ‘Donor Segmentation’. Donor segmentation takes your entire pool of active donors and puts them into smaller groups, or segments, based on their level of investment in your organization.

A typical visual representation of donor segmentation is called the donor pyramid. Donors start at the bottom of the pyramid and work their way to the top as they get more committed in their giving.

How to build a pyramid

People start at the bottom of the pyramid when they make their first gift. They might make their first gift in response to a number of different acquisition strategies. Maybe they got one of your acquisition mailings. Perhaps they saw a commercial or billboard. Or a web banner ad caught their attention and they clicked the “Donate Now!” button. Once they have responded, they are now in your donor file and it’s your job to cultivate that relationship further.

Donors move to the second tier when they make their second and successive gifts. Their continued giving may be in respond to a number of your different cultivation strategies. They might be ‘mail responsive’, which means that they’ll give when they get your future mailings. Or they might respond to your annual fund drive, email cultivation, or event fundraising. This stage is known as annual donors because a significant percentage of them can be counted on to make additional gifts to the organization in the future. Cultivating these gifts is part of your donor retention strategy.

The third stage, major giving, means that donors have both the capacity and the interest in making substantially larger gifts to your organization. Remember the pyramid… most people don’t start out as major donors. They might start giving because they liked a mailing that you sent, and continue giving because they got involved as a volunteer. A donor who gives a major gift to an organization will already display a significant level of commitment to the organization. Major gifts are cultivated through person to person contacts and so require a great deal more time and energy. They’re worth it, because the average major gift might be anywhere from 100 to 10,000 times larger than your average gift from the person who is in the second tier.

The top of the pyramid signifies estate gifts, also known as planned gifts. You’ll notice that this area is so small that I couldn’t fit all the words in the graphic. These will be fewest in number but largest in impact. These gifts will come from the donor’s estate once they have passed away in the form of a bequest, insurance policy, or other advanced planned giving vehicle. These gifts will often be 10-1,000 times larger than your standard major gift, because the donor is able to give out of their assets rather than their income. A strong planned giving program practically requires a strong major giving program. People will not give you to you from their estate unless they have already come reached a very high level of comfort with and attachment to your mission and organization. While it does occasionally happen that someone who is giving at the annual donor level will leave a planned gift, these kinds of gifts typically only come from people who feel like they’re ‘part of the family.’

When you are looking at your fundraising plan, you need to make sure that you are reaching out to donors at every level of the pyramid. Different kinds of fundraising approaches are appropriate for bringing people into each segment of your donor pyramid and moving them to the next level.

Here are some suggestions of strategies for each level:

New donor strategies – Direct mail acquisition, email acquisition, Television commercials, billboards, telethon, radio ads.

Regular donor strategies – Direct mail cultivation, personal support requests, online recurring donation cultivation, annual fund drive, phone-a-thon.

Major Gifts – Personal solicitation, volunteer solicitation.

Planned Giving – Personal solicitation, Volunteer Solicitation.