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-- Keith, Imagine That Ministries
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To Send or Not to Send

At its most basic, segmentation is useful for small organizations that have been accumulating names since Day One in a "mailing list" - a list which is typically used as a target for everything the group decides to mail, including newsletters, appeals and event invitations. The first step in segmentation is to divide those who should continue receiving mailings on a regular basis from those who should not. In one fell swoop, an attentive organization can substantially increase the cost-effectiveness of its mailing program by making this simple division.

This begs a question, however: On what basis do you divide the two groups? There are four criteria to take into account, if you want to be really thorough about it:

  • SOURCE: the means or channel through which the organization has acquired the name.
    Event donors may be one source, newsletter subscribers a second. People who called on the phone and asked to be put on the list may constitute a third source. For the purpose of direct mail fundraising, people who have previously sent gifts by mail are by far the most valuable and productive segment. People who have never given money for any reason are the least valuable.
  • RECENCY: the date on which you last received a contribution from an individual, or, in the case of non-donors, the last date you updated the person's address.
    As a rule (and it's a powerful rule), the more recent the record, the more likely you are to receive a response. In other words, if you haven't heard from someone for 3 years or more, chances of a response are slim, and you'll probably save money by excluding such people from a mailing.
  • FREQUENCY: the number of gifts you've received from a particular person - usually within a given period of time or number of years.
    People who give more frequently are the best prospects. One-time donors who never repeat their gifts are the least desirable.
  • MONETARY AMOUNT: typically defined as one of the following:
    • the Highest Previous Contribution received from that donor at any time in the past
    • the Cumulative Giving of that person during the last year (or to date this year); or
    • the amount of the last gift received from that donor

Obviously, people who have given larger gifts are more likely to give large gifts when asked to give again. People who have given smaller gifts are much less likely to do so. Why? People vary in their giving habits as well as in their means. However, it's also true that, generally speaking, people who give more generous gifts tend to be more loyal (perhaps because they can afford to be?).

These four criteria can be used in combination to segment a donor file. The simplest application is to divide the list in these four ways:

  1. donors versus non-donors
  2. donors who sent money in the last 12 months versus those who haven't done so
  3. donors of only one gift versus "multi-donors" who've given two or more
  4. donors whose Highest Previous Contribution was, say, $50 or more vs. those who have always given less

By segmenting in this fashion, you could establish minimum criteria for inclusion in a fundraising mailing - each person you mail to would need to meet or exceed the minimum criterion in each of the four areas.

Clearly, you can extend the same logic into ever-more-complex segmentation models. In some high-volume, big-budget mailings, there may be literally thousands of segments or "cells," each of which is defined by all four of these criteria (and possibly many others as well). For a small nonprofit, the most immediate, most useful application of segmentation is to cull a mailing list, so you'll waste less money on your mailings.

Divide the More Generous from the Less Generous

On the next level up the ladder, segmentation can (and should!) be used to divide more generous and more responsive donors, on the one hand, from those who are less generous and less responsive. The former are "worth" more. You can easily justify spending more money on mailing to them - by using first class postage instead of bulk rate, for example. Or by personalizing the message on, say, a laser printer rather than sending a "Dear Friend" or "Dear Member" or "Dear Alumnus" letter.

A prime application of personalization is to cite a donor's previous gift amount and suggest one that's proportionately larger. This works best of all if you can do so both in the body of a fundraising letter and on the response device enclosed (being careful to mention exactly the same amounts in both places).

An excellent example of personalization comes from a non-profit who added small amounts of personalization and greatly increased their return. In addition to the standard name, address and salutation, the list was divided into categories such as new donors last year, ongoing donors, lapsed donors, prospects forwarded from another affiliate. Subtle changes were merged into the letters that went to each of these segments. For instance:

  • First time donor last year: "We were so happy that you joined us last year... please renew your support."
  • Ongoing donor: "Your ongoing support over the years means so much to us... continuing donors provide the foundation of support for our programs"
  • Lapsed donor: "Your past support made a difference in the lives of people throughout the communities we serve. We haven't heard from you since... There is no better time than now to reinstate your membership."

In the two page letter, three places were personalized in this way. This was a two pass membership appeal, with the second pass being a shorter letter, to all those who had not yet responded (5 weeks later). Combined results of the two pass campaign had a very satisfying 21% for first time donors and 37% for ongoing donors with an average gift 30% above projections.