Year-End Appeal File Segmentation

File Segmentation

It’s well documented that segmenting a year-end appeal file increases response rate and gift size, but when applied as a methodology and practiced throughout the year, thoughtful segmentation also builds engagement by recognizing an individual’s relationship and history with your organization, and it can reduced donor fatigue by helping you solicit each donor at the right time, for the right amount, and for the right issue. 

A recent study by Nonprofit Marketing Guide and Bloomerang interviewed small-to-medium-sized nonprofits ($5M annual revenue or below) and found that 36% of nonprofit groups are not currently segmenting their lists for communications. Of the 64% percent that are segmenting, nearly half report using fewer than 5 segments to differentiate communications (though it’s noteworthy that 20% weren’t sure how many segments they use!).

The following is an overview of segmentation and some tips for groups that aren’t currently segmenting, or that are beginning to build on their simple segmentation practices toward a more refined and consistent approach to customized communications.

For a Year-End appeal segmentation, let’s assume that Foundations, Corporations, and all individuals your organization does not solicit have been removed from the file. The next round of segmentation divides the population into two groups; Major Donors who receive custom solicitations, and Member-level donors (or your group may call them “Annual” donors) who will be solicited via a “mass” appeal. The following tips apply to further refining and segmenting the Member file (for assistance segmenting and organizing Major Donors, please reference our Major Gifts Implementation Services).

Basic File Segmentation

The intention behind segmenting membership for the year-end appeal is to allow us to create the most compelling message for each donor while maintaining a manageable number of appeal versions. The data-point that provides the greatest differentiation between engagement and messaging expectations is the queen of list segmentation–Recency of Giving.

Recency of Giving

From this data-point, we typically segment into three big groups of appeal recipients: Current Donors (which for a year-end appeal, includes donors who have given already this year, and who gave last year but haven’t given yet this year), Lapsed Donors, and Non-donors. Each of these groups receive a different “call to action.”

Retention/Upgrade call to action for Current Donors
Versions of this message will be sent to all your current donors. Organizations define “current” differently, with some granting a year grace-period under the assumption that a donor’s lapse in support is unintentional, but others applying the strict definition of year-end current donors as “Gave This Year or Last Year.” This is the most valuable group, the most engaged, the most known, and the most expectant of informed and personalized communications. Therefore, most segmentation efforts will be spent customizing for this group.

Reactivation call to action of Lapsed Donors
Versions of this message are sent to donors who have given in the past, but are not “current” donors. Some organizations set a time-limit for non-giving, after which a lapsed donor is re-categorized as “way lapsed,” or grouped with non-donors and moved to an “acquisition” pool. This group is the second most important segment in an appeal, and represents–if not low-hanging fruit–an informed prospect about whom we know something.

Acquisition call to action of Non-donors
There is some debate within organizations about whether or not non-donors should be included in a year-end appeal. Though the response rate from this segment is predictably lower (around 6% compared to 40-60% from Current Donors), this group has some affiliation with your organization (they are in your file, after all), and are your next likely donors. Whether or not to include this group is typically a factor of cost. The year-end appeal is traditionally NOT a good solicitation for newly acquired prospects who do not have an established relationship with your group.

Many nonprofits segment their files into these three groups (Current, Lapsed and Non-donors) and call it a day; but if Recency of Giving is the queen of segmentation, we must also consider the rest of the royal family; Frequency and Monetary Value. These three data-points comprise the commonly used RFM indicator, a very accessible metric that can help increase response rates and gift size if used to segment your Current Donor list one more degree.

Frequency of Giving

This is a very telling behavioral indicator that can trigger customized language for long-time donors (legacy language), consecutive year donors (multi-year gift appeal), and donors who make multiple-gifts per year (monthly giving option). High frequency donors are likely to be your most engaged audience, and as such, expect to be recognized as loyal, consistent donors.

Monetary Value

One common use of file segmentation is to group donors by what gift string they receive on their reply cards, and the most used data-point for determining this is the Amount of the Last Gift–an over-worked field that has resulted in decades of under-asking! If your organization is using the Amount of the LAST GIFT for setting gift strings, consider that the standard practice is to set the baseline amount of a gift string 150% higher than the LARGEST GIFT made in the last 5 years.

For a broader discussion on Gift Strings, visit Gift String Logic for Year-End Appeals; but in terms of list segmentation, the important tip is to use the Largest Gift in the Last Five Years instead of Last Year’s Gift Amount as the prime indicator of giving capacity based on giving behavior. Another great indicator of capacity, as well as affinity, is the amount of a donor’s First Gift, and if you feel confident in your wealth capacity ratings, you may wish to increase baseline gift amounts even more for high capacity donors who give small gifts.


Segmenting Current Donors

As we mentioned above, this is your most valuable group, and you’ll want to spend most of your fundraising efforts reaching them with the right message and the right “ask.” When creating useful segments of Current Donors, consider using all three types of information available to you, and how these characteristics might frame an appeal message:

  1. Behavioral: What they’ve given, events attended, programs registered for, etc.
  2. Demographic: Age, sex, geographic location
  3. Attitudinal: What they feel about the organization, what aspects of the programming is important to them

If your fundraising systems are not currently able to capture, record, and report on the three data types consider adding custom fields in your database, designing online forms to capture more data, and exploring the reporting features of your email service. Your fundraising systems should provide an information loop, always collecting and reporting in ways that enhance your understanding of who your donors are, and why you are important to them.


Segmenting Lapsed Donors

Donors who are more than a year lapsed may not respond as well as Current Donors to a 150% baseline gift increase, but regardless how much you increase the baseline gift amount, be sure to use Largest Gift or Gift Capacity in the formula. Consider Interest-specific asks for this group, who may be less engaged with the organization in general, but have demonstrated past interest. Did they give to a specific program? After attending an issue-driven event? After a major initiative by your group? Review this file for gift fund, event attendance and other Attitudinal data.


Segmenting Non-donors

This is typically a large and nebulous group, about which we know almost nothing, and from which we expect very little. Here is where email can really shine as an engagement tool. Consider sending this group an email (no later than September) that is image rich and surveys recipient interests: Are they interested in your cause in general, or your group in particular? Are they affected personally, or know someone affected by your cause or your service? In short, why did they give you their address?

Once you have responses, look for trends and correlations that might help you generalize across your file and begin building segmentation data-points. For example, event participants might tend to be more issue focused than organization specific; or perhaps men are more interested in how they or someone they know was affected by your service, as opposed to women who tend to be more issue-focused. Whatever your findings, begin to capture this data and use it to learn what is important to your prospects so that you can begin speaking to these interests directly.

Email to the non-donor segment last. If an email effort hits a .1 percent complaint rate (people clicking the spam button), the rest of the emails will go directly into recipient spam folders, or the organization may be blocked from sending email until the issue has been cleared. Since any “non-responder” email list is more likely to generate unsubscribe or complain responses, be sure you have already contacted your most likely donors and responders before emailing this riskier group.


Guidelines for File Segmentation

When evaluating how to define and create segments, keep in mind the following guidelines:

  • People in a segment have common characteristics that inform how the organization can best engage and communicate with them
  • For each segment, there is a defining data-point that differs between groups
  • Not every segment is utilized in all communication, marketing, or appeal efforts
  • A person can be in multiple segments, which may require a hierarchy of factors to establish the predominant characteristics for a given appeal
  • Segments are relatively stable over time
  • The number of segments is organizationally manageable

Managing segments can become overwhelming if the process is not well organized. Be sure you are optimizing your software’s native list creating/segmenting capabilities, and build re-usable queries. You may wish to create a segmentation map for each appeal, detailing the characteristics of each group, and tracking response rates for each. The sample segmentation map below is published by Advanced Solutions International and illustrates a fairly simple method for recording and standardizing segments based on the RFM framework.

Segmentation Map

This sample is an “inclusion only” segmentation, meaning that the population is defined by stating who is “in” the group. A final segmentation will typically include a number of exclusions as well, and the order in which inclusions and exclusions are applied matters to the outcome of your file. For a good conceptual overview, look at this Mail & List Segmentation handout from Blackbaud. Even groups who are not using The Raiser’s Edge will benefit from seeing the step-by-step guide to crafting list segmentation logic, and most software products offer a similar feature, though it might look quite different.

Early in the segmentation process you may feel like your file will be segmented into hundreds of unmanageable bits creating an administrative time-sink, but by following clear guidelines and applying some basic protocols, you’ll find you are able to contain and manage your segments and lists. And it’s worth it! Ultimately, targeted communications based on solid segmentation will help you better understand your constituency, which will significantly impact your fundraising, marketing, and programming over time.