I fear that most nonprofits will fail to heed the alarm bells sounded in the Vital Signs study we reported on earlier this week. Dramatically increased competition in a time of declining numbers of donors — 23.6% more organizations chasing 7% fewer donors.

For this reason alone, there’s no question in my mind that the primary task for most nonprofits must be to deal with this issue of competition for donors and donor loyalty, not by carrying on business-as-usual (and maybe even adding in a few more appeals and more emails), but by taking the issue of donor identity seriously.

By ‘seriously’ I mean re-structuring their information-gathering and fundraising segmentation based on donor identity, not on the old bromide of segmentation by transactional amounts, frequency and recency. (RFM)

On the surface, such a massive shift in mindset and methods will seem to many not only expensive, but impossible. But, think about it.

Just yesterday, in response to our post Flying Blind Fundraising, veteran fundraisers Richard Turner, Pam Grow and Mary Cahalane shared a bit of their experience with seeking donor identity and the positive results that came from it. You can see their comments and those of other Agitators at the bottom of the post.

It’s mystifying to me why more organizations aren’t asking their donors ‘why?’ In fact, Jay Love commented, “I know as a donor I am always willing to share my thoughts, but have only been asked once out of my last 28 donation transactions.”

I want to build on their comments and experience and suggest additional steps beyond asking ‘why’ that need to be taken if organizations are to benefit fully from using ‘donor identity’.

In short, Donor Identity should become the central element in the process of segmenting a donor database.

I’m not making this recommendation lightly. It’s based on the last three years’ results of pilot projects conducted by Kevin Schulman and his team at DonorVoice. (Those of you who read my book Retention Fundraising may recall that the data for that book, collected over a three year period from 250+ nonprofits, came from DonorVoice research.)

To cut to the chase: Organizations of all types and sizes dramatically increase the commitment/loyalty and lifetime value of their donors when they segment their fundraising appeals and donor communications according to donor identity and utilize messages that go directly to those identities.

More fundamentally, they change the economic engine from one of pure volume (make more, ask more with all its diminishing returns and inevitable slow/no growth trajectory) and guesswork on what to send, to one based on donor understanding

The more understanding about motivation, need and preference, the more segments that get created and the more customized and relevant the interaction becomes. In turn, the more profitable that segment becomes.

The opposite of more isn’t less, it is better (which often results in less since better takes more time and effort).

Taken together — higher LTV and a new revenue/growth model — the improvement in net is dramatic (15% to 25%). More importantly, the increase is repeatable year over year. Anybody can grow gross or net in a single year, but sustaining that level of growth year after year is another matter.

If you work with a  big, mature organization then you know just how hard it is to achieve sustained, bottom line growth. The industry stats as reflected in Vital Signs don’t lie.

In preparing this post I reviewed ‘lessons learned’ about donor identity with Kevin in hopes that I could distill them here.

Essential First Steps

In order to segment a file using donor identity it’s essential to gain specific information from individual donors. There is a lot of spade work to be done to validate identities that reflect materially different needs and preferences.

(This is the reason that ‘asking why you donate?’ alone is neither necessary nor sufficient. But, we’ll save that for another day and focus on the implementation — the actions taken once identities and related needs and preferences are known.)

For purposes of illustration let’s take an organization with the mission of dealing with juvenile diabetes (Type 1 Diabetes).

The key questions asked of the donor (and they can be asked in an onboarding telephone call, on an online form or on a direct mail response form) are:

  • Do you have Type 1 Diabetes?
  • Does anyone in your immediate family have Type 1 diabetes?

The vast majority of those who answer either question in the affirmative are most likely to have a close connection with the organization and be of higher value than those who don’t have this direct connection.

“But remember,” cautions Kevin, “these answers are not monolithic. All those with Type I have this as an identity but they don’t all have the same values and goals. And, by extension, they aren’t looking for the same things from the organization. Folks in the early stages might be looking for help with diet and lifestyle and insulin options. Others who have been living with the disease are looking for research to find a cure.”

These identities — for example, ‘have Type I, immediate family member’ — and the subgroups defined by needs from the organization should be given radically different touchpoints and journeys. Far more than the casual ‘Because you’re affected by Type 1 diabetes…’ sort of approach.

Donor identities aren’t just about copy points for an appeal. It goes way beyond that. In fact, the way to raise money is to send content from the marketing/fundraising team that looks like it came from the services side of the house. As Kevin notes, “Yes, we’ll ask for money but only after the donor’s need is met, of which we haven’t a clue unless we’re segmenting based on understanding the donor’s identity.”

Better Segmentation

If you were the fundraiser for ABC Juvenile Diabetes and had this information, what type of file segmentation would you be using?

Would you still be segmenting by Recency, Frequency and Monetary Value (RFM) hoping that the donor in the under 14-month bucket with the most recent gift of $25 responds your generalized message, or would you be segmenting and specifically tailoring your appeals — and the entire donor journey — around a group of donors that was recently diagnosed with Type I?

Please remember: When giving behavior or transaction variables (RFM) are used to create segments you’re employing a selection tool that describes what donors did, not why they did or will do it.

Certainly, you don’t have to be a disease charity to effectively segment by identity. DonorVoice has done it for environmental, conservation, human rights and relief organizations as well.

What is necessary is your commitment to acquiring key information from individual donors.

“Yes, But… “

“Yes, but we can’t do that. Too expensive. Too time consuming. We’re just going to look for similar demographic characteristics, develop some personas and get the same result.”

Wrong.

Granted, it’s far easier for smaller organizations to collect this vital identity information from their donors, but there’s no reason why huge organizations can’t do the same.

After all, most huge organizations I follow don’t hesitate to churn out another appeal or a dozen or so emails if they need to close some income gap. Apparently they’re unaware that if they directly asked their donors some key questions and then communicated accordingly they would have far higher responses, and far lower costs.

And for those organizations that want to substitute direct, humanizing contact with their donors in favor of creating and segmenting by demographically created ‘clusters’ or ‘personas’, I have yet to see any of these latter costly endeavors produce much more than a consultant’s or data vendor’s multi-hued PowerPoint.

The principal reason for the failure of this approach is that it always yields an impossible-to-deliver-on number of ‘strategic’ segments; thus putting the ‘less’ in ‘useless’.

There’s no getting around the cold, hard reality of today and tomorrow’s fundraising markets: Identity with your organization is ingrained — or not — in the donor. And the donor has thousands of options.

So, if you’re going to win the emotional competition race, start guiding your actions by your donors’ identities.

Roger