Why Segmentation Should Write Your Development Plan
by: Katie Lord
Writing this year’s New Development Plan can be both an exciting and arduous process. It is a time to reflect on and re-evaluate this past year’s successes, failures and opportunities while at the same time creating a clean slate for the future.
Unfortunately, many organizations use the same format, template and KPI’s year after year, just increasing revenue targets. This could be the reason why donor retention rates are at all-time lows and organizational budgets are increasingly dependent on fewer donors at higher gift levels.
I suggest knowing two important numbers to increase donor retention and engagement. According to the Fundraising Effectiveness Project, first time donor retention rates consistently sit around 45%. With the cost of donor acquisition on the rise and one-time gifts averaging $128, it’s time to do a deep dive into a cost-benefit analysis on where to spend your organization’s time and resources. Compare that with the 61% retention rate for donors who have given a second gift and I think it is obvious what the math says.
A typical development plan focuses not on gifts based on donor preferences but more often on the medium used to earn the gift or level of donation based on internal budgeting criteria. Typical plans include sections like annual gifts, monthly gifts, major gifts, mid-level donors, event donors, digital gifts and direct response gifts. We use reports like LYBUNT (Last year but unfortunately not this year) or SYBUNT (Some year but unfortunately not this year) as a talisman for opportunities instead of expending energy celebrating milestones in years of giving or cumulative dollars invested.
Why are we still lumping all of our donors into broad impersonal buckets in our Development Plans?
It’s time to flip the tried-and-true Development Planning process on its head. How? By writing your plan from your donors’ perspective. Instead of writing your development plan based on what you want or need to accomplish to further the mission of your organization, write it from your donors’ perspectives on how to accomplish the wants and needs of your organization. How can your donors fulfill their needs to make a difference in your organization through the opportunities to engage and the ways to support your mission that your organization offers them?
Again, how do you do that? Well to paraphrase a well-known quote, if culture (Philanthropy) eats strategy for breakfast then donor retention through segmentation eats acquisition for lunch. Much of what we focus on is “fishing” for new donors instead of “farming” and growing the ones who already support us. What we focus on matters and unless you are in the early startup phase, 80% of the growth opportunity that you seek is already in your donor database. Through creating segmented donor journeys and mapping out engagement pathways, you can achieve greater revenue while expending effort that actually pays off.
When writing your next Development Plan, start by identifying your segments based not on just on annual gift size alone but integrating attributes such as organizational affiliation (donor, volunteer, board member), interest area or programmatic affinity (direct service, research, advocacy) and communication. These can be as numerous or finite as you and your organization need. Sit down and map out what a year in the life of your donors’ looks like and use that information to implement plans for your Development Strategy moving forward.
The creation of metrics that measure cultivation touchpoints and stewardship activities versus formulaic transactions related to your objectives will need to be the new standard for success. The results will be deeper mission ties with rapid stable increases. Some of these metrics could include:
- Number of touchpoints that are not donation requests, per segment
- Number of gratitude expressions, per segment
- Percentage of Survey responses, per segment (Yes, you should be surveying your donors, but not the subject of this article.)
- Increase in Donor Retention
- Increase in Average Gift Size
- Acknowledgment of Special Milestones
- Volunteer Hour numbers (100, 500, 1000 hours)
- Years of Giving (5, 10, 15 years)
- Cumulative Giving ($5,000, $50,000, $100,000)
It’s time to truly move away from transactional fundraising by using Development Plans more as a roadmap of relationship-based fundraising by donor segments and less as a “How to Manual” for gift collection.