Marketing concepts and applications

Marketing

Fundraising: The Importance of Donor Segmentation for Non-Profits

When marketing a new product, any for-profit company will naturally attempt to define and segment its likely target market. It will ask: what unmet need of the consumer does this innovative good or the service fulfill? How is this product development unique, in terms of its price, style, or purpose? The question of market segmentation is no less pressing for a not-for-profit organization. In fact, the fundraising task of a non-for-profit is in many ways more difficult than a corporation because the rewards for a prospective donor are often more elusive. Are the projected rewards those of personal fulfillment and a sense of social approbation for doing a good thing? Or are the projected rewards for the donor the sense of making a contribution to society, by furthering the mission of a worthy cause and organization? According to Phillip Kotler, "the organization's board, staff, volunteers, donors, and collaborators" are all equally important in a nonprofit's success in realizing its mission. (Kotler, 1997: 56)

First of all, to define its donor base the not-for-profit must define its purpose as an organization. This, in essence is the product that the organization is 'selling.' The worthiness of the cause is the presumed reason for the donor's desire to give to the organization. The nature of the cause will also determine the type of appeal used for fundraising. Merely because a cause is worthy does not mean that it will automatically draw donations. The organization must define its core audience of donors. This is again much like one would market any product or service. Is the target audience of the fundraiser primarily young or old? Male or female? Or a mixture of both? Is its geographic base broad or narrow?

For example, a local PTA or even the American Humane Society will have a much narrower demographic and/or geographic outreach (parents and the local community or animal lovers and owners) than a charity with a cause that touches many different demographics of lives, like the American Heart Association. A local organization with a narrow audience can solicit funds door-to-door, or use personal appeals, or at very least, carefully allocate its funds so that only likely donors receive mailings, for example. A national organization with a specific demographic can use mailing lists of women, pet owners, or persons who have donated to similar charities in the past.

Once the broad target donor market has been designated, next the nonprofit must determine what type of appeal is likely to draw such a market segment. An audience of affluent persons interested in donating to a worthy charity with a great deal of cache might like to participate in a celebrity auction. This has proved lucrative for causes such as AIDS awareness, aid to 9/11 and Hurricane Katrina victims, and other highly publicized causes where people may wish publicize their status as generous gives as well as make a contribution to a worthy charity. Other charities, such as health-oriented organizations like the March of Dimes or the American Lymphoma Society might wish to emphasize the health-conscious focus of its likely donor base and conduct a walk-a-thon, to draw attention to the cause as well as mobilize the core audience of donors in an event they find socially and physically invigorating.

The amount of money the target audience has at its disposal will also determine the type of event held -- a wealthy donor base might justify a fancy auction, with a high price per 'plate,' while a donation drive to encourage teenagers and middle-schoolers to donate a portion of their lunch money to help hurricane victims would stress small donations, but not justify the physical expense of an 'occasion.' At occasion-style fundraisers charities will often offer some sort of prize, small or large, to people who buy a share of a 50/50 raffle, or buy a dinner. These prizes may include a chance to win a desirable prize, like a car, or simply be a T-shirt that identifies the owner that he or she is a donor, and spreads awareness about the cause.

Besides encouraging people to donate, such tangible awards for donation create a sense of involvement with the donor, making the organization's cause something that they can wear with pride across their chest, or as a bumper sticker on their car. But even with these 'give-aways' the demographic target must be kept in mind. A diaper bag for a children's charity as a prize would be appropriate if the target audience is mostly parents, just as a chance to win a day at the spa would be appropriate if the target audience was mostly female. The charity must show that it appreciates the giver, by acknowledging the giver's identity.

The number of persons being solicited by the fundraiser must be of some concern as well. For example, a wide target audience that demands small donations from middle-class persons will require a wider 'net,' even if the demographic is segmented by age, gender, and region, than a fundraiser attempting to solicit much larger donations from a narrow audience, which often must depend upon a much more personal appeal. (for very large solicitations, for example, some fundraising auctions will auction off a day with a famous person willing to donate his or her time for the cause, which obviously demands a much more intimate approach to solicitations than asking for ten dollars in the mail through a form letter.)