making segmentation work

Making segmentation work: Grade 1 to 8 segmentation for a charity

Joe Saxton

March 2012

Tel: 020 7426 8888

Email: joe.saxton@nfpsynergy.net

Web: www.nfpsynergy.net

The foundations of communicating to audiences

• The audience: who you talk to/the audience is divided into segments

• The offer/message: what you say to the audience or ask them to do

• The channel: how the message reaches the audience

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The three elements of segmentation

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SEGMENT

CHANNEL OFFER

The simplest form of communication

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Grade 1 segmentation and targeting: one offer to one segment through one channel

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1 offer

• Make a donation

1 channel

• Direct Mail

1 segment

• Donors

But what about when life gets more complicated?

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Grade 2 segmentation and targeting: one offer with variants to many segments through one channel

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Grade 1

Grade 2

Make a donation

Direct mail Donors

Make a £5/£10/£20

donation Direct mail

Donors who last gave

£5/£10/£20

Grade 3 segmentation and targeting: multiple offers to multiple segments through one channel

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Grade 2

Grade 3

Make a £5/£10/£20

donation Direct mail

Donors who last gave

£5/£10/£20

Make a £5/£10/£20

donation Direct mail Donors

Buy a raffle ticket

Direct mail Raffle buyers

Upgrade your direct debit

Direct mail Direct

debitors

The first three grades

• All segments are based on previous buying history: donors are asked to give, raffle buyers are asked to raffle and so on

• All offers are static – the same offer as ‘last time’

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Grade 4: cross-selling of offers to segments who have previously bought another offer

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Grade 3

Grade 4

Make a £5/£10/£20 donation Direct mail Donors

Buy a raffle ticket

Direct mail Raffle buyers

Upgrade your direct debit

Direct mail Direct

debitors

Make a £5/£10/£20

donation Direct mail Direct debitors

Buy a raffle ticket

Direct mail Donors

Make a direct debit Direct mail Raffle buyers

Grade 5: Matrix of offers and cross-selling of offers to segments over a calendar cycle

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January

March

Make a £5/£10/£20

donation Direct mail Direct debitors

Buy a raffle ticket

Direct mail Donors

Make a direct debit Direct mail Raffle buyers

Make a £5/£10/£20

donation Direct mail Donors

Buy a raffle ticket

Direct mail Raffle buyers

Upgrade your direct debit Direct mail

Direct Debitors

Grade 6: Matrix of offers, cross-selling and a variety of channels to maximise ROI

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Make a £5/ £10/ £20 donation

£1 per person direct

mail Donors

Buy a raffle ticket

20p per person with magazine

Raffle buyers

Upgrade your direct debit

£15 per person

telephone call

Direct debitors

Leave us a legacy

£100 per person home

visit

Longest standing

supporters

The first six grades

• All segments are based on history of support and ROI

• So why someone gets a specific offer is pretty clear – it’s based on their support history

• And everybody on the database can get all the offers

• So no offer is rationed or inappropriate

(although some offers might go down like a lead balloon)

So, how can a charity maximise its income and support from its audiences?

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The next level of segmentation comes from offers that aren’t based on buying history but a more complex segmentation or analysis or customer insight

But let’s divert to a corporate example of segments and offers...

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De

mo

gra

ph

ic

Tra

nsp

ort

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How do McDonald’s segment their audiences?

Beyond the obvious: more complex segmentation for charities

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But why is more complex segmentation needed?

• To recruit new supporters who would otherwise not be interested

• To maximise existing support by discovering new clusters of support

• Complex segmentation is only useful if accompanied by complex products or channel delivery systems

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Grade 7: complex audience segments matched with offers tailored to those segments

Breadcrumb passives

Opulence seekers

Active existentialists

Sotto voce supporters

Committed giving for specific projects

Major donor peer to peer events

UK and global challenge events

Lifetime legacy with occasional

donations

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Where complex segments don’t work: same offers to flash new segments

Make a £5/ £10/ £20 donation

Buy a raffle ticket

Upgrade your direct debit

Leave us a legacy

Breadcrumb passives

Opulence seekers

Active existentialists

Sotto voce supporters

Grade 8: Complex segments matched with tailored offers for both recruitment and retention (and maintained over time)

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January

December

July

Committed giving for specific projects

Breadcrumb passives

New breadcrumb passives from

database recruitment New breadcrumb

passives from cold recruitment

April

The paradox of responsiveness – the most appropriate products for a segment may not be based because it is the most responsive to that segment

Breadcrumb passives

Opulence seekers

Active existentialists

Sotto voce supporters

1st. Committed giving for specific projects

1st.Major donor peer to peer events

1st. UK and global challenge

events

3rd. Committed giving for specific projects

2nd. Committed giving for specific projects

4th. Committed giving for specific projects

Best response for that segment

What complex segmentation needs to work

• Identify segments easily (eg golden questions)

• Communicate with segments according to their needs (not just giving history)

• Hold all the supporter data on a database (and covering time, money and campaigning if possible)

• Recruit new supporters and talk to them with the right offers (not just once or twice but always)

• Cross-sell where appropriate (but not remorselessly)

• Product innovation to dovetail with segment innovation (think of the McDonald’s Happy Meal)

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What makes segmentation go wrong?

• Campaigns, fundraising and volunteering all having their own siloed segmentation (what does a supporter get?)

• Segmentation development without product development

• Bored or forgotten after 9 months

• A database that can’t cope (it needs to store and segregate based on segments)

• Forgetting about existing supporters (how are they treated)

• Implementation is harder than identifying the segments

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