Understanding and Accessing Nonprofit Market Segments

Photo by Tyler Lagalo

How do you understand and segment your nonprofit’s market?

In the nonprofit sector, understanding your market segments—people groups, neighborhoods, and organizations with whom you seek to serve, partner, and co-create—is crucial. Market segments represent different audiences shaped by unique social, economic, and cultural factors. Segmenting these audiences requires moving beyond surface assumptions and biases, fostering deep understanding and meaningful relationships to serve communities effectively. 

A successful approach to segmentation begins by unpacking demographics and cultural influences. When we compartmentalize individuals based on age, ethnicity, or political leanings, for example, we risk reinforcing stereotypes (e.g., viewing millennials as entitled or Baby Boomers as resistant to change). Assumptions can subtly undermine your strategies, making it vital to engage in "deep listening," actively engaging communities to understand their needs and aspirations. 

Revisiting the Nonprofit Market Wheel

Steve Zimmerman's "market wheel" offers a useful model, identifying five key market segments nonprofits* often engage with:

• Direct Beneficiaries (those who use the organization’s products or services)

• Other Beneficiaries/Funders (wider groups who benefit from the organization’s efforts, values, ideals, etc.)

• Other Organizations (both for-profit and nonprofit partners who might share the target audiences)

• Input/Labor Market (representing the human capital of staff, volunteers, board members, etc.)

• Political/Social Environment (the environment that influences the organization’s ability to achieve its mission)

Zimmerman emphasizes that direct beneficiaries are the most critical segment, as they provide key insights for strategic planning and impact measurement. Direct engagement with these groups allows nonprofits to adapt to their evolving needs, improving alignment with the organization’s mission. 

Stakeholders and Systems Thinking**

Recent developments in nonprofit and social sector work stress the importance of stakeholder equity and systems thinking in segmentation. Nonprofit leaders are increasingly encouraged to view stakeholders not just as contributors or beneficiaries but as integral voices in strategic decisions. Rather than limiting interactions to “consultation” or “token involvement,” many organizations are adopting participatory frameworks. This perspective, explored by Cyndi Suarez in *The Power Manual*, emphasizes shared power and accountability, crucial for organizations prioritizing equity.

Systems thinking takes this further by looking at each stakeholder group as interconnected within a broader social, environmental, and economic system. It involves mapping relationships between stakeholders, contextual influences, and the historical factors affecting community dynamics. The “systems approach” underscores that every segment, no matter how peripheral it may seem, affects an organization's social impact. For instance, community food systems or environmental justice initiatives exemplify how multiple stakeholders—across power levels and interests—interconnect to influence outcomes. 

Practical Steps to Engage Market Segments

• Build Relationships at the Ground Level: Begin with grassroots engagement, valuing local knowledge and insights as you develop relationships within each segment. Community organizing techniques can be instrumental, helping gather people and mobilize action.

• Analyze Stakeholder Influence and Salience: Tools like the stakeholder salience model offer a way to categorize stakeholders by power, legitimacy, and urgency, highlighting how different groups may intersect and support your mission. This aids in prioritizing engagement efforts where they can have the greatest impact.

• Use Data-Driven Feedback Loops: Continuous data gathering from stakeholders, especially direct beneficiaries, can enhance responsiveness and improve impact measurement. By understanding specific needs and priorities, nonprofits can refine programs and communication to resonate more deeply with their segments.

Ultimately, a segmented and relational approach—grounded in understanding and systems thinking—enables nonprofits to create more nuanced strategies. By centering beneficiary voices and embracing stakeholder diversity, organizations can drive meaningful social change and elevate their impact in ways that resonate with the unique fabric of each community.

* Steve Zimmerman, “Community Influences: Understanding Nonprofit Markets,” Nonprofit Quarterly, https://nonprofitquarterly.org/community-influences-understanding-nonprofit-markets/ (accessed December 29, 2020).