A generation ago, economics was known as the rational science. The experts believed that people behaved logically and predictably when making financial decisions. Increase the price of a good and demand goes down. People were predictable in these decisions.
Fast forward to Fall 2017 and Prof. Richard Thaler wins the Nobel prize for his life work in “behavioral economics” – a phrase avoided, if not ridiculed, when he began his career in the 1970s. Dr. Thaler illustrates the unpredictability of decision-makers and the irrationality of people in multiple settings. The impact of a $100 loss is more profound than the impact of a $100 gift. Why do we will go across town to save $25 on shampoo but not to save $25 on a new car despite the same economic benefit? Why do employees turn down employers offer to fund retirement accounts?
As we consider human behavior in the context of behavioral economics, behavioral psychology and behavioral neuroscience, we begin to discover so many ways that, as fundraisers, we can be more effective. We also see some really bizarre donor behavior that for the first time can be explained through science.
Below are just a few of examples that I have gleaned from research in related behavioral science fields, and occasionally from primary research in philanthropy and fundraising.
- Lawyers are more likely to responded in the affirmative when they are asked to donate their time for a cause rather than receive nominal compensation.
- Randomly suggesting that a previous caller made a $300 pledge (rather than a $75) results in increased giving from these calls.
- People are more likely to give to help improve the lives of 100 out of 1,000, but not 100 out of 5,000, despite helping 100 people in each scenario.
- A longitudinal study of Red Cross data shows that people tend to give more to hurricane relief if the hurricane’s name starts with the same initial as their own name. [On a related note, female-named hurricanes are deadlier than those named for males even though they randomly alternate during each storm season.]
What does evidence-based research tell us about how donors respond to solicitations and appeals? How do we take these lessons to immediately improve our appeals, solicitations, and marketing?
Opt-in versus Opt-out
One of Dick Thaler’s most fundamental ideas is that people are inclined to not take action. So, making a new gift is an action that people are resistant to execute. The solution: Make every effort to sign people up for monthly giving since the “action” people are now likely not to take is stopping their giving.
Ok, so you’re ready to ask people to sign up as a sustaining (monthly) donor. In a controlled study, one group of public radio listeners was asked to sign up for monthly giving. A number of people said “yes.” However, a similar group was asked to sign up for monthly giving – “starting in two months.” By deferring the pain – with an offer of an extra two-month grace period – a higher percentage of donors agreed to do so.
While we’re on the subject of monthly giving. One group of prospects was asked to make a gift of $1,000. Another parallel group was asked to make a gift of $100 per month for the year. You and I can guess which group got more donors to agree – and thus raised 20% more money from each of these “more generous” donors.
Pundits and the media claim that fewer Americans are making charitable donations than a decade ago, thus people are less generous. My review of academic research comes to a different conclusion. People are as or more generous but they are tired. We as fundraisers are tired. We are suffering from attention fatigue, solicitation fatigue and giving fatigue. We’re not less generous, we’re just tired of the repetitive, boring pitch – and messages that do not motivate us to give. [And technology has not kept pace either, but that’s for another blog.]
Humans have a proclivity towards altruism. We open the door for others and on occasion we jump into the water to save another. We also are inclined to help others. Harvard researchers Michael Norton and Elizabeth Dunn tell us, however, that we are happiest in giving when three things are present: giving is a choice that donors control, we make connections to others, and we understand the impact our gifts make.
Daniel Mansoor, President of the GoodWorks Group and a 30-year veteran in the nonprofit and fundraising field, will be sharing his research on the science of giving, and the implications this has on how we fundraising at a Foundation Center webinar on August 23, 2018. As you prepare your fall and year-end fundraising campaigns, prepare to do good better.