Mental accounting and the exception expense loophole

We’ve gone through a lot of cognitive biases recently, but one we haven’t talked about is the idea of mental accounting or budgeting.  The idea here is that dollars are fungible: your picture of a dead president and/or founding father on special paper can be exchanged for rent, coffee, donations, whatever.  In fact, money says that right on it: THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE.

Onedolar2009series

Image credit. Dollah dollah bills, yo.

But that’s not how we think about money.  In our minds, we have special categories for each type of expense.  Think of it as separate jars into which we are putting our invoice: $1400 for the mortgage, $800 for food, etc.  We experience mental pain every time we have to rob from one cookie jar in order to put it into another, so we try not to do it.

Picture how you think of money; it probably is something like this.  In fact, some budgeting software (we use You Need A Budget at Direct-to-Donor Manor*) formalizes this process to make sure you don’t overspend in a category.  We get comfort from knowing that each month, there is $X set aside for eating out.

Your donors think this way also.  Somewhere in their minds, there are mental Mason jars with “CHARITY” written on them.  There may even be several such jars: one for each organization they support.

If you think of how your donors mentally account, the implications ripple outward.  This is part of why:

So how do we diminish the pain that a donor feels from robbing from their “movie” or “eating out” or “savings” mental accounts to give to us?  Part of this, as mentioned previously, can be framing the gift against the frivolous.  But another technique that breaks through mental accounting is framing your ask as an exception expense.

One quirk of mental accounting is usually there is an “incidentals” budget.  This is a “what happens if my 2003 Saturn Ion** chooses to give up the ghost today” contingency fund that we can dip into.

One study changed the frame on their annual event.  Instead of talking about their walk as an annual event that happens every year, they talked about it as an event that only happens once per year.

You have to admit, there is hardly any difference between the two of these phrases (and it’s always nice to run a test that will slip unseen past your Brand Police).

Yet the results were impressive.  By running Google Adwords with the new, unique, once-per-year framing, study participants said they would participate in the exception version at a 46% rate, compared with 35% for the annual framing.  When they ran the ad for real, people were 11% more likely to click on the exception framing ad.

Similarly, in the mail:

“This mailing is part of a special charity drive that happens only once a year. Alex’s Lemonade Stand is requesting only one donation a year going forward.”

Beat:

“This mailing is part of a regular charity drive that happens annually. The charity is requesting a donation every year going forward.”

Some implications of this research:

  • This can help immensely with your event advertising (and you are trying to get your direct marketing donors to your events and vice versa, right?).  But for us, we also are testing removing things like “10th annual” from the press activities around an event.  The idea of themes could also be potent as a way of differentiating this year’s event as its own unique snowflake.
  • This could explain part of the effectiveness of techniques like a membership campaign and a better way to frame said campaign: “this is the one special time of the year we ask all supporters to make their membership gift.”
  • This may explain as to why scarcity, urgency, and uniqueness are effective persuasive levers.  It’s challenging to use this framing if you are sending four to 24 letters per year, and your donor knows that.  However, techniques that increase urgency or uniqueness like matching/lead gifts, deadlines, urgent petitions, etc. can help give a reason to open the piggy bank.

This may seem to contradict the idea of consistency – that people give to the same campaign year after year.  I would argue that they complement each other.  If you are trying to get someone to do what they’ve done before, play back their previous history and lean into the fact that you and they have a history.  If you are trying to get someone to try something new, you have to figure out for them which jar to take it out of and why.

So go forth and be unique in your messaging; it seems to be a better strategy that appealing from the tried and true.

 

* I have received no endorsement money or considerations from You Need A Budget. But I’m open to it!

** This is absolutely your author’s ride of choice.  As I mentioned in the post where I outed myself as overhead, the life of a nonprofit person should be neither Bentleys or ramen.

 

Mental accounting and the exception expense loophole

2 thoughts on “Mental accounting and the exception expense loophole

  1. Dubs says:

    Anecdotally, I go through a range of emotions when asked to donate. The first time, it’s a pretty easy choice if the cause is meaningfully communicated and the timing is right. Beyond that, more times than not, the asks leave me with a bad taste in my mouth. I get the feeling that because I was a source once, I’m now being hit up on the regular as a donor who has been flagged as “gave once, more likely to give again, keep after him” in the database. Ultimately I trash it and forget it from then on due to a bad experience wholly made up in my own mind.

    Rather than asking me for regular donations on the regular and running the risk that I’ll simply move on, have organizations ever considered positioning the ask as a long-term commitment? I know many people do this but I don’t see it that often.

    I’d be open to a message that explained how Good Cause X is looking for long-term supporters. People who are going to stick with the effort and support it for the long haul. Why that’s important to their model and what it means for the organization (more appropriately the kids, animals, land, etcetera). And more importantly, that it’s basically a trivial amount that will be automatically taken out of my account each month.

    Rather than a substantial ask, I’d rather contribute the cup o’ coffee a month donation for years or even life than being hit up for hundreds, thousands or even tens of thousands randomly. Everyone loves predictable recurring revenue and I would think charities would love it even more. It takes more time to build a subscription model but in the long-run, I’d rather have an organization made up of thousands of micro-contributors who have made a long-term commitment over having to wake up every month and figure out how we were going to create an effective message built on our story that converts as good or better than last months.

    And, to keep me feeling good about my donation, just drop me a line once or twice a year to show me the great things the organization is doing with my money. That small effort will keep me from cancelling more often than not – far more often than asking me to donate again like I did last year.

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  2. This is a good summary and highlights the need to customize to the donor’s wishes. There are some people who want to hear from you frequently and some who just want a couple of check ins like is described here. Dubs, you might enjoy https://directtodonor.com/2016/02/25/welcome-step-three-ask-again/, which talks about the idea of asking for that monthly donation like you recommend and https://directtodonor.com/2016/02/16/read-this-article-for-less-than-the-price-of-your-starbucks-coffee/ to see why the cup of coffee appeal works.

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