Monthly giving

Time value of donations: I would gladly pay you Tuesday for a warm feeling today

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Are you ready to increase your monthly donations?  Can you wait until two months from now?

It’s time for a week of studies of nonprofit direct marketing.  This has quickly become one of the favorite types of post on the blog, so if you don’t want to miss the entries later in the week on ask strings, matching gifts, when to ask to support awareness activities and more, please sign up for my free weekly newsletter.

Today’s study comes to us from Anna Breman of the Stockholm School of Economics (it’s not actually a great school of economics, but the longer they keep you there, the more you believe it is*).

In it, she tries a unique approach to increasing monthly donations that, since the title of the paper is Give More Tomorrow, you can probably guess worked.

 

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Wimpy, Patron Saint of the Time Value of Money

The experiment takes advantage of one of those cognitive biases or heuristics we are always yammering on about (explanation of heuristics here).  In this case, being human means that you prefer immediate benefits and delayed costs.  This is why diets start tomorrow, plasma TVs trump retirement savings, and dentists ask you to commit to a time to come back rather than trusting that one day you will feel like a dentist visit.  It’s also why, in a famous experiment with children, the pull of one marshmallow now is strong even when there is a promise of two marshmallows later.

So what if you could commit future-you to making a monthly donation, but present-you doesn’t have to feel the pain?  It makes a lot of sense, given Benartzi and Thaler’s experience with a Save More Tomorrow plan that successfully asked employees to commit a portion of their future pay raises to savings.

Breman worked with a Swedish charity Diakonia** and their existing bank of monthly donors.  In one group, they asked their sustainers to increase their monthly donation now.  In the other, they asked sustainers to increase their monthly donation in two months.

The increase in donations was 32% more in the group asked to increase their donations in two months.  Part of this was an increase in average donation (19%) and part was an increase in the frequency of donation rate (11%).

And, looking back, the treatment donors were no more likely to cancel or decrease their monthly donation than the control group.  In fact, the long-run effect was slightly higher than the short-run effect.

This seems like a tactic that is easily implemented on the phone.  It would be harder online if you are using an out-of-the-box online solution.  I won’t mention any names (*cough*cough*BlackbaudLuminate*cough*cough*), but some programs are so inflexible you can’t even schedule monthly donations to be processed on a specific date each month, as is common practice for monthly donations.

While the study did not ask this question, I would also wager than donors who increased their giving months down the road were also happier with their decision as a result.  It’s quite common to have stress reactions to charitable asks (even when one wants to give) and knowing that you don’t have to give now in order to have the impact that you want could be soothing.

The next test, I would argue, for academia is whether this technique also works for monthly donor acquisition/conversion.  It would seem that the same logic would apply, but I don’t know of anyone who has tested it.

So, if you are among the bold and fortunate few, can I prevail upon you to share your experience in the comments or to email me at nick@directtodonor.com so that I might illuminate your fellow readers (and myself)?  Thanks in advance and hope you enjoyed reading.


* I just couldn’t help myself for this joke.  I apologize for that joke to you the audience, Anna Breman, the Stockholm School of Economics, any former or current hostages, the people of Stockholm and Sweden, people of Scandinavian extraction, and people who drive Volvos or have Ikea furniture.  Also to Tom Hanks.  He knows why.

** I should also apologize to Diakonia, which does really good work on sustainable development around the world.

Time value of donations: I would gladly pay you Tuesday for a warm feeling today

Using your real estate better: post-donation interaction

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Online and telemarketing donations have a unique feature that few other direct marketing interactions have: you are still communicating with them once they have made their donation.

Obviously, a large part of this post-donation interaction should be aimed at confirming that the donation was made and sincerely thanking the person for contributing to the cause.

But there is a unique opportunity in these interactions to get additional value from and give additional value to your donors; it’s the time between donation and processing.  A person has selected an amount, given their credit card (or EFT) information, and decided to make the donation (whether online or by phone).  But the person or the series of tubes has not yet processed the credit card.

You may not even have known there was a time in between donation and processing; I know it took me years before realizing this.  But you can put a shadowbox on your donation page immediately after someone hits “Submit” (or hopefully a more creative button like “Save Lives Now!”).  For telemarketers, it’s just a part of the script.

Since the donor is unlikely to turn back at this point, it’s an ideal time to explore an additional option with them (and I do mean “an” in the sense of “one and only one” – we do not want to turn off the donor).  There are two goals you can have for this: upgrade in amount or upgrade in kind.

If you are looking to upgrade in amount, I would suggest:

  • Selecting a small amount – something that is 10% or less of your normal donation in the medium.
  • Tying it directly to a tangible and immediate win for the donor – e.g., “if you add $3 to your donation right now, you’ll be feeding a child three healthy, lifesaving meals in war-torn Freedonia tomorrow.”
  • Making it very easy to say no and move on with the original donation.  This is not a circumstance to let the better be the enemy of the good.

Because of the limited upside of this tactic, I would suggest the second option: aiming for an upgrade in kind.  This will almost always be trying to upgrade to a monthly gift.  Some tips on this upgrade:

Don’t get greedy.  One of the more frequent upgrade strategies attempted online is a check box that says “repeat this gift on a monthly basis” as part of the donation form.  There are three problems with this:

  1. It explains none of the reasons why you would want to do such a thing
  2. It’s stilted, non-donor-friendly language
  3. It’s before the donation is attempted.  In this case, if the donor is turned off by this half-asked ask, there is no donation.

You want to make the donation ask small enough that it seems like a similar amount of money to what they have already pledged to give.  While you will want to test what this amount is for your organization, I’d advocate a rule of thumb that you’d want to start at about a quarter, plus or minus, of what a person has pledged to give.  Thus, if someone wanted to make a $100 gift, ask them if they would like to make a $25 monthly donation instead.

It doesn’t take a rocket surgeon or a brain scientist to see that this will take at least four months to pay off.  But the average monthly donor is far more loyal than the average one-time donor and will likely extend out past this four-month mark.  And, since we humans value present money more than future money (witness the exchange rate we are taught between birds-in-hand and birds-in-bush), this seems reasonable-ish to the prospective donor.

Explain the benefits of the upgrade to the organization. Your donor has already made the tough decision: to donate to you in order to help people.  If there is a way that they can be more effective in their giving, they are more receptive to it at this point than almost any other (and, at the very least, are not that likely to be turned off by it).  So let them know that giving a smaller amount per month helps even more, because it’s predictable revenue that helps you get through lean times together.  You’ll also likely want to have some strong social math here (what does their $10/month do in terms of tangible benefit) as well as positioning against a hedonic good (“that’s the price of a cup of coffee each day”) to help you win the upgrade.

Explain the benefits of the upgrade to the donor.  Of course, to some extent, being able to help more people is a benefit to the donor – that was their goal going in and they are able to do more of it.  However, there are also tangible benefits as well:

  • Ease.  No more forgetting a donation the donor might want to make.
  • Budgeting.  The donor would be able to budget for donations on a monthly basis, which is how our mental accounting systems usually work.
  • The donor will be able to cancel at any time.  This is critical in the pitch.  You want people to know that you want only 100% satisfied* donors and thus want them to have freedom in their donation.  This is also because one of the primary mental objections to setting a monthly donation is “what if I change my mind?” (and its close cousin, “what if the organization does something I don’t like?”).

You can also put in whatever benefits your organization has for monthly donors (e.g., special member card, donor newsletter, etc.), but I would test it both with and without.  You might find your donors are more drawn in by the mission and the impact they are having and don’t want that special relationship cheapened.

Speaking of special relationships, I’d like to have one with you through our weekly newsletter.  You can sign up here and get the week’s updates in digest form, along with late-breaking thoughts and information.  Thanks for reading!

* Perhaps even donors who are 110% satisfied, for those direct marketers who are bad at math.

Using your real estate better: post-donation interaction

A direct marketing bridge to… monthly giving

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I had the pleasure of hearing a speaker from Greenpeace talk about how you should never ask for a one-time gift.  In fact, he went so far as to say that you should turn down the one-time gift if offered because it is the wrong response.

I loved this talk, but I will freely admit that I lack the intestinal fortitude and the spinal integrity (guts and backbone) to try this approach.  Monthly giving is certainly more and more popular and more accepted in the United States, both with credit cards and with EFTs.  Electronic banking has helped with this; hacking scandals hurt, as you force everyone who shopped at Target (a purely hypothetical example) to change their credit card on your site.

 

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I can’t imagine why hackers would aim for this company…

But it still seems like we have at least one technological generation of people to go before every gift will be a monthly gift (Greenpeace, with a substantially younger supporter base than the average nonprofit, may already be there).

So I will confess that this is the wimp’s guide to getting into monthly giving.

First, as with planned giving yesterday, plan out your systems.  Part of this is the giving society you have for monthly giving (and benefit levels, if you choose to have them or incorporate a membership concept).  But the major part is managing exceptions.

You want to have a plan when credit cards are declined to try them again, potentially twice.  Then, you want to have a plan to reach out to that donor to attempt to obtain their new credit card information and a continued gift (telemarketing and email, not in that order, are preferred for speed).  Failing all attempts to get them into a monthly cycle again, you want to restart the appeal process, ideally to rejoin the monthly giving society.

The best way to do this is to charge all of your credit cards on one day a month.  Which is another way of saying “don’t use Luminate CRM for your monthly gifts.”  I had the pleasure of meeting with my then Convio, now Blackbaud, rep about one time per year and every time I would ask them to create the ability to charge all on one day so you can automate the recapture process and coordinate it with offline monthly donors.  They would look at me with the same expression that a Labrador retriever would use to regard the space shuttle and say they had never heard of something so absurd and no one else in history would ask for such a thing.

While just meant that I talked to more of their customers than they did because most people I talked to bemoaned the lack of single day processing.

So you want an online and an offline system for processing your cards and EFTs in place and a system for following up on declines.

Now, as for getting monthly donations, you should definitely have monthly giving incorporated into your online strategy and as much a focus of your donation forms as you can without giving away net.  You should also have it mentioned in direct mail pieces, especially in acknowledgment follow-ups (a good opportunity for a buckslip for the people who aren’t getting the planned giving one) and donor newsletters.

But telemarketing is the best means I have seen of getting a bulk audience of monthly giving donors.  Modeling your donors helps immensely. Your donors who already use online banking, who are receptive to telemarketing, and/or who do frequent online ordering are going to be good targets for this. Also, your telemarketing vendor should have a history of who paid by credit card in the past.  I’m not saying the people who send checks in for a pledge will be entirely useless for monthly giving, but I will say they will be mostly useless (for this; they are lovely people who are doing great work through great causes).

Since I’ve been critical of Blackbaud above with my Luminate ravings, I will say that I’ve had good experience with the Target Analytics Group’s telemarketing receptivity index.  I’ve found that it does a good job of separating out among people who haven’t given by telemarketing to find who is most likely to (that said, everyone who had given a gift in telemarketing before outpaces everyone who hasn’t in terms of calling).

One weird data anomaly – when I did sustainer calling, the best performing group were the people who had given through telemarketing to us, but rated low on the TAG telemarketing index.  We hypothesize that these were our special little snowflakes who we knew gave through the phone, but no-one else did.

Use a follow-up ask in traditional telemarketing. While you can and possibly should do telemarketing strictly for monthly givers, you can work with your callers to ask for a monthly gift after they have the credit card information from a donor.  The script would go something like “Thank you, Mr. Hinx, for your donation of $40 today.  Before I process that, would you like to be part of our [name of monthly giving society]?  It’s for especially loyal donors who make a gift each month on your credit card that you can cancel at any time.  I could set you up for a donation of $10 a month instead of your $40 donation today?”

The divide by 3-5 to get the monthly gift is a pretty good rule of thumb.  Before I had a lot of online giving experience, I took our average offline gift, which was about $28 at the time, divided it by 12 to get $2, then set up an ask string of $2, $4, and $8 for a monthly gift.  The average monthly donation on that form was almost $10 – the first and only time I’ve had the average gift be higher than anything on the ask string.  So learn from my idiocy.

In fact, if I had to rename this blog today, I could do far worse than LearnFromMyIdiocy.com.  It is available, but at some point, I’m going to have to blog about how rebranding is almost never the answer to a fundraising question, so Direct to Donor it is.

Thank you for reading once again.  Please let me know what you’d like me to cover next at nick@directtodonor.com or in the comments below!

A direct marketing bridge to… monthly giving