Mental accounting and nonprofit giving

Back in March, we looked at how people have different mental buckets for their expenses.  Certain amounts are set aside for home expenses, car expenses, utilities, entertainment, education, etc.  And there’s a bucket for many for charitable giving.  We talked about this in the context that you can (sometimes) get someone to make a gift they wouldn’t normally make by framing it as an exceptional expense — something they wouldn’t normally budget for.

Since then, there’s been a more in-depth look at mental accounting in nonprofit giving.  Monica LaBarge and Jeffrey Stinson published an article called “The Role of Mental Budgeting in Philanthropic Decision-Making,” as well as doing a podcast about it that you can listen to here.

Some key highlights from how people mentally account for their donations:

  • Generally, people substitute one charitable act for another, not for a non-charitable act.  That is, people substitute sports for movies or church giving for alma mater giving, but they don’t generally substitute movies for church giving.
  • The amount allocated to charitable giving is usually at about 10%.  It’s interesting to hear this, as this is the amount often suggested by religious institutions as the amount to give to them; generally, however, it seems to be a rule of thumb for charitable giving.  Even non-religious givers centered around 10%.
  • Interestingly, tickets to galas and events can be considered charitable gifts or in other buckets.  One donor to whom the researchers spoke talked about how buying a table for a gala was a business expense because that was his goal in sponsoring.  In the next breath, he talked about giving to an organization through a ticket purchase because he knew the person being honored.  Thus, it’s important to understand how the giver classifies their giving to you.  You may be able to take multiple buckets to maximize your giving.
  • The happier people are with their giving to you, the more they are able to give.  This sounds obvious, but when someone enjoys giving to you, they are willing to dip into other buckets (like entertainment) that may not normally be open to you.
  • You may be able to work with business people who support your organization to sponsor in ways that help their business, giving you access to their business budgets.  Focusing just on philanthropic giving caps your upside with your donors.

Much of this comes back to the dictum “know thy donor” — the more you know about how your donors think of you and their experiences with you, the better off you are.

Mental accounting and nonprofit giving

Winning the battle against scope insensitivity, part 2

A reminder for those joining our program already in progress: scope insensitivity means that people are willing to give the same about to solve a program almost no matter how big it is.

Part of this is likely that humans don’t reckon big numbers well.  After all, in our salad days, we needed to figure out how many animals were nearby and how many people were in our group, but we didn’t need to count the stars or, God help us, remember how many zeros are in a petabyte (answer: a lot).

Which leads us to have troubles with numbers like this:

1000_times

Thanks to xkcd for the illustration.

So how do you make large numbers comprehensible to your target audience?  In a great piece on Gizmodo, mathematician Spencer Greenberg covered some important ways to anything over a thousand into perspective.  His tips include:

Breaking the number down.  When MADD talks about the cost of drunk driving, the amount talked about is usually not the billions of dollars; it’s $500 for every adult in the United States.  Everyone can picture $500 or what they could buy with it, whereas we don’t know where to start with a billion dollars.

Actually, we do — with a vintage battleship gray Aston Martin DB5 — but that’s only a start.

Change the unit of measurement. The example he gives in the article is when talking about the deepest point in the ocean, don’t say 36,000 feet; say almost seven miles.  I would argue that for nonprofits, you may want to change the type of unit of measurement.  When doing earthquake relief, 8.4 on the Richter scale may not mean much.  But “I saw a sign that talked about the building being earthquake-proof buried under a pile of rubble” gives someone an idea for the force we are talking about.  Or 8.4 can be “the same force as the largest nuclear weapon ever tested.”

Batching the numbers.  We can’t picture 2.3 million people.  But we can picture the football stadium we saw on TV last night.  So “every NFL stadium filled to capacity at once” gets the message across.

Incorporate time.  In the article, he mentions that during the Battle of Stalingrad, Russians broadcast the message that “every seven seconds, a German soldier dies in Russia.”  That gets the message across (that message being “RUN!!!”) in a way that 388,000 people dying each month does not.

These are some good tips.  I would add another — infographics.  For the modern nonprofit, an infographic can explain in a way that simple numbers can not.  There is a strong article in this month’s Bulletin of the Association for Information Sciences and Technology (get it on any quality newsstand today!) that highlights tips for creating a good infographic.

They include:

  • Identify a meaningful comparison for your audience. It has to be something that resonates with your audience, not just you.
  • Tell your audience what you want them to do or think. Like all things, we want to begin with the desired action in mind.
  • Don’t crowd your message with less important numbers or statistics.

There are some good nonprofit examples in the article, so I recommend a read.  Hopefully, you can now get your millions and billions down to something that people feel like they can do something about.

Winning the battle against scope insensitivity, part 2

Winning the battle against scope insensitivity, part 1

Back in February, we talked about how humans have scope insensitivity; that is, they don’t look at the scope of a problem.  This manifests that we are more likely to give to an individual story than to a global problem; it also means that we are willing to give just as much to help save 2000, 20,000, or 200,000 birds.  Even though the problem is greater, we have the same mental bucket for the amount we are willing to allocate.

What if you could change this with your copy?

It turns out you may be able to.

Hsee et al experimented with a way to combat scope insensitivity called unit asking.  The method is deceptively simple: before asking how much a person would give to support a group of needy people, ask how much the person would be willing to give to support a needy person.

The psychology here is brilliant: by setting a mental anchor for an individual person, suddenly the scope of your program is working for you instead of being a spectator in your ask.

Their first experiment was with a survey: people were asked how much they would donate to help 20 children in need.  Half of the audience had a preceding question:

“Before you decide how much to donate to help these 20 children, please first think about one such child and answer a hypothetical question: How much would you donate to help this one child? Please indicate the amount here: $____.”

People who got this priming question expressed a willingness to donate more than twice as much as the control group ($49 versus $18).

Then, like good researchers, they wanted to see if this would actually have an impact in the real world.  They worked with a company in China that was raising money among its 800 employees to help 40 school children in the Sichuan province, which had just gone through an earthquake.

The company emailed its employees, half with a unit ask, half without.  Average gifts went up 65% among those asked to envision what they would give to support one children first.  Additionally, response rate was unaffected (actually, response rate was slightly higher with the unit ask, but not significantly so).

They then tested the wording in the mail, with even bigger results — those who received the unit ask first had gifts that were four to five times higher than those who received a plea for the 40 children alone.

So, if you have a large number of people affected, ask how people would treat one person first.  Here, we return to the wisdom of Mother Teresa again:

engaging-millennials-as-organ-donors-june-13-2011-35-728

That probably works for numbers that people can picture.  I can picture one child, multiplied by 40, to get 40 kids.  What do you do if you are working with numbers large enough that people can’t picture it?  We’ll talk about that tomorrow.

Winning the battle against scope insensitivity, part 1

The limits of urgency

Back in December, we talked about how scarcity and urgency can help build response and persuade people to give.  But in April, we reviewed a study that indicates that a deadline actually suppressed response rates and that that suppression is only lifted when there is a good reason for a deadline, like the end of a matching gift.  

So how does urgency affect an appeal?

Two researchers took a look at this with a large Danish charity.  

danish

A large Danish.  But not a large Danish charity.

In email, they had four test groups.  All received the same email with the subject line “Lokwang is grilling rats”.  This isn’t actually the first half of a Cold-War-era spy passphrase (where the other spy is supposed to say “But the oyster wears a fine green wristwatch”); it tells the story of a child named Lokwang who go weeks without food who eat rats in order to survive.

The only difference in the emails were that they had different deadlines:

  • Three days out
  • 10 days out
  • 10 days out + a reminder email
  • 34 days out

Similarly, they ran text campaigns with deadlines two days, three days, and 34 days out.  If a donation was made before the deadline, it would be matched.

The deadlines had no significant impact on the propensity to give.  None.  The researchers found a “now or never” effect that you probably have seen with every email you’ve sent — people generally act upon reading it or not at all.  Text messages, even more so.  

Additionally, the increase in urgency was linked to an increase in requests to be removed from the email/text list.  I usually don’t look too much at this as a metric, since often the things that are most effective have higher removal rates (after all, if you have double the open rate, for example, the more people are exposed to the “unsubscribe like.  The only email that would have no unsubscribes to a list of size is the one that was never opened.

What did increase giving was the reminder email/text message.  While this also increased the unsubscribe rate, it also increased giving rates by over 50%, a trade off you almost certainly are willing to take.

So perhaps urgency is not as powerful a force for online donations as perhaps I had thought.  While I’m thinking it still definitely has places in end-of-year fundraising, disaster fundraising, and a few other places where urgency is real, this would tend to indicate that manufactured urgency may be unnecessary and, in fact, counterproductive.

The limits of urgency

Cognitive fluency, your brain, and direct marketing

“Cognitive fluency” means brains like things easy.  Easy things make brains happy.  Happy brains make people do things we want them to do (proof is here). 

Options of three things are easy.  Brains Goldlocks it and pick the one in the middle – not too much, not too little.  There’s a study that shows this

Repeating things makes them easier.  Seeing something once makes you more likely to like it a second time.  Thrice is even better.  Even if it is nonsense, you like it because you’ve seen it.  

The easier something is, the more it convinces.  That’s also been shown.

art1__1264872682_4038

Image credit: The Boston Globe.

For example, reading Arial makes us think doing something will be easy.  Reading a script font makes us think it will be hard.  The study is here.  

Simply named stocks do better than tough ones.  Simply named people become president.  More info here.

Also, repeating things makes them easier.

So make it easy for your donors.

Have people looking at your donate button.

Repeat things.  Because repeating things makes them easier.

Build up to your ask.  Small steps like email petitions increase donations.  

Tell people what other people are doing.  That’s social proof.  Brains like social proof because it makes things easy.

Just like repetition does.

Make your text a very different color from the background.  Because this stinks.  If it’s too close, it blends in.  Blending is bad.  Reading easily is good.  

Bigger fonts are also better.

Write at the lowest grade level you can without sounding Dick and Jane.  Jeff Brooks, in his very good book, recommends 4th to 6th grade level.

Some may call this stupid.  But it’s not dumbing down.  It speeds your donor up.  It makes it easy for their brain.  And that makes you more persuasive.

So, small words.  Short sentences.  Fragments of sentences, even.

Your high school English teacher might disagree.  If s/he wants a say, s/he needs to donate.

Please make your donors’ brains happy.  Make it easy for them.  Then they will make it easy for you.

Cognitive fluency, your brain, and direct marketing

How the brain decides whether to donate

The classic of this decision-making writing is Daniel Kahneman’s Thinking, Fast and Slow.  In it, he talks about two thinking systems, cleverly named one and two.  System one is our fast thinking, emotional, instinctual system; system two is our contemplative, logical, slower system.  Many of the cognitive biases and heuristics that we talk about in this blog stem from system one having clever (and not-so-clever) shortcuts so that we don’t have to spend the energy to think.

There’s a subtle shift on this that more neurological minded decision theorists propose (not that Kahneman’s system is bad — there’s a reason it’s a classic).  They say there are three decision-making pathways: 

  1. Pavlovian: This is the system that makes you want a meringue cake dessert.

    300px-pavlova_dessert

    Nope, sorry.  Knew I shouldn’t be writing while watching Food Network.  A Pavlovian pathway is instinct: it’s an unconscious or nearly unconscious, reflexible behavior.  It gets its name from the ring-a-bell, get-a-treat, now-the-dog-salivates-when-the-bell-rings conditioned response guy.  This may be System 0 in the Kahneman taxonomy.

  2. Habitual: When you repeat actions over and over, they become subconscious behaviors.  There’s a neurological saying “fire together, wire together,” meaning that if you do something repeatedly, the stimuli involved in that something will tend to become associated and more efficient working together.  Think of walking the same path through grass day after day.  Pretty soon, that path becomes almost as good as a sidewalk, controlled by your basal ganglia.

  3. Goal-oriented: When you make conscious, reasoned decision based on trying to get to a positive outcome.  You likely have heard about how people like President Obama, Steve Jobs, and Mark Zuckerberg wear the same thing every day so they don’t have to make that decision every morning.  There is a germ of truth in this: we can only handle so much in a day and every goal-oriented decision takes its toll.

If you would like to read about these three mechanisms and how they function in prosocial (not selfish) behavior, there’s a nauseatingly detailed study here

So what are the implications for direct marketing?  I’d love to hear yours; here are a few of mine:

  • For a certain type of supporter, is reduced cognitive load part of the pitch for a monthly donation EFT?  That is, can you take something that you have to think about in the goal-oriented pathways and put it into automatic?
  • Conversely, do you want to?  Do you want to encourage goal-oriented thinking or aim for a more conditioned response?
  • Donors will likely expect that you behave like Pavlov’s dog.  That is, you need to do what you say you are going to do, especially as it relates to acknowledgments.  If someone is going to expect that hit of dopamine upon receiving their thank you, you need to follow through on that.
  • This likely explains the reason that gifts under $100 are given with the heart and over $100 are given with the head.  At that point, a gift goes from a habitual response to a goal-oriented action full of actual thoughts.
  • What type of conditioning are you doing with your direct marketing program?  There is a chance that premiums are conditioning some of your donors, whether habitually or Pavlovianly, to donate only when they get something for that donation.
  • Are there some means of communication that are truly Pavlovian?  I’m thinking here of mobile messaging.  When someone automatically checks their phone when they get a ding sounds, it’s not too many steps removed from a salivating dog listening to the bell.
  • See if you can discern habitual behaviors in your donors.  Do you have a set of donors who gives every year in November or December, but never in the other ten months out of the year (answer: yes, you do)?  Do you still mail them or call them with all of the other donors in June?

Any other thoughts?  I’d love to hear how you are building positive habits with your donors at nick@directtodonor.com or in the comments section.

How the brain decides whether to donate

Oxytocin and direct marketing: beyond the cuddle chemical

 

Oxytocin is a hormone produced in the hypothalamus, which is responsible for a number of major autonomic (or unconscious, like breathing) functions of the body.

Oxytocin is sometimes called the cuddle chemical or the hug hormone.  It’s a natural classification.  Oxytocin is released naturally as a part of childbirth and is associated with maternal behavior and social attachment.  

However, it goes much beyond this.  More recent research has shown it’s important in the formation of trust.  People dosed with oxytocin are more willing to trust their money with strangers.  Some researchers think this is because they are also more able to read facial expressions and emotional states.

On the dark side of oxytocin, while it promotes trust with in-group members, it also increases distrust of foreigners and outgroup members (study here)

More to the point of nonprofit direct marketing, when people empathize with a story, oxytocin levels are on average 47% higher. (study here)  (More so among women than men, which is perhaps why women are more likely to empathize and give charitably).

This translates to additional giving.  Subjects who received oxytocin gave to 57% more causes and 56% more money after exposure to PSAs (study).

But that’s nothing compared with what is possible.  In the same study, they looked at what happened when people experienced increases in both oxytocin and a fast-acting arousal hormone called adrenocorticotropic hormone (which people abbreviate ACTH for obvious reasons).  When the PSA increased both of these, giving increases 261%.

This means that the story has to both arouse empathy (releasing oxytocin) and draw the person in (stimulating ACTH).

So how do you do that with your narrative?

First thing is to take what your high school English teacher taught you about the five-act structure of plays, where you have rising action, leading to a climax, then a falling action that leads to a resolution.  Remember that?  (You may even remember the term Freytag’s pyramid, in which case, good job, Hermione.)

Now crumple it into a ball, throw it away, and try to forget it ever existed.  As we’ve said before, all pyramids are lies.  Even in the two-minute video that Zak used to test his subjects, attention tended to drift until tension raised again.  This is far less Freytag’s pyramid and far more the latest Avengers movie, where there has to be a tension set piece every so often to hold interest.

The goals are emotional resonance and attention holding.  When you have a narrative that does that, you release oxytocin and ACTH.  And when you do that, you get donations.

We’ve talked a lot about ways to do this, imagery and specific details being particular favorites.  However, when it boils down to it, take a look at your story.  If there are any paragraphs, sentences or words (especially adverbs!) that don’t help one identify with the people in the story or hold the attention of the reader/listener/watcher, cut it.

It’s brutal, but you need to hold attention and create empathy with it in order to succeed.

Tomorrow, we’ll get out of chemistry and into how people make decisions.  

Oxytocin and direct marketing: beyond the cuddle chemical