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

Mars, Venus, and social proof

Here at Direct to Donor, we have a tradition – every 100th post anniversary, we take a look back at some past posts and update them with new information.  “Tradition” may be a bit strong, since we will hit 200 posts this week, but we’re working on it.

Back in February, we took a look at how women and men donate differently.  TL; DR?  Women generally donate more and more often.  Women respond best to social proof, clear injustice, and efficacy appeals; aligned self-interest worked best for men and worst for women.

However, there is a new study that may shed different light on the gender* dynamics of social proof.  In the original study, here’s the phrase researchers used to try to get men and women to donate in the social proof condition:

“When you give to CRP, you join your fellow citizens in helping to fight poverty. The poor are now being helped by record numbers of charitable givers across the country. You can join the movement to eliminate poverty with your contribution to CRP.”

As you can see, this doesn’t mention a specific amount – the social proof comes in the decision to donate, rather than the amount to donate.  The researchers in this case found that women donated more often to this type of appeal.

The reason I go through this set up is that there is also a study out that indicates something different.  This study from Croson, Handy, and Shang looked at a radio station call-in scenario.  Subjects were told, after making a $25 gift, that someone else had just donated either $10 or $50.

Croson and Shang have looked at this type of data in the past (here and here), finding that this type of social pressure/pull can significantly increase the amount given by a person.

Here, they asked subjects how much they think and average station listener would contribute and how much they would contribute in the next year.

It turns out that social norms did influence contributions, but almost entirely from men.  So men were more likely to use this social information to inform the amount they gave.

So, these sound like two opposing studies – one indicating that social norms work better on women; the other indicating they work better on men.

However, I think there is a way to reconcile these results.  It would appear that social norms – how a community is banding together to help fight poverty – are more influential for women than men when it comes to deciding whether to make a donation.  However, when the time comes to actually make the donation, women will keep their own counsel about how much to give more than men, who are more influenced by outside views.

This is an interesting area of research; I hope we can get research that is able to show a clearer direction.  In the meantime, I would keep appealing to men and men alone with enlightened self-interest and use social proofing as a strategy to anchor men to higher gift amounts.

 

* Technically, it’s sex dynamics, since the study appears to have looked only at a male-female dichotomy, but “Sex Dynamics” sounds like a book you would get on Kindle so no one would see you looking at the cover.

Mars, Venus, and social proof

Doping in your direct marketing

lance_armstrong_tour_de_france_2009_-_stage_17

Not this kind of doping.

Our brains are miracles of electricity and chemistry.  Each electrical and chemical reaction is a way of communicating from one part to the other.  And there’s hardly a more fun chemical in the brain that dopamine.

Dopamine is what’s called a neurotransmitter.  It is released by nerve cells (neurons) to send messages to other nerve cells.  And it moves through special dopamine pathways.  One of these is called the mesolimbic pathway, aka the reward pathway.  There will not be a test on this.

Think of the classic rat-pushes-a-level-and-gets-a-reward-experiment.  That’s what dopamine does.  Do good.  Get a dopamine reward.  Most addictive drugs work through dopamine and most anti-addictive medicinal treatments repress dopamine.  In fact, there are case studies, including this very readable one from The Atlantic, of people who are addicted to giving because of their neural pathways.

Dopamine dulls pain, arouses, causes pleasure, and dilates the eyes.  I mention this last one so I can give you a good tip for reading people by way of Sherlock.

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Sherlock: because I took your pulse: elevated; your pupils: dilated. I imagine John Watson thinks love’s a mystery to me, but the chemistry is incredibly simple and very destructive.

As a result, it’s a pretty nice thing to have on your side in nonprofit direct marketing.  The “warm glow” of giving is largely a dopamine reward (mediated by oxytocin, which we’ll talk about tomorrow).  When researchers look at fMRI data, they found that when someone gives to charity, the nucleus accumbens (which is usually associated with unexpected rewards) lights up and produces dopamine.

So how do you build dopamine and how do you use it?

The first is obvious and we’ve talked about it ad nauseum: thank your donors well.  Part of why dopamine is addictive is that the brain tends to anticipate it.  And you don’t want to deny someone that hit of dopamine for their good deeds.  Conversely, an unexpected reward can have the same impact that unexpected flowers or a gift can have for a spouse or loved one.  No, not the wondering what you did wrong one — the good one.

Beyond that, it’s something you can stimulate in your copy and storytelling.

Seeing other people happy releases dopamine and makes the person who observes them happy.  While I’m on the record not to sugarcoat our issues, when you can show the after and the impact you are having, you can do so in a way that makes your donor happy as a result.

Affirmations.  On online buttons, you’ll notice a lot of conversion buttons are now starting with “Yes,” or its excitable cousin “Yes!”.  This is because a positive affirmation can release dopamine and excite the person seeing it.  We become the rat pushing the lever.

Exclusivity can also give a dopamine hit.  We’ve talked about its power in persuasion; dopamine is part of why.  Here there’s a double shot; once when you know things that no one else knows and once when you share it with them.

And finally, use lists.  Our brains love to complete things, thanks to the reward it gives itself every time.  Bullet points tend to work better than comma’ed lists with each one making a nice mental check every time it’s read.

So that’s dopamine in a nutshell (or a skull).  Please check back tomorrow to learn about oxytocin, or sign up for our newsletter and never miss a post!

Doping in your direct marketing

Learning from political fundraising: chip in change for change

You’ve seen the headlines: “Americans more divided than ever”, “Gridlock reaching threat level crimson, which is worse than red somehow”, and “Pelosi-McConnell dancing knife fight leaves two dead.”*

Seemingly, parties can’t agree on anything.

But here’s a ray of hope.  They can agree on donors chipping in:

Martin O’Malley:

chipinomalley

Rand Paul:

chipinrandpaul

Bobby Jindal:

chipinjindal

DCCC:

chipindccc

RNC:

chipinnrcc

Jeb Bush:

chipinbush

Bernie Sanders and MoveOn:

chipinsanders

John Kasich:

chipinkasich

Marco Rubio:

chipinrubio

Hillary Clinton:

chipinclinton

I’ll be honest: usually my research for this blog is harder than this.  The hardest parts of finding these were:

  1. Remembering who had been running for president.  For example, it turns out Lincoln Chafee is not a model of car.
  2. Finding photographic from former campaign sites.  There’s evidence that Scott Walker, Chris Christie, Mike Huckabee, and others used chip-in language, but couldn’t find them online.  So passes away the glory of a presidential campaign.

But nonprofits don’t seem to be using “chip in” much.  Yet.  I think BirdConservancy.org was the largest organization I could find in my Googling.

So why do political organizations almost unanimously use “chip in”?  Here are my theories:

  • “Chip in” sounds very small. Giving permission for small donations increases the likelihood of giving. This is probably part of the appeal.  This extends to the standard ask strings.  Clinton, Cruz, Kasich, Rubio, Sanders, and the current Republican frontrunner (since I pledged I wouldn’t use his name as a cheap SEO play) all start their asks at $3-25.  In fact, if you take out Kasich, the highest initial ask is $15 (ironically, for Bernie Sanders).
  • Making a cost sound small also decreases the amount of pain that someone feels from making a purchase/donation. 
  • The value of a name in political spheres far exceeds just their donation value.  A $3 donor is also a voter at worst and perhaps a volunteer or district captain.  And of course, they may be able to give more in the future.  A $2,700 donor is these things, plus someone who may be able to attract like-minded funders at a max level.

    I say this is in political spheres.  But isn’t this true for your nonprofit as well?  You want that $3 donor as a volunteer, walker, bequest donor, monthly donor, etc.  And yet we generally have higher online ask thresholds. 
  • “Chip in” implies that others are doing the same.  In fact, Oxford Dictionaries defines “chip in” as “contribute something as one’s share of a joint activity, cost, etc.”  Social proof is a powerful persuasive force and knowing that others are doing it and are counting on you too can greatly influence decisions. 
  • People like to be a part of something bigger than themselves.  This is especially true for causes, political or non-profit.  The ability to make something part of your identity that ties you into a larger in-group can be very powerful.

So I’d encourage you to try chipping in as part of your emailing strategy (and, if it works, test elsewhere) as a way of pulling these cognitive levers.

A post-script: after I drafted this piece, this came in from the Clinton campaign:

unnamed

 

* I will offer a free signed book (in that I will print out any one of my ebooks , sign it, and mail it to you) for the first person who can do a Photoshop of this based on West Side Story.

 

Learning from political fundraising: chip in change for change