matching gift

When does a match light a flame?

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We’ve talked about how a lead donation can be as or more effective than a matching gift campaign and how using a lead donation can also calm the overhead related concerns of donors.  

From that, it may sound like I’m anti-match.

 

mission2bimpossible2bfuse2blighting2bmatch2btv

(insert Lalo Schifrin score here:
BUM BUM BABA
BUM BUM BABA
WAHNAHNAAAH WAHNAHNAAAH etc.)

But I’m not.  It’s a widely used tool that I’ve found to be effective in several cases and, unlike most tactics, the donors I talk to also seem to enjoy matching campaigns.

Some research can help shed some light on when to use a match and when not to.  Karlan, List, and Shafir published a study in the Journal of Public Economics (and who doesn’t pick that up for a little beach reading over the summer) looking at match rates.  

Normal studies tend to focus on whether the match works overall: yes it does or no it doesn’t.  This study, however, gives some guidance on when to deploy a match.  It also cross-deployed the match with a test of urgency, which is one of the building blocks of influence.

So there were four test conditions:

  • Matching gift with urgency (with a reply device and PS that said things like “NOW IS THE TIME TO JOIN THE FIGHT!”; you can tell it’s urgent because it’s in ALL CAPS!).
  • Matching gift without urgency
  • Control with urgency
  • Control without urgency

And they did a bunch of other stuff also that is not relevant for our purposes here, including testing different match sizes and timings and such.

The authors found that urgency actually hurt the appeal in many cases (probably, they hypothesize, because there was no particular reason given for the urgency; when it was combined with a match deadline, this negative effect disappeared).

As for the matching gift, there was evidence that it worked, but it only worked for donors who had made their previous gift in the past year.  These donors were 3.2% more likely to donate with a match in place and their average gift went up.  On the flip side, donors who had last given more than 12 months prior had their response rate drop when the match condition was in place.

I mentioned earlier that the donors with whom I spoke seemed to like the tactic and that seems to be supported by this study: active donors do like a match.  However, it seems to bump into trouble when the person has not donated reanecdotalcently.

There’s likely one exception to this (and this is based only on anecdotal evidence, so take this with an appropriate-sized amount of salt).

I have found that people who have given to a match before are more likely to give to a match again.  Thus, if you are suppressing out 13+ month donors from your match campaign, I’d counsel you to leave the ones who have shown the tactic has worked for them.

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When does a match light a flame?

Validating small gifts to increase response rate

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There is an old joke that actually got turned into a Robert Redford/Demi Moore/Woody Harrelson movie.  It is potentially off-color for some readers, so if you think you might be one of those readers, skip down past the image of the movie poster below and you will be fine.

A woman goes up to a man in a bar and asks him “Would you have sex with me for a million dollars?”

The man ponders this for a moment and replies that he would.

She then asks “Well, how about for $5?”

He is shocked, retorting “What kind of a person do you think I am?”

She smiles and says “We’ve established what kind of a person you are; now we’re negotiating price.”

indecent_proposal

The lesson from the above, other than it’s less funny to read written jokes than to hear them told, is that it’s better to get someone to decide how much to donate, rather than to have them deciding whether to make a donation or not.

Researchers have found in several studies that rather than talking about a million dollars, you can have success by talking about a penny – specifically, the phrase “even a penny would help.”

This technique has some impressive results.  One study of this in a face-to-face environment increased giving from 28% to 50%.

One could argue that the success of March of Dimes in their original launch was in part a variant of this.  Although a dime meant much more then, it still was a way of giving permission to lower level gifts.

The phrase fails Kant’s categorical imperative: if everyone did it, it actually would not help.  Your penny would be eaten up by credit card fees, postage, and acknowledgments.  And I have not used this technique extensively because I’ve been worried about the anchoring effect.  My concern has been that while response rate may go up, average gift would plummet and, as a result, we’d have more lower-value donors instead of fewer high-value donors.  The former can be a strategy, but isn’t the one I’ve traditionally aimed for.

But the evidence is that people actually give significantly more than a penny.  While gift did go down on average, the total revenue from the canvass went up 64% because of the increase in response rate.

Since revenue per communication is usually a pretty good way of measuring its success (in an ideal world, you’d want to measure its impact on lifetime value, but on a one-year time horizon, you go with what you have), I would call this a win.

I would go one step further in this to say that this technique would be best combined with others to give a reason for why a penny would help.  Potentially pairs I see:

  • With membership: we want to have as many members as possible so we have the political clout to pass legislation.
  • With petitions: as we’ve seen, the humble petition can be very effective.  And the petition can make the “even a penny” part of the pitch be secondary: “please return your petition today; your voice is vital to this important issue.  And if you could also send a donation – even a penny – it would help move this issue forward even more.”
  • As a lead gift variant: I haven’t seen this tried, but you could see saying “we have a lead donor who has made a gift of $X.  We would like to report back to him/her that his/her gift inspired 50,000 other people to give.  Even a penny would…”  My thought is that, like how the matching gift variant that an additional gift would be generated for every gift made worked, this would help impact response rate positively.  If you’ve tried this, please email me at nick@directtodonor.com; I’d love to feature a case study.

Here at Direct to Donor, we don’t even need a penny; what we would love is if you would sign up for the weekly newsletter that has a digest of this type of information, plus special bonus content each week.  Thanks in advance.

Validating small gifts to increase response rate

The power of a lead gift

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Back in late December, we looked at a study that indicated that a lead gift is a better direct marketing strategy than a matching gift.  While it seemed to slightly depress response, the extra authority and social proof helped increase average gift significantly.  With a matching gift, the reverse seemed to happen: response rate went up, but average gift dropped significantly, with people thinking that they didn’t need to give as much to have the impact they wanted.

Now, there is another study that may show another impact of lead gifts, but at a cost.

The title of the article is Avoiding overhead aversion in charity, which should give you some idea of why I have some uneasiness about the cost of the tactic.  Gneezy et al found that many people are averse to covering overhead expenses of a nonprofit, wanting to fund only the work of that nonprofit.  (This, of course, leaves aside how the work of the nonprofit will get done without that overhead, but it is a concern expressed by some donors, so it is worth considering.)  So donations decreased when the percent of overhead increased.

Then, the study looked at whether having a lead donor, matching donor, or lead donor covering overhead influenced donation rates to increase.  Here were the conditions:

  • Control: “Our goal in this campaign is to raise money for the projects. Implementing each project costs $20,000. Your tax-deductible gift makes a difference. Enclosed is…”
  • Seed money: “A private donor who believes in the importance of the project has given this campaign seed money in the amount of $10,000. Your tax-deductible gift makes a difference. Enclosed is…”
  • Matching gift: “A private donor who believes in the importance of the project has given this campaign a matching grant in the amount of $10,000. The matching grant will match every dollar given by donors like you with a dollar, up to a total of $20,000…”
  • Seed money to cover overhead: “A private donor who believes in the importance of the project has given this campaign a grant in the amount of $10,000 to cover all the overhead costs associated with raising the needed donations…”

Here were the results, in response rate and revenue per piece:

  • Control: 3.36% with $.80 revenue per piece
  • Seed: 4.75% with $1.32 revenue per piece
  • Match: 4.41% with $1.22 revenue per piece
  • Seed covering overhead: 8.85% with $2.31 revenue per piece

So, having a donor or donors to cover the overhead of an endeavor raises the likelihood that someone will donate significantly, seemingly combining the benefits of authority and social proof from a lead gift and the direct donation to the cause from low overhead.

I would encourage you to tread lightly here, however.  The concern is that it could reinforce the (in my opinion) mistaken notion that overhead is bad or something to be avoided.  Not only is it necessary for organizations to exist, it’s necessary for them to grow.  Too often, nonprofits avoid investment that will bring back rewards for their cause and for their organization because it gives the perception of high overhead.

I believe in this so strongly that I dedicated all of last week to discuss overhead and vent my spleen on this.  However, if you want the TL;DR version, I strongly recommend overheadmyth.com, which goes into the mistakes of this approach.

My concern is that there will be a tragedy of the commons with regards to this.  If nonprofits choose to compete on overhead, then everyone will have to compete on overhead and it drags the industry down.

So my counsel is to be cautious with this.  It’s one thing to say that a lead donor has covered the infrastructure costs of a campaign.  It’s another few steps down the slippery slope, however, to say that this nonprofit is good because they spend 92.2% on programs, versus this one that only spends 89.3%.

The power of a lead gift

Cognitive biases, loss aversion and your nonprofit marketing

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1410734667Last week, I used a magnet strip on a plastic card to buy passage on a giant metal bird. The bird leaders asked me to turn off the thing the size of my palm that connects me to all human knowledge, but I could use my book-size thing.  In two hours, the bird took me to a place that I couldn’t reach in a season by walking.

And yet you and I have the same mental equipment that supported our deep ancestors to decide only the four f’s: fight, flee, feed, and, um, well, when two cavepeople love each other very much (or are just anatomically compatible)…

We may stand straighter with less hair and more clothing; mentally, we haven’t changed as much as we’d like. 

We deal with this by taking mental shortcuts, or heuristics, constantly.  There’s a good, bad, and ugly to these biases.  They allow us to function in a complex world and many of them (e.g., trial and error) are pretty good rules of thumb.  However, many of our worst tendencies are in this primitive coding.  They poison our unconscious mind.  For our ancestors, it was useful to use the heuristic that the more the thing looks like me, the more likely it is a friend.  For us, that’s called racism, sexism, and many other unpleasant -isms.  

Heuristics lead to cognitive biases, where we skip over a number of steps in the thought process  to arrive at conclusions.  That’s what we’re going to talk about this week: cognitive biases and how to either use them or mitigate them in your direct marketing.

One common bias we have is loss aversion.  People hate to lose things more than they like to win things.  This sounds nonsensical, but here’s an example from the literature.

Scientists asked people to imagine preparing for the outbreak a disease expected to kill 600 people. If Program A is adopted, 200 people will be saved. If Program B is adopted, there is a 1/3 probability that 600 people will be saved, and 2/3 probability that no people will be saved.  Seventy-two percent of people opted for program A.

They also asked people about two other programs.  If Program C is adopted 400 people will die. If Program D is adopted there is 1/3 probability that nobody will die, and 2/3 probability that all 600 people will die.  Seventy-eight percent of people opted for program D.

The thing is that programs A and C are the same and programs B and D are the same.

The study is here.  All that changes is the framing device.  People hate the option of program C — that 400 people will die.  And they hate the option of program B, where they can’t lock in gains.

The authors conclude that people faced with choices involving gains are often risk averse.  However, we will take risks to avoid losses.

This is partly intuitive.  Picture two gamblers.  One has an early run of luck and is trying to sit on his lead.  Another has an early run of bad luck; she starts wagering more and more to try to get back to neutral.

So, the obvious implication for nonprofit direct marketing is that you aren’t trying to do good things; you are trying to prevent bad things.  People are more likely to donate to prevent a negative than to preserve a positive.

But you can read other blogs to get the obvious implications of things.  There are two other important implications of loss aversion to nonprofits.

The first has a recent snappy acronym: FOMO or fear of missing out.
 enhanced-13539-1397047008-6

Something doesn’t have to be as dramatic a loss as death for people want to avoid it.  Sometimes it’s as simple as opportunity cost: the idea that you could be doing something other than what you are doing.  This dovetails with the scarcity/urgency persuasion trigger discussed here. 

You can trigger this fear by:

  • Having a time deadline on your action.  I’ve done this with matching gifts (which is why I’m only testing the lead gift strategy described here and not rolling out with it).  In both mail and email, these are the only communications I see where the follow-ups do better than the initial communication (because they are closer to the deadline).
  • Having unique benefits that belong to an exclusive few.  This could be an invitation to a gala or access to information before the hoi polloi.  
  • Asking people with exclusive access to information to share it.  You can trigger FOMO if juicy tidbits might be shared with someone’s social network (in the broad and specific senses) before one has a chance to share it oneself.

The second is that dollar signs trigger fear of loss.  There is an excellent study of this on restaurant menus, which is why you see high-end restaurants put 38 sans currency market or cents next to that duck a la orange.  They don’t want you to have a fear of losing your money, but rather want you to focus on what you can get.

The problem is that, in my limited experience testing this, forms and reply devices without dollar signs look a little bit silly.  I’m hoping that we can make this the standard over the long term, but for right now, they seem required.

However, we don’t have to do it in the letter or email copy.  Spelling out dollars instead of putting the currency mark alleviates the fear of the recipient until they (hopefully) have already made the decision to make the gift.*

Tomorrow, we’ll talk even more about ask strings with the cognitive bias of anchoring.

 

* Why is this section green?  Because after I posted this blog post, there’s now some evidence that many of the money priming studies aren’t able to be replicated.  Additionally, there’s evidence that there were negative results that were not reported.  There’s a good write-up of this at Discover Magazine’s Neuroskeptic blog and I learned about it from Andrew Gelman’s blog here.

I feel I owe it to you both to not change my original post (and thus to admit when I’m wrong) and to let you know about the change, so this is my mea culpa.  If you have other ideas as to what I should do in these circumstances, email me at nick@directtodonor.com.

Cognitive biases, loss aversion and your nonprofit marketing

How to structure your matching gift campaign

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Matching gift campaigns work. But are they necessary?

Whether it’s a grantor’s challenge fund, a campaign match, a fund set up by a generous donor or donors, matching gifts are a frequently used and frequently successful tactic.  Most of the time, it’s set up as a “double your impact” campaign.

Three researchers — Huck, Rasul, and Shepard — looked at whether a lead donor increased the success of a campaign and how the structure of the match impacted that success.

They did this for the Bavarian State Opera House.  (BTW, if you are a researcher and want to run a test with donors on your dime, email me at nick@directtodonor.com; I’m usually game.)

300px-mc3bcnchen_nationaltheater_interior

The Bavarian State Opera House.
Fundraising motto: hey, these inlays don’t gild themselves.

Here were the six test treatments:

  1. Control: No lead donor, no match commitment
  2. Lead donor: A generous donor has already funded part of the program for 60,000 Euros (remember, Bavarian State Opera House).  We need your help with the other part.
  3. 50% match: A generous donor will match your Euro with .5 Euro.
  4. 100% match: Euro for Euro match
  5. Non-linear matching: A generous donor will match any gift made over and above 50 Euros.  (Which is to say if you donate 120 Euros, the donor gives 70.  If you donate 70, the donor gives 20.  If you donate 40, the donor gives nothing)
  6. Fixed gift matching: A generous donor will match any positive gift made with 20 Euros of his* own.

Got your guesses of what will do what?  Good — here we go with the results**:

Response rate Average gift Revenue per piece
Control 3.7% 74.3 2.79
Lead donor 3.5% 132 4.62
50% match 4.2% 101 4.19
100% match 4.2% 92.3 3.84
Non-linear match 4.3% 97.9 4.18
Fixed gift match 4.7% 69.2 3.27

Yeah, not what I thought either.  I figured, from all of the virtual ink I spilled in social proof and authority last week, that the presence of a lead donor would help. Presumably, there was another mechanism in place — that of anchoring.  I’ll dedicate a full post or five to anchoring effects at some point, but now, suffice it to say that by throwing out the number of 60,000 Euros you can trigger the idea that a person’s gift should be closer to that number.  For some, that may turn them off (although the decline in response rate wasn’t statistically significant).

What surprised me was that the matches didn’t help revenue per piece (unless of course the match is generating marginal revenue).  The matches increase response rates, but the average gift was significantly lower in all of the matches.  The authors’ hypothesis is that the match has a bit of a crowding out effect — that is, the donor feels like their 50 Euros is actually 100 Euros, so they need not make the donation of 100 Euros to have the impact they wanted to have.  This is certainly plausible and consistent with previous research.

What to make of this? Like, I’m guessing, many of you, I’d only tested matching gift language versus control language. However, there is some evidence here that simply stating that a lead gift has been made can increase the anchoring effect and support the idea that a program is worth funding without potential negative byproducts of crowding out donations.

That’s for the general case.  You might also take a look at a fixed gift match depending on your goal.  Generally, I prefer quality of donors to quantity.  However, if you were running a campaign like lapsed reactivation, you might legitimately want to maximize your response rate at the expense of short-term net revenue.

Based on this, I’m going to be looking at testing this against our typical matching gift campaign.  If you do likewise, please let me know at nick@directtodonor.com or in the comments below.  It would be great to see additional evidence on this.

*  The gendering is from the original — not my own.

** The rounding is in the original paper and throws off the revenue per piece variable a bit, but I chose to stick with what they had in the original paper.

How to structure your matching gift campaign

Influence in direct marketing: scarcity at work

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Scarcity as an influencer should be of no surprise to those who know basic economic theory – as a good gets more scarce, assuming demand remains the same, the price will rise.

Given this, you might think it has no impact on nonprofits, as we sell no goods.  Even the corollary to the supply and demand argument – the idea that there is a psychological fear of missing out that makes people want an item more – doesn’t work for nonprofits, given that one person’s donation makes you no less able to donate.

And yet scarcity can be a powerful motivator in nonprofit direct marketing when harnessed correctly.  Here are five ways how:

Back-end premiums.  This is a way of mixing scarcity with reciprocity.  In the reciprocity piece, I mentioned that back-end premiums (aka the public radio tote bag model) can help increase your donations.  Now, what if there were only so many of those tote bags, calendars, or whatever other premium you have available to go around?  By limiting the premium to only the first X number of people who donate (or take whatever other action you are aiming for), you can have scarcity working for you.

I would recommend layering on a third influencer – social proof – and setting the number of giveaways above what you would expect to get in terms of actions.  This not only mitigates the likelihood that people will take your action and not get the potential reward.  It also has the benefit of making it seem like many people will be taking this action.

Matching gifts.  A matching gift deadline can create scarcity of time – by limiting the amount of time someone has to make a gift in order for it to double, you create urgency in the desire to give that gift.

Exclusivity of information.  In reciprocity, I mentioned that giving someone information that they wouldn’t be able to get elsewhere is a good way of creating the desire in them to reciprocate.  The key part of this is that the information must be scarce – giving someone something that the general public would or could know does not trigger the desire to reciprocate.

Done well, you can also build in authority and/or social proof to this.  Let’s say you do a conference call with a select group of high-dollar donors (scarcity).  The lead speaker is an expert on the harm that your cause is trying to end (authority); supporters can ask questions of him/her (reciprocity and scarcity, as you are providing a unique experience for them) and hear that there are other interested donors on the call (social proof).  Then you follow-up with a transcript of the call for everyone who was invited but couldn’t attend to make sure they can this important information.

Exclusivity of opportunity.  This can also work well with social proof.  Which one of these volunteer opportunities is more appealing:

  • We desperately need more people to help serve lunches this week to the homeless.
  • There are only six slots left to help serve lunches this week; we may have more opportunities available next month, but it is first come, first serve.

Through a reframing, you have turned your lack of volunteers into an exclusive experience for those people looking to help.

Event exclusivity.  Many of your high-end type events are exclusive in terms of guest list, but there are opportunities for exclusive beyond just this velvet rope effect.  Table sponsorships are one: as you will only have so many tables, you can advertise the number left (and, if you are doing well, ask sponsors to reserve their spots for the following year).

Then there are auction items. In a traditional (non-Dutch) auction, auction winners are like the Highlander: there can be only one.  The exclusivity of a package leads to higher prices as both the auction structure, which economics shows is the way to get the good to the person willing to pay the most, and the fear of missing out on an exclusive good conspire to maximize the price achieved.  The best nonprofit auction images are experiential items that cannot easily be purchased on Amazon – this exclusivity makes it so that only one person can possibly get the item.

The exception to this was a nonprofit I worked with that had an auction item go far beyond the expected price.  Apparently, while the bidding was ever-increasing, they were able to talk with the person providing the experience and negotiate another package.  Thus, at the end, they were able to provide a package to the second-place bidder as well, doubling their rewards.  This was a brilliant strategy – using exclusivity to get the maximum possible price, then expanding the pool (only slightly, so as not to cause regret among the first-place bidder) to maximize returns.

This week has been dedicated to the idea of major influence levels you can use in your direct marketing and development areas.  I would be remiss if I didn’t once again recommend the original book itself, as it has examples behind what I’ve provided here.  Thanks for reading and I’d love to hear examples you have from influence in the comments section or (if you are willing) in a guest blog post – just email me at nick@directtodonor.com if you’d like to post your success story.

Influence in direct marketing: scarcity at work

Influence in direct marketing: authority at work

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I debated whether to do this one.  I have a bit of an anti-authority, and a definite anti-authoritarian, streak.  When you read about authority as a form of influence, you can delve into some very dark parts of what it is to be human.  There are famous Milgram experiments, where people generally gave shocks to a test subject to the point that the person would be in severe pain or dead just because they were told to.  And the Stanford prison experiments show “absolute power corrupts absolutely” isn’t just an aphorism to be stitched onto the world’s most off-putting throw pillow.

But authority is a form of influence.  And it’s one that nonprofits can and should wield.  After all, quite frequently, nonprofits are experts within their own realms and those with great expertise serve on their boards and as volunteers.

Testimonials in various forms can help validate your nonprofit in the minds of your supporters.  Some of that, as mentioned earlier in the week, can and should be from individuals who support your individuals as close to your target audience as possible.  But an authority pitch, with external validators, can be helpful as well.

So can burnishing your credentials.  One test to run online is whether an online security badge can increase your donation form activations (sometimes it does, sometimes it doesn’t).  A seal from the BBB can likewise be tested (just don’t use your Charity Navigator perfect score – that isn’t a badge of honor).

Talking about influential donors can also help.  Dean Karlan and John List did a study that found two things.  The first, no surprise, was that a matching gift increases response rates.  The second was that identifying the matching donor as the Bill and Melinda Gates Foundation (versus an anonymous matching donor) increased response rates by over 20%.  This effect also lasted past the matching period, which is unusual for often ephemeral nonprofit solicitation.

This would tend to indicate that the Gates authority is rubbing off on the nonprofit they are supporting and that their authority is a signifier for other donors.  Celebrities can also be a nice validator for certain audiences.

Finally, a successful authority technique that I’ve seen is to send copies of positive editorials or stories about a nonprofit’s impact to donors.  It’s one thing for a nonprofit to tell you how great they are and how great you are for making their work possible.  It’s another thing for an unbiased external source validating your choice in cause.

So that’s authority.  I hope you’ll join us for the scarcity discussion tomorrow.  It’s the last in the influence series, so you’ll want to be sure to read it.

(Yes, of course I planned the scarcity post as the last one.  Why do you ask?)

Influence in direct marketing: authority at work