The seductiveness of overhead rates

As you saw yesterday, I’m partly biased on the issue of overhead rates, because I’m professionally overhead.

However, overhead ratios are not just a suboptimal way of evaluating charities.  If that were the case, you could say stand them being part of the mix as people evaluate nonprofits.  In reality, they are actively negative ways of evaluating nonprofits — to a point, the nonprofits that do the “worst” on overhead are actually better and more effective organizations.  They avoid the starvation cycle outlined in Gregory and Howard’s article and are investing enough to build the infrastructure of a vital, vibrant organization.  

the-starvation-cycle-e1374848049660

Credit to DNA Creative Communications

Additionally, consideration of overhead crowds out consideration how much impact a nonprofit is having.  Leaving aside for the moment the obsession with overhead that caused Charity Navigator to rate an active scam of a cancer charity with three starsthere is research to bolster this negative impact of overhead.

The journal Judgement and Decision Making called this the evaluability bias: people look for and want one easy number that tells them how good something is.  They found that when people are presented with a charity, they look for a low overhead rate and value it for its own sake.  However, when presented with two charities and both overhead and effectiveness ratings, they valued effectiveness over overhead ratios.  This means that people actually care more about whether a charity is effective or not at what they are trying to do.

In other words, they look at overhead ratios because they are easy, not because they are good.  

One is reminded of the man who is looking for his car keys under a streetlight.  A policeman comes over and asks what the man is doing.  After the explanation, they both look under the streetlight together. After a few minutes the policeman asks if he is sure he lost them here, and the guy replies “No, I lost them in the park.”

“So why are you searching here?”

“Because this is where the light is.”

Part of the obsession with overhead rates is because Americans believe nonprofits spend far more on overhead than they do.  This is no doubt spurred by news stories about the grossest abuses of nonprofit status and, because we can remember these, the availability bias kicks in.  We forget that the reason that the story is news is that it is the exception and not the rule.

Part of this obsession is self-inflicted.  We nonprofits are the ones who talk about how XX cents out of every dollar goes to the mission and not about how giving to others is life-affirming and one of the most powerful positive things about being human.  We plant trees so that those who come after us can sit in shade.  It’s a beautiful thing with real impacts, cheapened by a discourse of whether you spend 6.2% or 6.7% on administrative costs.

And part of it is that overhead ratings and discussions of CEO compensation are baked into some “charity watchdogs.”  I’ll cover Charity Navigator and their hypocrisy on overhead ratios tomorrow.

The seductiveness of overhead rates

What’s in a name? Word choice in direct marketing

It is an article of faith that names have power. In Genesis 1 and 2, Adam names the animals as part of his dominion over them. Many wizards in the Potterverse dare not speak the name of Voldemort, choosing He Who Must Not Be Named instead. Shakespeare asked what was in a name and it turned out it was quite a bit, given the death toll at the end of that play. Rumplestiltskin, Isis versus Ra, Doctor Who, Bilbo in Smaug’s den, YHWH, and so on: so much of our myth and mythology is about there being power in what something is called.

The truth is that, because of nominal biases, what something is called matters. I’m cheating a bit with this topic, because this isn’t one big cognitive bias, but a few different ones. They can have an impact on your direct marketing language.

People tend to prefer things, people, objects, etc. that are easy for them to understand. (study here). This is known as the fluency bias. There’s a reason that only eight names cover more than half of our presidents (James, John, William, George, Thomas, Andrew, and Franklin (which used to be a lot more popular than it is now)). Names that are more common help people rise faster in occupations. Believe it or not, stocks that have ticker symbols that can be pronounced as words outperform stocks that can’t be

Our brains are more persuadable by things that are easy to read and to hear. Winston Churchill, winner of the Nobel Prize for Literature (and he did some other stuff), talked about how he intentionally chose words with few syllables in his speeches. As a result, they have a fluency that sticks in the mind.

Even as an American, I can easily recall more of Churchill’s rhetoric (“this was their finest hour”, “an Iron Curtain”, “we will fight them on the beaches”, “blood, toil, sweat, and tears”) than FDR’s (“a day that will live in infamy”, “all we have to fear is fear itself”, and I hit a wall).

So never select a gargantuan word when a minuscule one will suffice.

Of course, the most fluent name for something is one’s own name. Believe it or not, people who have the same initial as a hurricane give more in disaster relief to that hurricane. The theory is that people want to distance themselves from the act that “they” are committing.

This works in other ways as well. I once tested state-specific victim stories in direct mail pieces. In half of them, I indicated that the story came from that person’s state; in half, I didn’t. Response rates went up an average of 30% when the story presented in a place the person was familiar with. Thus, customization to personalize the details of stories to your audience can raise more money.

Details also have a powerful nominative effect. In the classic Made to Stick, which I strongly recommend, the Heath brothers relay the study that stuck in my mind as the Darth Vader toothbrush study. Simulated juries were given eight facts for and eight facts against.

darth vader toothbrushThe stories differed only in detail. Half received irrelevant details for the good side: e.g., instead of just “Mrs. Johnson sees to it that her child washes and brushes his teeth before bedtime,” they added “He uses a Star Wars toothbrush that looks like Darth Vader.”

The other half received irrelevant details for the dark side: e.g., in addition to “The child went to school with a badly scraped arm which Mrs. Johnson had not cleaned or attended to. The school nurse had to clean the scrape,” they mentioned that the school nurse spilled the treatment, staining her uniform red.

Jurors who heard vivid details for the good things judged Mrs. Johnson to be a more suitable parent than jurors who heard the unfavorable arguments with vivid details. So make sure you are providing a real picture for your audience.

There is also a framing effect to word choice. Everyone in the abortion debate wants to be pro-life or pro-choice and not anti-life or anti-choice.

I find this to be especially true for verbs. Ideally, you will be able to ditch adverbs like ideally and have your verbs do the heavy lifting. In a study, witnesses were asked how fast two cars were going when they crashed. Except instead of crashed, the authors tended a few different verbs; here are the results:

  • Smashed: 40.5 MPH
  • Collided: 39.3 MPH
  • Bumped: 38.1 MPH
  • Hit: 34.0 MPH
  • Contacted: 31.8 MPH

Let me stress this: they watched the same crash. All that was different was the word that the question used and you still see an impact of almost 30%.

So how can you improve your own copy? One solution is Hemingway, an app that allows you to upload your copy. It then highlights long sentences, adverbs, passive constructions, etc. The reading ease score that comes with Word or similar software can also help.

Or ask a child to read it and see what s/he thinks.

Hope this helps your writing! If you would like some more of my favorite writings of the week, please sign up for my weekly newsletter, which has the feature “favorite thing I didn’t write this week.” I’m very creative at naming things.

What’s in a name? Word choice in direct marketing

Scope insensitivity and direct marketing: why one beats many

There is a famous study in nonprofit marketing that shows that an appeal that tells the story of a child does better than an appeal that tells that same story with information about the general problem of poverty in Africa. Even more oddly, a story of one boy did as well as the story of one girl; both did better than the story of the boy and the girl. The study is here and it is both fascinating and disheartening.

We humans think in simple narrative. We are used to hearing a story of a person (then using availability bias, which we talked about, to generalize). When we hear the story of a person, we react to it with emotion and affect. When we hear the story of many people, we react to it with logic and calculation. Or as Stalin put it: “If only one man dies of hunger, that is a tragedy. If millions die, that’s only statistics.”*

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

Image credit here. Odd that Stalin and Mother Teresa had similar sentiments on this. And I don’t think anyone has ever seen them in the same room at the same time…**

Unfortunately, this leads to us (in theory) misallocating our resources. Vox did an illustration of the types of cancer people donate to, versus what they die of.

fundrasing4disease

Image credit here.

This seems to focus on special events and looks at one organization per disease, so it isn’t perfect but is emblematic of this problem. In 2010, the humanitarian aid response to the Haiti earthquake (which affected 3 million people) was more than 3 billion dollars. The flood in Pakistan (which affected an estimated 20 million people) received only 2.2 billion dollars. (study here)  People donate relatively the same amount to save 2,000, 20,000, and 200,000 birds.

So the rule you could get from this is to tell only one story at a time. Which is not a bad rule.

However, your organization likely has a scope you want to achieve. You don’t just want to help one person. You want to help one person, then another, then another, etc., until your problem is solved and you can take up golf or something.

So how do you talk about scope without turning off your donors?

One way is to talk about scope and statistics, but to do it with the right donors. I would point you to the post I did about a month ago about the study that shows that statistics depress response among smaller donors, but increase it among larger donors. Thus, you can save it for the right audience.

Another solution that was interesting to me came from a study in the Journal of Consumer Research

At first, they just found what we’ve been talking about: single identified victim works better than large numbers of victims. Scope blindness in action.

However, you can get people to donate more to large numbers of victims if the victims are seen to be entitative.

This was the point in reading the study that I had to pull out the dictionary. I thought that entitative meant “similar to a walking talking tree from Lord of the Rings.”***

In reality, “entitative” means how much people consider something to be a coherent whole. This can be helped by group membership. In the study, they found that donations to help children were greater when the children were part of the same family, instead of random so-and-sos.

Similarly, they asked about saving butterflies, showing butterflies either flying randomly (low entitativity) or together (high entitativity). The butterfly flock (is that a thing?) raised 69% more on average.

They also found when that in-group had positive qualities, people were more likely to donate. Specifically, when the starving children in Africa were said to be in the same prison, rather than the same family, the group dynamic hurt donations rather than helping them.

So if you are going to talk about multiple people, try to frame them as part of the same in-group and make that in-group as positive as possible. Then, and seemingly only then, will you be able to tell more than one story and get more donations instead of fewer.
* I’d heard a different pithier version of this also (one where if you kill one person, you are a murderer; if you kill a million, you are a conqueror). However, this one seems to have the greatest basis in fact according to Quote Investigator.

** This is a joke, of course. This seems obvious, but one can not be too careful on the Internet. Clearly, Stalin is the evil twin of Mother Teresa.

*** Yes, I know that the ents aren’t really trees. They are treelike guardians that take on the shape of the trees they herd. But I’m trying to get everyone to read to the end of this, not just people who are as nerdy as I am.

Scope insensitivity and direct marketing: why one beats many

Availability heuristics and direct marketing: what we remember easily is all there is

Today, we’ll look at the availability heuristic. Availability means if you can recall an example of something happening, it must be as or more important than something that you can’t easily recall happening.

A classic example of this from the literature is people overestimate the number of words that begin with the letter R. They also underestimate the number of words where R is the third letter.

Or, similarly, some people will say there are more six-letter words that end in “ing” than end in “g” (which is impossible). We can easily recall things that begin with R or end with “ing.” That’s how they are filed in our brains; thus, we think it happens more often.

This can affect how our causes are seen by the public. Quick: how many people are killed by drunk driving versus cell phone use while driving?

Got your answer?

In 2013, the last year for which we have data for both causes, drunk driving killed 10,110 people in the United States.

Cell phone use and driving killed 445 people

Chances are, if you are like most Americans, you thought these were about equivalent. You almost certainly did not think these two numbers were more than an order of magnitude different.

Why is that? Because you can look at the car next to you at a stoplight and see the driver is texting. It is far more difficult for you to look at the car next to you and see that the driver is drunk. And so our availability heuristic can easily recall cell phone use and driving and that gets moved up in our mental queue.

Incidentally, both are dangerous. If you are reading this on your phone while driving, please stop now.

So how can you use (or mitigate) this effect in your nonprofit direct marketing? The biggest example is take advantage of news. Disaster fundraising is in part successful because it speaks to a desperate, urgent need, and partly because it reminds people that those needs are with us. Similarly, if your issue is in the news, most people think to reach out via fast means like email and text messaging. However, we don’t often think to swap out our telemarketing scripts or send out a direct mail piece for an urgent issue. One solution is to pre-print appeals. You can have stationary with a reply device on hand. If there is something urgent that comes up, customize the copy, laser in the text, and go straight to postage.

It’s also important to build plausible scenarios. Were I to do marketing for an organization fighting drunk driving (you know, purely hypothetically), I shouldn’t say “When was the last time you were driving next to a drunk driver?” It’s very difficult to recall this.

However, what if I say:

“When was the last time you were out on the roads and the driver in front of you just didn’t seem right? You know, they were weaving in their lane, waited too long to brake, or didn’t seem to be paying attention…”

My guess is that you have seen numerous people who fit that description recently. In truth, not all of these people were drunk (they could be stoned, distracted, sleepy, morons, etc.), but puts the frame around something that is instantly recognizable.

A less obvious solution is to ask people for a lot of negative feedback. One study looked at course evaluations for college students and found that if they were asked to provide 10 examples of how the course could be done better, they rated the course almost 10% higher than students who were asked to provide two examples.

The idea is that two examples are easy to come up with:

  1. The professor should consider using an antiperspirant
  2. Ethan Frome sucks; we shouldn’t read it

Boom. Done. Having to come up with 10 examples taxes the brain. Thus, we think the class was better because it’s hard to come up with things that are bad to say about it.

This was a shock to me, because one of my favorite open-ended survey questions is “What is the one thing you would change about X?”. My thinking is this a way of cutting through all of the minutiae to find out what is important to people. What I’ve been unconsciously doing is priming people to focus on that bad thing and making them think it’s incredibly easy to come up with bad things to say.

This is probably also another reason to do search engine optimization and use those Google Grants. If people see your organization’s name associated with an issue in the sponsored listings, news section, images section, videos section, and organic search engine listings, you will be top of mind for them. When people are thinking about your cause, they will more likely think of your organization.

If you liked this post, please consider signing up for our weekly newsletter that bundles these along with other hopefully valuable stuff every Saturday.

And if you didn’t, please send me 17 reasons why not to nick@directtodonor.com.

Availability heuristics and direct marketing: what we remember easily is all there is

Anchoring, ask strings, and the psychology of first impressions

One of the most talked about cognitive biases, for online donations especially, is anchoring. Anchoring means we rely on the first piece(s) of information we get about something more than the last.

Where this comes into play most often, and intuitively, for nonprofit direct marketers is in ask strings. People tend to key on the first value of the ask string most. Ordering your asks from high to low will increase your average gift and decrease your response rate; low to high will do the opposite. In our The Science of Ask Strings post (which is currently the most visited post on the blog, so don’t be left out (we talked about fear of missing out yesterday…)), we saw single givers were more pliable on the anchor than multi givers. Single givers receive an anchor from you; multi givers have their anchor already in their minds.

This piece of information doesn’t have to be an all relevant. People were asked to recall the last two digits of their Social Security number, then tell how much they would pay for an item. Those with higher numbers gave higher prices by 60-120 percent. This is why if you have a focal point number in your piece, it’s good to make it higher than your average gift. If you usually say four people die every hour, move it to 96 people die every day; that 96, if highlighted, will ask as an unconscious anchor on giving.

Anchoring can tie very deeply to social proof. If you give people the impression that most people are doing a thing, that’s an anchor. If you give the impression that most people don’t give, that also is an anchor for not giving. Last time, I picked on Wikipedia’s fundraising for this; now it’s Charity Navigator’s turn:

CN social proof2

I think they think they trying to anchor people to give $50 or more and they may be increasing their average gift with this because of this. However, when the first thing I hear is that less than one percent of people give to Charity Navigator, I’m less likely to give. Or I would be if my personal likelihood were not already a negative number.

The anchoring/social proof crossover also supports letting people know what the average person like them donates. As you might guess, people who have their anchor set by social proof higher give more. What this study found is people are more influenced by what their in-group was doing than their out-group and thus more anchored by their giving. Thus, I would bet good money that “most people give X” beats no anchor and that “most Texans (or whatever) give X” beats “most people give X,” because it’s a closer in-group.

This also manifests in peer-to-peer fundraising. It’s vital to educate fundraisers that the most important gift they get will be their first one (ideally, the one they give to themselves). If that first gift is $100, they will almost certainly raise more than a person who gets a $10 initial gift. Since peer-to-peer fundraising is more giving to a person than giving to a cause, people want to know what a socially acceptable donation is. We want to tell them the right number.

It probably goes without saying, but don’t advertise average gift to people who give more than the average gift.

Finally, there is an anchor you might not think about that falls into the Blink category of quick reactions. You know that first impressions matter, but you may not know how fast is fast. Research shows that people form a solid impression of a Web site in 50 milliseconds.

For perspective, a blink is at least 100 milliseconds. So in the time of half a blink, people have judged your Web site.

So the big question here is what is your first impression? Especially for mobile, what loads first on your site (if anything)?

You may want to make sure that it is your name, what you do (in quick, not in mission statement, form), and a call to action (whether donation or not). Because a second is an eternity now to set your anchor.

Anchoring, ask strings, and the psychology of first impressions

Cognitive biases, loss aversion and your nonprofit marketing

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

Education versus emotion in direct marketing appeals

You can not educate your donors into giving.  It’s close to a cardinal rule in direct response fundraising.

At the same time, it’s a constant temptation.  You have great programs that save and change lives.  You’ve worked hard to validate that you are making a significant impact.  And you’d love to tell someone about it who cares.

Karlan and Wood tested education versus emotion in mail appeals.  And while the results are a bit more obvious than the last two days’ studies, they are still instructive for direct marketers.

The researchers sent mailers to recent donors (which they define as past three years, an interesting difference between researchers and we direct marketing practitioners, who would likely look at people who made a single gift almost three years ago as lapsed rather than recent).  In the first test, the control group (⅔) received an emotional and personal story about a participant in the nonprofit’s program.  In the test group (⅓), there was an additional paragraph in the insert, which talked about the “rigorous scientific methodologies” that demonstrated the impact of the nonprofit’s program.

For the follow-up, one-third received an emotional appeal, one-third received the control letter plus paragraphs about program effectiveness, and one-third received the control letter plus paragraphs about program effectiveness that explicitly cited Yale researchers as the source of program effectiveness.  This is likely an attempt to use authority influence similar to the Gates Foundation study discussed last week.

The researchers found that the information on program effectiveness had no impact on either likelihood of giving or amount given.

That is a nail in the coffin for those who think we should be talking about program effectiveness and double-blind studies and outputs versus outcomes versus impacts in our fundraising copy.

And we could bury that coffin now except for an interesting split that the researchers found in the data: effectiveness data turned off smaller donors and turned on larger donors.

That is to say, people who had given larger amounts (about $100+ more recently) were about one percentage point more likely to donate when given effectiveness information and donated $4.45 more.  Smaller donors were .6 percentage points less likely to donate when given effectiveness information.  With controls in place for things like household income, previous gifts, etc., the researchers were able to reject the idea that larger and smaller donors behave the same.

This goes to the idea that there are two different mechanisms for giving going on: heart gifts and head gifts.  (Or, if you prefer the Kahnemann nomenclature, gifts that come from System I and System II).

Your smaller donors are potentially giving gifts because of how it makes them feel and how you make them feel as a result.  A $10 gift is something many can do without deep contemplation.  However, if you are dedicating a more substantial part of your income to a gift, you may want to know that Yale researchers (or, better yet, Vanderbilt researchers) have backed up the program’s effectiveness.

The lesson that comes from this, in my mind, is that we should not have the same verbiage in our letters for a high dollar and a low dollar audience.  In fact, this study indicates that you can get more and larger gifts from your high-dollar donors with a simple paragraph addition to your existing emotional impact appeal.

In the unlikely event that there are social scientist researchers reading this, this study presents three questions in my mind:

  1. Does the amount at which the heart/head switch occurs depend on your income?  That is, for some, $100 is a life-changing amount of money; for others, it’s a tip at a restaurant.  My thought would be that everyone has a different threshold for what type of gift is which.
  2. Is this why we see an end to people upgrading their gifts at a certain point?  That is, once a charity has recruited your heart, is there a point beyond which you won’t give to them because they are entering the head realm?
  3. Finally, is this part of the reason sustaining gifts work well is that they break down a gift that, annualized, would require sign-off from the brain into gifts that can be given on an emotional basis?

Please leave your thoughts in the comments.

Education versus emotion in direct marketing appeals

The science of ask strings

Today’s direct marketing paper says, in essence, the less you ask for, the more people respond and the less they give.  Duh.

But there are some great surprises in the paper that make it well worth exploration.

De Bruyn and Prokopec took a look at anchoring effects in ask strings.  Specifically, they worked with a large and anonymous European non-profit to mail to their donor list.  They did so with a 3 x 3 matrix of ask strings set by two criteria: 1) is the initial ask below, at, or above their previous contribution? and 2) is the ask string steep (20% increases in levels), steeper (50% increases in levels), or steepest (80% increase in levels).  The ask strings were four items long.

This is a bit confusing, but here are initial and final asks for each condition, assuming a $100 donor.  You’ll note they are appropriately rounded:

Lower Equal Higher
Steep $85 … $140 $100 … $170 $120 … $200
Steeper $70 … $230 $100 … $350 $150 … $500
Steepest $55 … $320 $100 … $580 $180 … $1000

Some of these may look to you as they looked to me — fairly aggressive.  In the higher steepest condition, you are asking your $100 donor to donate $180, $320, $580, or $1000 — not a common ask string by any means.  That’s why I’m glad there are studies like these that test this with other people’s money.

As I mentioned, they found asking for more got more in average donation but suppressed response rate.  However, there were several other elaborations on this:

  • Ask string steepness didn’t affect response rate. Only the lowest, left-most ask seemed to affect response rate significantly.  The lesson here is that you can ask for more and get more without hurting response.  This is potentially free money.
  • Steepness did increase average gift.  So 80% increases won in this case.
  • Multi-donors were more set in their ways. Indexing off of higher than their previous contribution was related to a big drop — from an average of 10.5% among those who had the ask string that started at equal to 9.1% among those who were asked for higher.  It is, not shockingly, as if the multi donors were saying that they had already told the nonprofit what they give and don’t forget it.
  • The worst thing you could do was ask single donors for what they gave before.  This surprised me.  Response rates for the single donors were 5.3% in the lower group, 4.1% in the equal group, and 4.3% in the higher group.  Indexed average gifts were .937 (lower), .909 (equal), and 1.162 (higher).  So there was a trough in both response rate and average gift for asking a single donor for the same thing they gave before.

They didn’t give the net revenue per piece charts in the study; I found them invaluable in understanding the implications.  These are indexed to a $100 donor to make the math easy:

Single donors Lower Equal Higher
Steep $4.74 $3.54 $4.23
Steeper $4.76 $3.96 $5.62
Steepest $5.49 $3.68 $5.26
Multi-donors Lower Equal Higher
Steep $10.42 $10.16 $9.96
Steeper $9.30 $10.44 $9.67
Steepest $10.46 $10.53 $10.68

All this indicates something to me that I hadn’t thought of before (and maybe you have and have tested it — if so, please put it in the comments or email me at nick@directtodonor.com so we can have a report from the trenches): different ask strings for single versus multi-donors.

The hypothesis that I would form based on these results is that people who have given before are set in their ways of what they want to give and thus we should index from the previous contribution or the HPC.  Single donors are more pliable, so we can work to get more value out of them early in the relationship, elevating their support before they get set in their ways.

science-pinkman

Hope this has been as valuable for you as it has been for me.

The science of ask strings

How to structure your matching gift campaign

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

Is your direct marketing hot or not?

You are likely being inundated this week with best of 2015 posts in your feed.  This is not that kind of post.

Rather, I’m looking to spend this week delving into academic studies of nonprofit giving that may have been missed or underreported in the popular nonprofit press.  If this isn’t your cup of tea, I wish you a happy new year and I hope to see you again on January 4th.

However, I like the idea that other people are paying money for me to learn things about nonprofit giving, especially with the alternative is for nonprofits to pay for me to learn things through failed tests.

So today we’ll look at the impact of attractiveness in the photography that you use in your communications.  Think for a moment about the picture that for-profit businesses use alongside their inbound call center’s phone number.

attractive-blond-call-center-rep-13691665

Hi. I care deeply and passionately about your call.
Let’s ignore this stock photo watermark and get down to business.

BTW, you can order this stock photo here, where the intent of the photo is clear from the title they give it: Attractive blond call center rep.

Anyone who has worked at a call center, or thought much about what a call center looks like, or thought much about what the average member of the human race looks like can easily deduce that this is not likely to be on the other end of the photo line/fiberoptic cable.

Yet these images are often used.  Why?  Because for-profits think that attractive people make us want to buy.

A study that came out last month from Jenq, Pan, and Theseria shows this effect works for nonprofits as well.  They looked at direct philanthropy on Kiva, a microlending site of which I am a fan.

The authors asked research assistants from Singapore and the US, male and female, to rate the photos of the people requesting loans on Kiva on several criteria, some of which were:

  • Attractiveness
  • Physique
  • Skin color
  • Whether the person was smiling
  • Neediness of the person
  • Trustworthiness of the person
  • Creditworthiness of the person

They then looked to see if these factors impacted funding.

Let’s pause here to ask ourselves WWSD — What Would Spock Do?*

Spock would not care about the photo.  Rather, he would care 1) maximizing the social impact of his loan, 2) maximizing the likelihood of getting repaid, so he could regift and maximize someone else’s social impact afterward, and 3) there is no number three — he would care only about those two things and certainly not some photograph.

Yet, we are human.  Studies show that attractiveness has an impact on pay, dating profiles, perceived intelligence, perceived competency, tips, success in customer-focused enterprises, etc.  

So it should not be surprising that people take a non-Vulcan approach to photographs.  The study found that, all other measured things being equal:

  • Those people who were one standard deviation more attractive had an 11% shorter time to get full funding.
  • Those people who were one standard deviation heavier had a 12% longer time to get full funding.
  • Those people who had a skin color one standard deviation darker had a 8% longer time to get full funding.

For perspective, asking for 10% more money increased the amount of time to complete the loan by 13%.  So, in essence, being more attractive and skinnier than the average was the equivalent of getting almost 20% more money.  Just on the photograph that you use to ask for a microloan.

It’s important to note two things here:

  • Reporting this is not to justify this.  Attractiveness and skin color have no relationship to need, desire, or any other factor under the skin that would merit investment.  We should interrogate ourselves and our choices to try to dismantle this unconscious bias.
  • This is where we are right now.  I try to be a pragmatist.  In trying to get to the world to where we want it to be, we have to start at or near where it is right now.

So the implications of this study for nonprofits?  There are three in my mind:

  • Put your best foot forward.  Other than those pictures that are designed to show the harm you are trying to solve, the photos on your Web site should largely be smiling, happy people (happy people generally show as more attractive than unhappy).
  • Invest in photography.  Good lighting and posing can take someone like me and bring them to the median.  OK, it can bring me closer to the median.  OK, let’s just say it can help and leave me out of this.
  • Invest in professional retouching.  This is not to advocate for going the full fashion magazine airbrushing and Photoshopping; as Meghan Trainor would remind us, we know that [stuff] ain’t real.  But simple things like increasing the size of pupils can increase trust and attractiveness.  Similarly, increasing the size and darkness of the limbic ring (the ring around the outside of your iris) can increase attractiveness.  Look at that: three more studies for the price of just the original.

So, now you can ask yourself, knowing that (sadly) it matters, is your fundraising hot or not?

* Those of you who prefer can think of it as what econs would do in Richard Thaler’s description or what those thinking slow would do in Daniel Kahneman’s description.  

Is your direct marketing hot or not?