Episode 254: Annual Giving Troubles - Try Behavior Economic in Appeals
Welcome to another edition of Around with Randall, your weekly podcast for making your nonprofit more effective for your community. And here is your host, the CEO and founder of Hallett Philanthropy, Randall Hallett.
I'm honored to have you take a few minutes of your day to join me, Randall, on this edition of Around with Randall. I'm having very similar calls with quite a few of my clients, and then some others in the industry that sometimes reach out and ask for my thoughts every once in a while. It's around what we're seeing.
I'll call it the hollowing out of our annual giving programs, whether it is social service where I have a client or two that I work with, education both at the higher educational level as well as at the secondary, more independent schools level health care. I'm having very, very, very consistent conversations, people asking. We're doing the same general things that we've done in the past when it comes to mailings, digital paper.
And what's happening is, is that we're watching a hollowing out or no responses or so few responses. And today I want to talk a little bit about this phenomenon. And I am not the world's greatest content expert, but I've had to kind of dive into this a little bit differently. And what I want to really try to address is the idea of behavioral economics, that maybe we have to get more sophisticated with the way in which we're approaching our mass donor opportunities in more of a for profit manner.
And in doing so, we're going to look at data. We're going to look at better designs. We're going to look at the science behind why people might be willing to engage and really give you eight practical things to think about in how you communicate and provide people the options. Why are we in this situation? Well, the first thing is, is that fewer people are being philanthropic.
We're back to one of the premises that I deal with quite often, the latest numbers, if you want the kind of the rationale, what we call the generosity crisis, read Nathan Chappelle's book, The Generosity Crisis. It's where the name comes from, where we're now below 46% of the households in the United States making a gift. Which means when we get somebody, we've got to do a much better job on stewardship and engaging and then finding the right way in which to re approach them in terms of the next possible gift.
At the same time, we have some economic as well as just communication challenges. I truly believe that economically there are more people out there struggling with their disposable income decisions than we might actually realize and what the economic statistics tell us. This is more anecdotal, but I see lots of things. And in fact, so many that my wife and I tend them say, hey, look at that particular scenario.
And it's just an individual small circumstance. But we're kind of like, I wonder because those are the disposable dollars that people utilize to live their life, that all of a sudden they don't have as much of that. I think this is really more of an issue than we realize. I think there's also a communications overload, whether it's by mail or by digital email, text, QR codes, things of that nature.
I do believe that this overload is leading to kind of an inertia of what I would call parallelization, that it's just easier not to answer to anything than it is to try to sift through all of the communication coming our way. I would use as an example, and this is maybe just my example, but the Giving Tuesday and there's a very large swaths of different ways of doing this.
But the concept of a giving day and literally every week in my email box, whether it's the law school, organizations I've given to before or things that I've done or been involved with, there are a constant barrage of, hey, we're having a giving day and we've got a matching gift, and I'm just like, oh my goodness, I'm just trying to get through my day.
And I can't be much different than most people. Which is why the way in which we do this has to be done, I think, more effectively. And when we get into this idea of behavioral economics, again, I'm not an expert at annual giving, but in my educational life, I have studied behavioral economics because it's used as a for profit decision making process to get people to engage, either purchasing in the store or online, where we look at tools to create less friction into the decision making.
And so I want to give you five different terms for you to think about. And then we're going to get into the tactical. What are eight things that you can do to think about how you reframe this conversation or these solicitations to reengage. So behavioral economics deals with a lot of different concepts. But it's about as mentioned this reduction of friction.
And to do so we have terms that we use. So things like nudges which are subtle cues that give kind of a preferred action an easier path to completion. And so we're trying to nudge people. It sounds by making it easier to complete what they're wanting or hopefully wanting to do. Then there's default options where we don't give people as many choices except the choices we want them to take.
The default is we want you to do this. And you'd be surprised from a behavioral economics perspective, how many people just say, well, I'll do what I did last time, or I'll do the default, even if they haven't done it before.
The third is what's called lost aversion, and this is where we make people feel the loss more strongly than the actual gain. It's like a fear of losing something or losing the connection that that motivator that moves us. And so this loss actually propels us to do what hopefully we're going to talk about the nonprofit wants you to do, which is to give the third.
Fourth is what they call social proofing or social proof, where they're tying what they want you to do to other people. You might respect testimonials, participation counts and things of that nature so that you feel as if you're not involved. There is a negative social impact, or you want to look at more positively, which I tend to do when I'm involved.
I'm part of this group or I'm part of this identity. The last is what's called framing, and this is how information is presented that might change the perception of what's being asked. And a way to think about this is joining others to keep this particular nonprofit or maybe the industry that we're in alive or robust. And instead of asking for money, we're actually asking them to join in the larger pursuit of what we all want, which is if we use health care as the an example education examples of people to be fed health care for all educational opportunities for the next generation of leaders.
We're recasting it or reframing it in a much potentially larger perspective. So nudging default options, loss aversion, social proofing, and framing are all concepts that we feed into this behavioral, economic, tactical discussion. And as we try to do each week here on a round with Randall, give you some tactical solutions that might be of assistance to you. What can you do today, particularly as maybe many of you are thinking about the end of the year process of asking, but you could use this at any time.
So let's jump into the tactical eight different things you can think about. Number one is, as you heard, kind of in the beginning, is this idea of the default reoccurring option. What behavioral science teaches is, is that people will do the default more often than what you might realize, not because it's best, but because it really requires no effort.
I don't have to think about it. I'll do that. They told me to do that. And so this is where we lead in our solicitations with the default option, that it's almost as if we're saying everybody's doing this. And so we could make it monthly giving or automatic giving or automatic renewals. And this is when we talk about automatic renewals, something I find to be somewhat challenging on the for profit side where I'm always using one of my two.
But it's usually the outlook task list or to do list to make sure that I don't get hammered with automatic renewals. For profit companies have figured this out, and I'm in an incredible way. They don't even give you that option. They just say it's assumed you're going to automatically renew. And as a result, what's going to happen is you have to decide to pull yourself out of it.
So would you like to make this a recurring gift? Would you like to find a way to make this a monthly recurring guest? To give you a sense of how powerful this is? When they've looked at behavioral studies through various ideas of what they think of as the nudge meaning, we're going to give you this as our as our subtle cue.
This is the preferred option. There's a book written called The Nudge that they found that 20 to 40% increases when you use the default in the right way. So really what we're talking about is to pair the default at the top with really donor friendly language. And you probably want to add, because we want to be good stewards of the relationships we build.
You can say you can change your stopping any time, but it's not quite pushy, but it is creating the least resistant way to maximize someone's engagement.
So in this process, the nudge using a default number two is the idea of social norms. Leveraging this idea of connection that people take their cues from others when they're uncertain, when they're if you if someone's locked into your organization, then you know that they're going to give. But at the end of the day, what we what we've got to figure out is.
That we have an opportunity to create a connection beyond just our organization, particularly for those that aren't as locked in. So you could do things like join 1200 alumni who have already given. So if they feel as if they haven't, or maybe it's an employee campaign, 95% of our employees have given, and we would love for you to join this effort.
Why this works is, is that social proofing reduces the idea of the anxiety that they are isolated, or that might strengthen their community connection.
You have to be cautious though, if you overuse this, you lose credibility. Or if you try to stretch the truth too much, you end up in a situation where if somebody catches you, it really diminishes your trust. So make sure that it's quantitatively accurate. Numbers matter. Number two, the social norms or the social proofing. The third is framing appeals around loss diversion.
It's amazing that people are more and more motivated to avoid loss than they are to achieve gain. So this is not about creating a negative but turning it around that the loss if people aren't involved, are the opportunities that the not your nonprofit provides. An example. So what happens if and we've done this let's say Time in Memoriam where you say your gift will help ten students.
Your gift $100 will help ten students attend a camp. Does it make a difference?
Well, what happens if we pivoted it and made it? And this is where the idea of behavioral economics comes in. We're asking for the same thing. We change the language. Without your support, ten students may lose their chance to attend camp just in missing it. It's kind of freaky how I feel like, well, I don't want someone to lose out.
I want them to get what they've gotten before. And so you're repositioning this as the loss, triggering a stronger emotion in someone. But it's not their loss. It's your loss or the people that you're helping. Feeding people, helping people with their health care challenges, providing scholarship. You can spin this in so many different ways. The real conundrum here, or something to be aware of, is it you have to balance this because if you make the loss so urgent or so large that it's just insurmountable, well, people will look at that.
Well, I'm not going to give that because I can't really help. So you're going to have to probably segment this kind of conversation around the different levels of giving and connect it to things that your organization does.
Without your help, our students, our are our recipients of the food. We provide scholarships. But your gift restores their hope, their opportunities.
Loss aversion has a powerful impact on decision making, but we have to be a little bit careful that we don't overuse it or make it too big, where we seem like what we're trying to accomplish isn't possible. So lost aversion number three. Number four is simplifying the choice that people have, that I'm seeing this more and more and you can tell the really professional mailings and I look at all of them at home don't respond to all of them.
But I'm always looking. The really professional ones are only providing 3 or 4 options to choose from. So you could use the default at the top, you could use an automatic qualifier. There's a lot of different ways in which you can use this, but if you're more than four, then chances are it becomes too complicated. I recently went through this with my mother when she was trying to do something nice for some people, and she got online and she just got overwhelmed.
And I know why because we're like nine choices. She's like, I don't, I just want to. It just was more than she wanted to deal with. Simplified options, reduce the idea of what's thought of in behavioral science as cognitive load, meaning people have to think too much and it actually speeds up the decision making. We have fewer things.
So you might have giving levels of $50 for supplies for student in one week, $250 for the classroom technology for the month, $1,000 for a full scholarship, $5,000 to, you know, buy a big piece of equipment for the students in their use. Keep it simple and keep the ranges actually somewhat separated now, maybe 50 to 250 in my example, maybe too much, maybe 100, 100 or 150.
But if you have 25, 50, 75, 100, it doesn't get you to the higher levels of options. When you use this idea of simplifying choice. So the more you use, the more complex you make the choices, the less likely they are to give because of what sort of is cognitive load. Number five is highlighting the immediacy or the tangible impact, which we've talked about a number of times throughout in different ways, throughout the different podcasts, that just asking for dollars is less impactful than seeing visible results.
Not abstract, not distant, but what it means to someone now. Your gift of today of $25 will provide five meals for people who come in to our food kitchen this week, or a donation, possibly before midnight with the match that we have will allow students to attend a class trip. Or it could be to provide scholarships or provide books or whatever the things that you are.
This is going to require you to break down some spending. Meaning. And we've talked about this in various episodes, about going to your CFO or the finance team and asking, tell us how much something costs so we can spin it. But that immediacy can't be for next year. It's got to be for now. The reason this works is, is that people's emotional connection satisfaction are more elevated when we have immediate need, or when the result in their when they look at it from their standpoint, is sooner.
And so follow up in real time then also becomes important. Not only if someone makes that $25 gift to provide five meals, it's being able then to steward them almost instantaneously to say, I'm going to show you a picture of the five meals you provided, or because of you, these five meals were provided this week or yesterday. And today it's shortening that feedback loop with that sense of immediacy because that's how they chose to give.
So you're matching stewardship to solicitation. This is a wonderful way of elevating instant connection.
Number six is making sense of personalization with what sort of is called behavioral cues. So this is really important when it's linked to past behavior. Our repeat donors are like buttons and silence, connecting them in a way that allows them to elevate their own personal behavior. You've been a part of this mission for five years. Would you consider deepening it with your gift of this year by increasing it by 10%?
As someone who's provided scholarship support before, did you know that your difference is not just in totality, but individually for a particular student?
The reason this works is, is it builds upon something that is their identity. They've done this before, and this is exactly why you always see it in the chat rooms. And I've gotten to the point of no response anymore why memorial gifts don't work, or the idea of trying to keep them because they didn't give to you, but they did give to you.
They gave to someone else. And so a recognition gift of someone's work. And I see someone who works. They're still there. That's one thing. But we know well, how do we keep our. Well, you can't because they're behavioral cues. Their identity was with someone else, and it was a memorial gift to organization that they chose. But this is where we lose our light once inside.
Once this is where we can turn to get them back. Because if we were to talk about their behavior in the past, you've given we missed you last year. Would you consider this kind of a micro recognition of your amongst some of our longest standing donors, we don't want to lose you. This is your third year of doing this.
These small affirmations help create that loyalty. And behavioral economics says this once people give. This is about plain giving as well. Once someone's in their estate or nonprofits in the state, they tend not to come out. That's a behavioral cue or behavioral connection. How do we use that? Which means greater levels of segmentation, more letters with a different variety of letters or emails.
Our outreach that individualize is more of a solicitation, behavioral cues. Number seven is the idea of commitment and consistency. What we know is, is people tend to do the same thing over and over, and when they feel good about it. What this is, is you're inviting donors to affirm this connection, this consistency of their past. You could say something like, as someone who believes in the openness of education, the hope of education, your continued support changes lives.
If you know me or have heard me speak before, I tend to talk about familial circumstances and I tell the story of that. Many years ago, my sisters and I started a scholarship fund in my parents name, and my parents were, you know, for the 40’s winning industry. They were live. They've given to it now, mom giving to it.
But for mom, it's interesting to watch. I did it to honor them because they valued education so much and provided us with that opportunity as their children. But for mom, it's more than that. Mom talks about the fact that the reason she feels so good about it is because we've been given so much. She wants other people to be given that same opportunity that commitment and consistency.
And so when she's most passionate is when they advocate and that connect to her past, this idea of the consistency of what she believes. And I don't think they figured it out that much, to be candid. But I've watched it. And so you show this commitment by this long standing, identity based giving pattern. Now, this requires some stewardship.
If someone just write you a $5,000 check, $500 check, hundred dollars check, and there's no ability to figure out why they give, we can't use this one, which makes stewardship. Thank you. Calls outreach. Have a client I'm working with. Really kind of an amazing thing that the particular gift officers doing. She's spending every half an hour every at an afternoon for half an hour or two an hour, depending on how much time she has just making thank you calls.
And what we've worked into this is exactly we're talking about it here. Why did you choose to give that becomes a note in there's in the CRM that allows them to ask for, as we've discussed, that consistency. The last is kind of a catchall, but it's creating small positive friction moments to reinforce value. So sometimes friction isn't all that bad.
We talked about it at the beginning about creating ease in doing this. But I also believe, and I tell my clients this all the time, one of my greatest joys is creating an idea of friction, of creating discomfort, because we don't tend to change what we do until there's a little friction. No, not a lot. But don't be painful.
But small pauses in this case can increase perceived meaning. So are you providing particularly long standing donors an opportunity to reflect, to write back to you and tell you why, to find a way for there to be a dedication, or to take someone's $100 general donation and figure out how they can make it something more specific in an area that you need support.
What you're doing is you're causing them to think. Now you can't go overboard because we want annual giving to be somewhat easy, but there is a way to make it workable, and maybe it's something as easy as would you like to dedicate your donation? Now we're into the future to specific area or specific person, or specific reason. All of these aid in the behavioral sciences, behavioral economics, if you think about it in these ways, and maybe it's too late for this year, at the end of year, but you might change how you do your annual giving process.
If you're sending out one letter to everybody that is not going to work anymore. Behavioral economics is teaching us that we should think about this differently to maximize the opportunity to connect to the donor where they are giving them eight different things we talked about today opportunities to engage in a much higher level. And in doing so, maybe this is one tool to keep and increase our annual giving platforms.
And as I've said, they're decreasing, which means we need to become better at what we do to sophistication. The thought process, getting out ahead of it, not waiting for the last minute to find ways of increasing connection with those who support our nonprofits.
Don't forget to check out the blogs two per week 90-second reads at halletphilanthropy.com backslash blogs, you can do an RSS feed right to you. It'll come out to you when it comes out Tuesday Thursdays. And if you'd like to, you can reach out to me at podcast at Alex lantz.com. I sense a sense of inconsistency, unevenness, kind of a process of feeling discontent a little bit amongst people I'm dealing with because it's getting harder to do what we do.
We are a profession. So let me reiterate what I try to every week. The best people I work with, the best people I know, the best in this profession, build deeper, more meaningful relationships. They make phone calls, they go see people, and they're talking to them about their passion and their connection without actually asking them for anything to make it more about the relationship than the dollars.
And in doing so, what we find is that that's the kind of behavior from our standpoint that is fits into the category that I love the most. What I always say, some people make things happen by reaching out and building those relationships and buying into your nonprofit's mission and building those relationships with the people in the community who want to make a difference.
$100 $100 million. You are someone who is making things happen, seeking others just like you. And to complete the Gaelic old Gaelic phrase. Some people watch things happen and there are those who wondered what happened. We do what we do for the people in the places and the things in our community that wondering what happened that need help.
That's a worthy cause. It's not easy. It's not meant to be. But as we professionalize who we are, we're going to make progress. If we continue to make ourselves feel a little uncomfortable and getting out and talking to people either on the phone, stewarding them, making them feel whole, not just always asking them for money and, if possible, having individual face to face conversations.
Today we talked about behavioral sciences and economics to the idea of donor behavior is that it's irrational. But these nudges in these defaults and the framings may help you build those deeper relationships. And then you are someone who's making things happen. And that's a great way to spend every professional day. I'll look forward to seeing you the next time right back here on the next edition of around with Randall.
Don't forget. Make it a great day.