6 Ways Nonprofits Can Increase Giving Using Behavioral Economics
If you’re responsible for nonprofit fundraising, you’re continually looking for new and creative ways to engage prospective donors. Increasingly, forward-leaning nonprofits are turning to the field of behavioral economics to motivate donors to action.
What Is Behavioral Economics?
According to Harvard Business Review, behavioral economics comprehends the extent to which personal bias influences financial decisions:
“The operating assumption of behavioral economics is that cognitive biases often prevent people from making rational decisions, despite their best efforts. Behavioral economics…examines the real decisions people make.”
How Can Fundraisers Incorporate Behavioral Economics to Increase Giving?
Incorporating behavioral economics research, you can increase giving rates by understanding the factors that motivate and influence the behavior of donors. Following are six behavioral economics principles, and how you can use them to achieve your fundraising goals:
1. Donors Care What Others Think
Donors are more likely to give if they think others will think less of them if they don’t, or more if others know they did. For example, several studies have discovered that donors who are recognized for their philanthropy are more likely to make subsequent donations.
The takeaway: To increase giving rates, recognize donors in a giving record that you publish on your website, in newsletters and in all public appeals.
2. Donors Are More Likely to Respond to a Personal Ask
Research from Meer and Rosen (2009) found that donors who speak with a live person are more likely to give than those who receive a mailed solicitation. People find it more difficult to say “no” to another person than in the more abstract context of print materials.
The takeaway: Use direct mail and email campaigns as precursors to personal asks. Have someone whose opinion donors value make these personal asks.
3. Donors Follow the Crowd
Frey and Meier found that University of Zurich students gave at higher rates when they were told that their fellow students had made donations. People conform to social norms when presented with credible evidence of those normative behaviors.
The takeaway: Include in your fundraising materials social proof points, like statistics and testimonials from current donors about the value of your fundraising goals.
4. Donors Feel Obligated to Repay Favors
A study from Falk found that donors to a fund that helped street children in Bangladesh increased their giving rate after they received thank you cards from those children. This is the behavioral economics principle of reciprocity.
The takeaway: Find creative ways to thank donors, especially ways that reflect your fundraising goals and mission. This could be a personalized thank you note from a beneficiary, an invitation to a donor luncheon or a guided tour of your headquarters.
5. Donors Connect with People, Not Metrics
Small, Loewenstein and Slovic found that giving rates doubled when donors were presented with an “identifiable victim” versus statistics or abstract narratives. Donors respond more positively when they can see the direct impact their gift will have on a person with whom they can identify and empathize.
The takeaway: Make an individual beneficiary of fundraising efforts the focal point of your campaign. Create a compelling narrative that articulates the ways in which donor gifts will improve that beneficiary’s life.
6. Donors Conform to Their Identity as Previous Donors
Research from Kessler and Milkman demonstrated that donors who are reminded of their previous giving record are more likely to make subsequent gifts. When you tell someone of their prior good deeds, they will tend to take requested actions which validate that identity.
The takeaway: In your fundraising appeals, remind donors not only of their previous gifts, but also of the specific impact those gifts have had. Show them how a new gift will add to that impact and help you achieve your larger objectives.
Incorporating behavioral economics into your fundraising does not entail compromising your values or appealing to donors’ darker angels. Your appeal is still to donors’ empathy, compassion and goodwill. The new paradigm simply recognizes a more effective means for making that human connection to achieve your fundraising goals.