The Future Of Donor Behavior: Linking Giving To Daily Life

*Editor’s Note: During the next 10 days The NonProfit Times will publish commentaries looking to 2021 and beyond from some of the sector’s most accomplished leaders. All of the commentaries are available in The NonProfit Times’ digital edition on this website.

GivingTuesday, and the whole December giving season, is nerve wracking for fundraisers and leaders at their charities. It also isn’t healthy for the sector to be so reliant on once-a-year fundraising, to then float expenses until the next giving season. But, of course, sitting out is far worse.

Fundraisers can use GivingTuesday as an on-ramp to more regular giving, rather than a one-shot, enjoy it but save most of it because you ain’t getting more for another year donation. Behavioral economics provides some guidance with two wonky words: bundling and heterogeneity.

First, bundling. Behavior change is hard. If it wasn’t hard, we wouldn’t see successful products and companies focused solely on helping people change, such as smoking cessation tools or weight reduction. Bundling desired behaviors with existing behaviors can work to help people make the changes they want in their life. Research shows this works.

For example, putting chlorine dispensers (https://bit.ly/2GNRqDX) by wells (rather than offering chlorine in a separate process at home) has remarkably improved the quality of water low-income households use in Kenya. In another example, bundling listening to audio-books with exercise (https://bit.ly/36lBJMZ) led people to exercise more.

Next, heterogeneity. Can you imagine an athletic apparel company running an ad with a family sitting around, laughing, playing a game, and getting in silly fights over each other’s crispy fries (wearing fitness clothing, of course)? Can you imagine a fast food chain ad with a sexy person running along the beach, evoking aspirations of health and accomplishment? Obviously not. Why? Because the purchase decisions are likely driven by vastly different emotions and mindsets. Yet somehow, for charitable fundraising, most “how to” guides treat charities as if they are all the same. Too often charitable giving fundraising guides are monolithic, as if the underlying psychology that motivates people to give to the philharmonic is the same as a children’s cancer or to a poor women’s micro-finance program.

Successful fundraisers’ strategies should involve the psychology that motivates giving to their charities, and how to let that guide the fundraising strategy.

Now put these concepts together, and this could lead to some thoughtful and effective fundraising strategies.

How can charities “bundle” giving into other activities, such that giving then takes place more automatically throughout the year, rather than entirely at the end of the year? (A cautionary note: While undoubtedly helpful to smooth revenue, it is imperative to make sure that any such strategy doesn’t lead to lower aggregate giving. Making sure of that requires randomized tests and patience.)

“Linking” giving to other life events might be a promising approach. This entails bundling giving with some other things in donors’ lives. Given heterogeneity in donor motivations, the first step is to identify what drives your donors to give. Do people donate to your charity out of compassion for others or out of fear for injustice in the world? Are the benefits of your charity immediate and shareable or longer-term and more abstract?

With some clarity on the underlying emotional triggers, it helps to think about a 2×2 matrix for the type of “linking” viable. One dimension is “extrinsic” or “intrinsic.” An extrinsic trigger is something out of the control of the donor, something that others do, e.g., actions by a musician or sports figure or politician, or other such outcomes in the world. An intrinsic trigger is something the donor does, e.g., something they buy, somewhere they go, or some achievement or milestone they reach. A positive trigger is something that you perceive as “good” (or perhaps just “not bad”) that happens, and a negative trigger is something that you perceive as bad. (See the accompanying chart.)  The prompt that is most likely to promote frequent donor engagement will depend on a nonprofit’s cause area, support base, and the likely psychology of giving. Let’s review an example in each category.

Charities that work to correct social injustices might find the most success in leveraging negative-extrinsic donor appeals. Progressive and racial justice groups in the United States have seen a flood of donations since the killing of George Floyd and subsequent protests. And the #DefeatByTweet movement — where donors contribute to grassroots organizations fighting against President Trump’s re-election every time he tweets — has raised more than $4 million since June.

In contrast, environmental charities can connect with donors through negative-intrinsic appeals. Everyday consumer behaviors — from online shopping to air travel — have clear environmental impacts. Growing consumer consciousness has generated a desire to mitigate some of these harms. Online calculators allow consumers to estimate their carbon footprint. Travelers can purchase carbon offsets for their flights. Consumers can round up their change at the coffee shop to donate to a clean water charity, using tools like the Coin Up mobile app.

Nonprofits helping low-income households might find the most traction with positive-intrinsic appeals that resonate with donor earning and consumption behavior. A classic example is the buy one give one model, as pioneered by TOMS. The company now gives donors greater flexibility to identify a cause area to support with their purchase. While this model has typically worked well with activities supporting people in need (of shoes or eyeglasses, for example), charities across cause areas might find success in engaging donors with positive-intrinsic appeals. Facebook birthday fundraisers are making this easier, by giving users the opportunity to celebrate their birthdays by encouraging friends to support causes they care about. A donor-advised fund that links to investment portfolio also has tremendous ability to employ such tactics: a donor-advised fund could ask individuals whether they would like to link future gifts to future earnings, and then use the information from the investment portfolio to report back to customers on what they have earned, and remind them of their stated intentions on donations.

Finally, charities supporting civic engagement can embrace positive-extrinsic donor prompts. Democratic campaigns and get out the vote charities reunited celebrity casts to raise money during the 2020 election season. As is the case with positive-intrinsic prompts, charities across sectors can leverage positive-external prompts to engage donors. Matching gift campaigns and challenge gifts are two ways to get started. In 2017, Stephen Colbert and Nick Kroll raised $1 million for Puerto Rico’s Hurricane Maria recovery by donating $1,000 for every celebrity who tweeted a photo of themselves from puberty. Marking significant anniversaries is another strategy. Many nonprofits that support women and girls launch fundraising and advocacy campaigns each March, for International Women’s Day.

These four donor prompts provide a variety of creative ways to engage with your donors throughout the year. There are no hard and fast rules. As a nonprofit, start by understanding your mission and message – and what appeals to donors about your work. A food bank may find that donors care about feeding the hungry in their community, and internal triggers related to personal food consumption are a strong motivator for giving. An after school sports program may find that donors are sports enthusiasts, excited about the idea of connecting their giving to their own athletic hobbies. The point is – figure out what excites your donors, then build your fundraising appeals around the prompts that are most likely to engage and sustain your supporters.

A closing caveat: Keep in mind that leveraging these techniques might help you raise more money in the short run, but we have limited insight on long-run donor behavior in response to such appeals. It’s possible that integrating giving into daily life can cause donors to give more, when they see how easy and rewarding it is. On the other hand, giving small gifts frequently might prevent donors from giving larger, planned gifts if they think they’ve done enough already. Careful research on the portfolio of donor giving is needed to understand these long-term trends. In other words, run some randomized tests of this, and be patient: the answer to this question requires waiting a year or so to see which raises more money in the long run. And in the meantime? Leverage these insights from behavioral economics to make giving fun and frequent for your donors.

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Dean Karlan, Ph.D. is Dean Karlan (CV) is the Frederic Esser Nemmers Distinguished Professor of Economics and Finance at Northwestern University/Kellogg School of Management, and the founder of Innovations for Poverty Action, a nonprofit dedicated to discovering and promoting solutions to global poverty problems.