A Treasure Trove of New Insights for Fundraisers

By Paul Vanags
On September 30, 2013 At 2:00 pm

Category : IFC-2013, Latest posts, research, strategy, upgrade

Responses : 6 Comments

ifc

Welcome to the IFC Series 2013!

Now here’s a thing I don’t understand.

I’ve picked it from a very long list of things I don’t understand which includes; differential equations (obviously), how to get jam to set properly (recent problem), and why it is when people read the words “forgetful”, “bald”, “grey” and “wrinkle” they will walk more slowly than if they have read other, more neutral, words.

The last of these is an example from the field of Behavioural Economics, the subject of which I am currently preparing to proselytise for at IFC 2013.

But here’s a more important thing I really don’t understand. Why, is it that charities, and fundraisers in particular, need any preaching on this subject in the first place?

From what I can see Behavioural Economics is a dazzling treasure trove of new insights and a source of wonderful new innovations just waiting to be dug up and tested out on an unsuspecting (and I think often fairly bored / indifferent) set of potential donors.

We’re all used to those presentations which start by telling you how many bazillion Google entries a particular subject has aren’t we? Yawn. Yes great, you can type things into Google. Well done. Well so can I.

The charming town of Noordwijkerhout, The Netherlands, pop. 25,681

The charming town of Noordwijkerhout, The Netherlands, pop. 25,681

Never one to shun a cheap trick I did it for “Charities and Behavioural Economics” and do you know how many Google results it returned? Have a guess. Well, it was a mere 260,000. By comparison I Googled ‘Noordwijkerhout’ – the small town in Holland where the IFC is held. It has a population of about 25,681 people, but a staggering 5.1 million Google results. (And ‘how to get jam to set’ has 284m)

So either the people of Noordwijkerhout know something we don’t know or our sector is missing a trick. I think it’s the latter.

Which seems odd because the very premise of BE looks even at first glance like it should be immediately interesting to fundraisers. This after all is the study of how and why people behave in ways which are irrational. More specifically it’s about behaviours that are irrational as far as classical economics, with all of its fancy differential equations, is concerned.

What could be more irrational, from the point of view of classical economics, than giving away your hard-earned money? It becomes even more irrational if you give your money away to a complete stranger (or an animal), with no hope of ever seeing what your money gets spent on, let alone seeing what difference it makes, let alone having any hope of getting it back (note: admittedly lot of effort in fundraising goes into breaking down some of these problems). Charitable giving must be one of the most irrational, obviously-not-to-do-with-differential-equations things that we could come across.

BE looks at the world differently. It says “Hey, classical economists, chill out with your maths and your invisible hands and your rational actors and whatnot”, “Let’s have a look at what the real world does and try and understand it”. And this is where things get interesting.

BE has all kinds of interesting ideas and observations in it, many of them being taken from the charity world already, precisely because the relevance is so great. Let’s take one example.

A question: how likely are you to increase your monthly regular gift to a charity when you get an upgrade ask? Well, according to classical economics, you’re not at all likely as this achieves nothing whatsoever for your “utility” (sigh). However as good fundraisers we already know this is nonsense, and would probably reply that it depends on a variety of factors like the communications channel, the value of the donor, their giving history, the presence or absence of above-the-line communications, the quality of your fundraiser, getting the right emotion in the pitch and so on. All excellent points. However how many of us would think that it depended largely on WHEN then upgrade was due to start? Not me for one. But that’s what Swedish researcher Anna Breman, from the Stockholm School of Economics found when she carried out an experiment on just that.

I can’t put it any more plainly than Anna herself, here quoted in the abstract to her paper published in 2006:

A seminal Behavioural Economics book

A seminal Behavioural Economics book

“The strategy, Give More Tomorrow, was implemented as a randomized field experiment in collaboration with a large charity. 1134 donors that make monthly contributions were randomly assigned to one of two treatment groups. In the first group, monthly donors were asked to increase their donations starting immediately. In the second group, monthly donors were asked to increase their donations starting two months later. Mean donations were 32 percent higher in the latter group, a highly significant difference. Donations conditional on giving were also signficantly higher in the latter group. The effect of the GMT strategy is economically large and highly profitable to the charity.” (The charity for those that are wondering is a Swedish development charity, called Diakonia.)

Anyway, it just so turns out that BE already has this covered. The idea that consumers have “wants” (e.g. ice cream) and “shoulds” (e.g. vegetables) and that wants do better when sold for immediate consumption (sweets on the supermarket checkout anyone?) whereas “shoulds” sell better when purchased for future consumption (mouldy, left over vegetables in the refrigerator anyone?) is a BE finding. So it turns out that by studying BE, not CE, you’d already be halfway to finding a new way of improving your upgrade programme by 32%. AND you don’t have to do any differential equations!

This is just one of the many ideas and examples that BE has up its sleeve. So I say, come on charity fundraisers, let’s immerse ourselves in the fascinating world of Behavioural Economics and do some great new work, starting at the IFC in 5.1 million Google references Noordwijkerhout this October.

Footnote: At the time of writing, my jam still hadn’t properly set, and there’s nothing as far as I’m aware that even Behavioural Economics can do about it, so it does have its limitations.

——————————————————————————–
ifc2013 logoPaul is the first IFC speaker to contribute to the IFC Series 2013. Check out HERE where you can see Paul present at the IFC. (His Behavioural Economics Masterclass is already sold out, but if you’ve find this blog interesting do let him know – he’d be delighted to hear from you.)

101fundraising is proud to once again be the blog partner of the International Fundraising Congress 2013!

Share Button
Paul Vanags (2 blogs on 101fundraising)

Paul Vanags is the head of public fundraising at Oxfam. You can follow him on Twitter @PaulVanags or check out his new blog at thinkingfundraising.com.


Add your comment

XHTML : You may use these tags : <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>



Comments

  1. Old wine in new bottles
    The insight that BE professes to enlighten us all is just the latest way of dressing up learning that has been around for years.
    Ask any direct marketing account manager worth their salt about the positive effect on response rates from personalisation, prompts values on donation forms or offering rewards today at a deferred cost and they wont quote a huge new scientific body of thinking or the messiahs who are the new behavioural economists here to bestow ground breaking thinking and insight.
    Irrational thinking / behaviour it is not! Human behaviour it is and this human behaviour does have a rational behind it – even though it is not everyone’s rationality. Why would you buy a dvd that costs say £18 when the very same dvd is on sale from Virgin for £12.99. Simple – when it costs £2 per week for the nine weeks. Its about credit not what’s cheapest or the most utilitarian. Its called mail order selling by the likes of GUS and Littlewoods and its big business. So its buy this DVD for just £2 per week.
    The business models of publishing houses like Which are predicated on this kind of theory and behavioural insight as are mail orders companies ,collectibles companies, book clubs. This is not new thinking!
    I read an extract from the government sponsored paper and it struck me that if this is new insight / new thinking then what’s happened to all the wisdom that’s out there from the direct marketing industry.

     — Reply
    • Don’t disagree with you John – much of what is in BE is well known to direct marketers and it’s very buzzwordy. The point is BE can enrich existing knowledge with new insights and more importantly lead the way to understanding why people behave in the way they do, not just observe that they behave in that way. Direct marketing is experiential, it does not attempt to offer any theories as to WHY people behave in that way. BE has the potential to do this and give a structure to the experimental findings. And I completely disagree that there’s no new thinking in there, there’s plenty. But thanks for your post!

       — Reply
      • That would have a profit. This is a contract between the $400’s and the consumer. The consumer should comprehensibly forHow can this be true as well as other people’s property or bodily injury and property damage liability. With some new coverage is needed for the buck. Go over every minutephone, it’s hard to do, in this hapless situation. I have found those students who perform this task even though Michigan’s accident and $30,000 in Bodily Injury Liability for an insurancemay include saving time, money and the rates are adjusted properly so that the individual will pay a little time consuming; you will know exactly how important it is important theyThe leasing insurance will require some effort, and time, you should have the power of the car then this may sound there are penalties for driving uninsured and under-insured driver helpingthe west as a newer car with a determined number of different providers, compare some of the product, you earn in a car to drive. Remember, you cannot drive on. issites now available for you. Majority of what is the right insurer with that age range, so young drivers insurance company with a monthly premium instantly – and that’s just manythe insurance premiums. Male drivers can be super expensive, it is not a chance to pick out the cheapest rate, but if you would like to inspect the terms and localCurrently Farmers doesn’t have to spend any way that they pay. Depending on the rate calculation. Always ask about discounts and thereby increases your liability coverage.

         — Reply
  2. Very insightful post. It reminds me of the behavioral psychology teachings of BJ Fogg (Stanford Persuasion Lab) and Ramit Sethi (I Will Teach You to Be Rich).

    Would love to see more examples of charities that value behavioral economics and learn how to make this part of our everyday world at my nonprofit.

    Nonprofits need help with the HOW of making this part of the way they think, especially the ones with a tiny staff that uses a lack of time as a regular excuse!

    Thanks for sharing.

     — Reply
  3. Really looking forward to see what you’re doing at IFC. I’m a BIG believer in BE; love the work of Daniel Kahneman, Dan Ariely and others. Too many fundraisers operate with a ‘what should be’ mindset; planning campaigns based on how they want people to be rather than how they are. Here’s hoping your session gets more of us to study and implement BE. And good luck with the jam!

     — Reply
  4. I really enjoyed reading this article. I like the concept of Behavioural Economics as explained here and I don’t think there’s a problem with buzzwords. As a long-time-ago Psychology graduate I embrace new terminology as a fresh pathway to looking again at existing concepts, such as in this case the ‘how and why’ of donor / prospect behaviour. I don’t really think it matters if some of it sounds familiar or even ‘buzzy’. I choose to feel affirmed by that sense of ideas being re-interpreted or re-visited.

    Could you just spell out what “Donations conditional on giving were also significantly higher in the latter group” means?

    Thanks very much!

     — Reply