The Generosity Bug - How behavioural science makes giving addictive

In the talk, I explain how behavioural science has allowed nonprofit organisations to multiply their donations and increase the average amount given by up to 30%. However, over half of new donors never return to make regular contributions, meaning good causes miss out on the vast majority of their lifetime value.

This talk shows how fundraisers can unlock that lost revenue by making charity addictive. Using the behavioural toolkit developed by big tech and social media, nonprofits can make good habits irresistible.

Welcome to the Generosity Bug - how behavioural science makes giving addictive. This talk is about how to grow a long term revenue by retaining more of your donors. To do that, we're going to talk about behavioural science.

So first of all, what is it? Behavioural science is an approach that brings lots of techniques together to explain and influence real-world behaviour. In recent years, economists, psychologists, and social scientists have made a huge impact in their fields by exchanging ideas and applying them to real situations.

Unlike traditional economics, the behavioural approach looks at what people really do rather than what they should do. And unlike pure psychology, it's more interested in applications than theory. It's had a big impact on public policy, not least through the creation of the behavioural insights team within the cabinet office. But it's also begun to change the strategies used by fundraisers.

For example, a number of fantastic charities have found ways to increase donations by applying psychology to their websites. Introducing form fields can improve cognitive fluency and, therefore, trust. At the same time, using donation prompts create anchor values that change how donors think about their contribution. Some charities have even experimented with seed donations to reduce their perceived charity cost.

A/B testing has shown that combining these techniques, all of which draw from behavioural science, can increase average donations by as much as 30%. Other organisations have used social psychology to change the norms associated with giving. In 2012, the behavioural insights team worked alongside cooperative legal services to try and increase charitable giving and wills.

Their research, based on telephone will-writing sessions, showed that a simple social prompt had an enormous impact on legacy donations. After hearing that others had left money to charity in their will, customers were over 42% more likely to do the same. These cases show how behavioural ideas can influence donations, but there's been less work on how to increase long term engagement. And that's a problem because there's a clear case for focusing on regular giving.

Monthly donations typically provide more lifetime value with some sources putting the figure around four times higher. It's certainly not always the case, but data from online donation platforms seem to point that way. Recurring revenue is also more useful because it doesn't rise and fall as much.

A survey by the Charities Aid Foundation in 2017 showed that the number of people who made a single donation fell from 39% in December to just 26% in August, which is obviously a real headache for services that rely on those donations. So how can nonprofits increase their recurring revenue? The next section of this talk shows how behavioural science can help us understand the problem and find ways to solve it.

Since the early '90s, economists have grouped donor behaviour into two different types. Pure altruism is motivated only by outcomes, which means it disappears once a target is reached. Impure altruism comes with additional motives, most notably that warm glow that comes with donating. Well, the majority of donations tend to be one-off gifts. And it's reasonable to assume that a lot of this is due to warm-glow giving.

So to increase recurring revenue, you need to do two things. First, retain the trust of pure altruists through transparency and impact reporting. Secondly and possibly more importantly, you need to make recurring donations as rewarding as possible for people who want a warm glow each time they donate. How do you do that?

Well, in some ways, that question is really about how you create a charitable habit. I'm not assuming behavioural science can help this. There's already a template for creating addictive products. It's the one used by social media, video games, and software designers. Digital products are incredibly good at getting people hooked. And there's a growing literature that explains it using behaviourist psychology, the study of reward, reinforcement, and conditioning.

That kind of behaviour is simplistic, and the science is controversial. But its key concepts provide a powerful explanation of how social media, video games, and real-world activities capture and hold our attention. By taking some of these ideas and applying them to a nonprofit scenario, you get a simple model for creating charitable habits.

This diagram is a kind of Frankenstein's monster that combines a lot of those ideas. It's a simple way to think about how to create a cycle of motivation and engagement using variable rewards. The process starts with motivation. Contrary to early behaviourism, it's clear that human decision making is not a simple carrot and stick equation.

Intrinsic motivations are often the most powerful, and the most pertinent, the impure altruism. You also need a trigger, something social media platforms have become adept at engineering. The cycle of notifications, updates, and requests is finely tuned to turn basic motivations into action.

Next, to encourage engagement, you need to remove any barriers your donors face. Richard Thaler, the Nobel Prize-winning behavioural economist, put the principle bluntly in his best selling book, Nudge. He said, "If you want people to do something, make it easy." That's true in everyday life, but it's especially true online.

The final step is the most complex. To create an operant feedback loop, actions need outcomes. This can take a number of forms, and there's an archive of research and rewards schedules and strategies. Some of the most striking insights, however, come from real-world trial and error. Entertainers have long understood the importance of feedback, such as near misses, when it comes to keeping players interested. And that's something psychologists didn't fully understand until the introduction of advanced MRI.

In this model, a habit becomes continuous when motivation starts to come from the anticipation of your input rewards. So without taking a deep dive into brain circuitry, what can the good guys learn from big tech? In the time left, I'm going to outline five simple ways these ideas can help you keep regular donors engaged.

Firstly, one of the ways social media platforms seduce us is by getting us to associate notifications with things we crave like approval, friendship, being noticed. Most nonprofits and charities don't think about the associations they create. But if you're subscribed to a list that only sends you bad news, it won't take you a long time to subscribe. Instead, nonprofits can use positive messages to per day emails and notifications with the same warm glow donors got when they first signed up. That means that the people who really care will keep clicking through time after time.

Secondly, nonprofits can enrich the donor journey with milestones. Anniversaries have an inbuilt sense of achievement. Each one has a way of winning, advancing, or collecting points. Because of that, it's a neutral tool for reinforcing habits. But there are two other reasons why you should celebrate milestones.

First, cost-benefit decisions tend to happen around anniversaries. So it's a good time to remind your donor why they're involved. Second, psychological research shows how our memory is usually governed by a few select events, so making the occasional moments special has a disproportionate impact on the whole donor experience.

It's important to remember that creating a habit is not just about rewards. It's also about reducing the effort required to take action, and there are some simple ways to do this. In 2012, the Home Retail Group and Charities Trust teamed up to test a default scheme that increased the value of a payroll donation by 3% each year.

Making the scheme an opt-out option increased participation from 6% to 49%, and the behavioural insights team calculated that similar changes across all types of donation could generate an extra 40 million pounds each year. Charities and nonprofits can incorporate that kind of evergreen giving to their recurring donations at the sign-up stage or in follow-up emails, helping supporters to keep up their contributions with zero effort.

But when economists talk about warm glow altruism, social pressures play an important role. As we know from previous research, peer effects shape perceived norms and the decision to donate. So one way to grow engagement is to experiment with membership status. That has several benefits.

First, social validation is refreshed at every stage of the donor journey. Second, it lets you vary the incentives, giving new donors and long-term supporters a sense of exclusivity. It also creates a process of incremental investment similar to the bonuses that insurance brands use to increase loyalty.

Finally, one of the simplest and most effective insights that behavioural science can offer is to avoid coercive design at all costs. A series of firm studies conducted between 2000 and 2009 showed how important personal volition is to potential donors. Simply reminding subjects that they were free to accept or refuse a request increased both donations and the amount people were willing to give. So however tempting it might be to put obstacles in front of people who want to cancel, making the exit clear and obvious is the secret to a happy marriage.

I want to end with a disclaimer. Although these ideas have dealt mainly with action and rewards, none of them will stick unless you understand your donor's motivations. After all, the things that make social media truly addictive are the connections, status, and affirmation it promises. Nonprofits and charities promise us something completely different, and it's often something unique. That means if you want to improve long term engagement, you have to start by asking questions. Thank you so much for listening.

Thanks again for listening. If you want to know more about our charities or need tips on tracking your goals, getting more website visits, or growing recurring donations, please get in touch. We'd be delighted to hear from you. Thanks again.