It was interesting to read the recent story in Third Sector about the giving trial that ‘nudged’ people into leaving a will. The trial, which was conducted by Remember A Charity, Co-Operative Legal Services and the Behavioural Economics Unit at the Cabinet Office, found that people were three times more likely to include a legacy if solicitors or will writers reminded them to do so.
The story reminded me of a recent conversation between the Resource Alliance and the fundraising consultant Nick Allen, who will curate a session at the International Fundraising Congress in October on the role of behavioural economics in fundraising.
As he explained, all fundraisers wants to understand their donors better and to find out more about what motivates them to give and keep on giving. Behavioural psychology is one of the ways in which we can do this. Nick referred to the book by Dan Ariely, Predictably Irrational, which shows that although we like to think that we make decisions based on fact and reason, it’s often our emotions that rule us.
For example, studies have shown that if you show a donor information about 1.3 million starving children and then a separate case study about one starving child, the donor will have a much stronger reaction to the one child, even though rationally they know that millions of children would be suffering in the first example.
Commercial organisations have, of course, been using behavioural economics for years – you only have to look at pricing and the way supermarkets are designed to find examples. Meanwhile, the UK government has been exploring how these theories can be used in public policy. One of the projects the Behavioural Economics Unit has recently worked on involved encouraging people to pay their tax. Instead of focusing on the risk of punishment, people were reminded that the majority of their peers are honest, desired behaviour was rewarded, and it was made as easy as possible for them to pay. These subtle changes to processes, forms and language were found to have a positive influence on behaviour change and resulted in many more millions of pounds of outstanding tax bills being paid.
However, while the recent legacy giving trial might give the impression that this is something new and exciting for fundraisers, it seems to me that our sector has already been using behavioural economics – or at least the theory of ‘nudge’ – for many years. Take, for example, the discovery in the 1990s that the inclusion of a pen in a direct mail pack results in higher donation rates; or the tests that have been conducted regarding the way in which an individual is addressed on a letter. These are both ways in which people are ‘nudged’ towards making a gift, are they not?
Am I right? Have fundraisers been using behavioural economics in everything but name for years? Or is this actually something new and exciting that has the potential to dramatically increase levels of giving in ways we have never seen befor? I would love to know what you think.
Neelam Makhijani is chief executive of the Resource Alliance