It’s no secret we live in a society prone to instant gratification.
From a weekend binge-watch of Game of Thrones, to polishing off a whole pint of Rocky Road in one sitting, to impulsively tossing in that issue of People Magazine at the grocery store check-out, most folks naturally exhibit a preference toward short-term gain, even if they understand the pleasure experienced by delay might be greater. (Spreading one’s enjoyment of Game of Thrones over an entire season, for instance.)
Related to this phenomenon, losses are also experienced more strongly in the present. As a result, people tend to defer those losses into the future whenever possible, even if doing so might actually cost them more. One look at the credit card debt so many Americans carry confirm this fact. Pay for those noise-canceling headphones with plastic and start enjoying your music today, even though you’ll pay an exorbitant 22% annual interest rate for that pleasure.
How can this basic human behavior drive the act of giving in different ways?
One well-known international child relief organization tested this condition directly to their monthly donors in Sweden. As part of a routine fundraising campaign, the donors were contacted by telephone and asked to increase their donation.
A total of 1134 donors were contacted and were randomly split into two groups. The first group was asked whether they would like to increase their monthly donation today while the second group was asked whether they would agree now to increase their donation in two months. In both groups, credit card or EFT authorization was taken today.
The results were dramatic.
Researchers discovered that 10% more donors agreed to increase their regular gifts in two months, than those that chose to increase it today. More impressive than this, however, was the fact that mean donations were 32% higher in the ‘tomorrow’ group than the ‘today’ group.
The overall impact of the change — in traditional RFM terms, a 10% lift in response rate and a 32% in average gift — was huge, especially in calculating the Lifetime Value (LTV) of a monthly donor that these increases represent.
This human behavioral trait could play an important role in a variety of ways, beyond simply amplifying the LTV of active monthly donors. Some examples…
- In monthly donor acquisitions, ask for the authorization today with the understanding that the first donation will not come due for two months.
- Similarly, in renewals, accept authorization today, before a membership expires, when the renewal date is still several months out, and the membership gift will not automatically transfer until expiration day.
- In appeals, authorize today, but actually take the gift in the future, for instance, against a logical point in the mission calendar. (e.g., authorize your commitment today and your gift will automatically transfer in two months on World Hunger Day.)
Traditional fundraisers may resist because of their fear of a revenue risk they see associated with foregoing money on the table for a commitment to give in the future.
However, research shows that, with their credit card or EFT authorization grounding the donor’s commitment today, not only is there no risk, but in fact response rates and gift revenues improve significantly.
Understanding basic human behavior behind the perception of gratification versus loss across time can help us craft tests that can measure some powerful amplifiers to our campaigns.