What do behavioral Psychology and Crowdfunding have in common? A lot!
By Shlomo Schreibman
As a young teenager, my dream was to pursue a career as a psychologist. I have always loved people and found the relationship and interaction of our beliefs and actions fascinating. Five years ago, I became a Social-Industrial certified psychologist. Not the type that deals with serious issues such as depression and anxiety, but rather the type that helps individuals and businesses thrive using the latest behavioral psychology research. Since then, I have been leading research programs and professional development days with some of Israel’s largest companies, including several of Israel’s top Banks.
During this time, I started working with Israel365 Media on marketing campaigns. While being a consultant is important and rewarding, there is nothing more satisfying than actually being involved with organizations days to day work and seeing the actual change and growth. Lucky for me, I realized this at an early stage as a result, over the past 5 years I have been focused on digital fundraising. Along with the wonderful Israel365 Media team I have embarked and successfully implemented dozens of crowdfunding campaigns with the leading Jewish platforms such as Charidy, Cause Match, Jgive, Jewcer, Chesed Fund and more recently on our own platform at Israel365 Media that we white label for clients..
Unless you have experienced it or studied it, you may not appreciate why individuals might experience FOMO or give more generously to a matching campaign because takes place in a bracketed 24-hours, but the data proves- it works. We are simply not rational species. Familiarize yourself with the work of Rory Sutherland and Dan Ariely for more on the human tendency to engage in irrational behavior.
What do behavioral Psychology and Crowdfunding have in common? A lot.
Below is a list of 13 cognitive biases and psychological effects that you should utilize when strategizing how to fundraise through the power of the crowd:
- Planning Fallacy – Projects take time and always more than expected. Many organizations tell us that they don’t have the patience for Crowdfunding and I understand them. You need to have a big upside (2x your usual income) in order to invest the time and to present the campaign in such a manner that is exciting and motivating for the team. In order to overcome the Planning Fallacy, set your deadline to be ready at least 2 weeks before launch.
- Don’t Show Broken Windows – start with those who actually know you (e.g. Friends and family, previous backers) – Donors want to feel like they are making a difference. Show them how they are helping start momentum by engaging them. Their early pledges and contributions have a greater impact than the same pledge and donation in the final hours of the campaign. Why is that? To be frank, no one wants to donate to a loser. A page with no donations is like a neighborhood with broken windows or an odorous bathroom. It encourages further disorder and unempathetic behavior.
- Information Bias and Simple Data – As digital marketing and fundraising experts, my team is often asked what the financial goal should be. The answer is simple – You don’t need a magic formula and hours of crunching numbers. You already have the data easily accessible. Look at what you raised in previous years to determine a benchmark to work with this year. Most organizations I have worked with reach their initial target, but don’t be afraid to have a stretch goal. If you raised $250k last year, you want to raise the stakes this year with the power of crowdfunding 30%-70% more. Obviously other factors should be taken into consideration including a variety of factors including your recent campaigns, the economy, your team’s capacity and buy-in and budget for growth.
- Social Proof – By having a section on the site with names of other donors who have given and a thermometer showing the hundreds or thousands of backers, you are signaling trust. CauseMatch reports that this section is consistently the most visited section on heat maps. So make sure to use a proper platform and not just an old donation page with a banner on top saying “all donations matched.”
- Copy and Micro Copy – What I like most about crowdfunding campaigns is that marketers up their game. They stop doing a general donate campaign and invest time to explain the need, and how when you become a donor – you are awesome with specifics about their giving’s impact. Studies show that being specific about the need and value will increase conversion rates by 83%.
- Anchoring – One of the most interesting findings of the Nobel Prize winners, Kahneman and Tverksy was the phenomena of anchoring. If we ask donors for a default $100 donation, that becomes an anchor. They may want to give more or less but it will be near that amount. We suggest to look at your average donation and make the default amount higher. Don’t have too many low options that will reduce your average transactions. Check out this research in which the organization raised their average donation by $79.
- Decoy effect -This phenomenon became widely known to the world with the publishing of the Freakonomics. If a donor is debating whether to donate $50 or $100, and a third option of $200 is presented, the donor will be persuaded to donate the $100. The $200 serves as a decoy.
- Default effect – People have too many decisions to make on a daily basis. That is why Mark Zuckerberg only wears gray t-shirts to make his morning routine a bit easier and allows his decision making challenges to focus on the high level dilemmas only. Donors also have many daily decisions to make. Let’s make it easier for them with the default amount. It will increase donations and, if played right, will increase the average transaction in our favor.
- Authority Bias and Halo effect – The combination of these two psychological theories, that of people listen to authority and once someone performs well in one area we assume overall excellence, can be a dangerous combination. There is an interesting halo over people with authority in specific fields, even when they are talking about fields they know little of. This is why influencers in various fields are influencers for campaigns they know very little about. Use this knowledge to your advantage. Engage your celebrity friends to promote your organization and people will have more trust in you.
- Ben Franklin Effect – Ever go into a shop and get offered a free coffee or mint? Or get a lemon wet-one with the bill at the restaurant? The thought behind these small acts are motivated by the Ben Franklin effect also known as the reciprocity rule. We respond to positive action with another positive action. What is your takeaway as it relates to crowdfunding? Highlight how your organization has been helping potential donors and their communities. Good deeds breed more good deeds (i.e. donations).
- The Finisher Effect – I am officially coining this new term. People love being the ones that made a difference. Jumping in to donate and help the campaign reach its goal when we are near compilation is something I have seen donors do with a sense of accomplishment and purpose. Make sure that the goal is achievable, so that donors can help cross the finish line.
- People Donate to People – A study by Agrawal, Catalini, and Goldfarb examined the types of risks that donors encounter in crowdfunding. They identified that donors are less concerned with the project and more with the organization behind the project. (Is the staffing competent? Is this fraud? etc.). Use your fans who have gravitas to build trust. Highlight the matching donors:
- Send a letter from the president of the organization with his impressive bio.
- Show a video of people who have benefited from your organization with messages of gratitude.
- People Donate to Victims – Social psychologists have come to appreciate the identifiable victim effect. We show more empathy toward specific people (compared to an unidentifiable group of people). For example, participants in one study were more likely to donate $5 to an African girl named Rokia instead of donating that money to millions of people who were suffering from severe hunger. Even if you have to use stock images to respect the privacy of those you care for, give them a name and a face.
Having been in this field since the beginning of Crowdfunding, we now develop unique platforms for our clients to best meet the needs of their donors with all of the above psychological effects in mind. If your organization could benefit from major crowdfunding, it is worthwhile to move forward with a custom platform with your messaging and branding and a flat fee rather than proceeding with a cookie cutter platform which often take a percentage of donations earned. If you are interested in a free consultation, I would be happy to make the time.
Shlomo Schreibman is VP of Business Development of Israel365 Media.