The Economist publication was first published in 1843 with the stated mission of “taking part in a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress”.

Harsh?  Maybe.  Accurate?  Absolutely.

A similar contest exists between academia and the real world, with the former having answers too many of the latter’s seemingly intractable questions and struggles.

One such real world struggle is the use of premiums by the nonprofit sector to drive response and average gift while negatively impacting the net and likely crushing lifetime values.

So what to do?  Choosing to ignore it is one often chosen option.  Another is the mythology of “converting” premium givers to non-premium offers.

Mythology because the science and data from academia are at a feverish consensus on this singular reality – the use of extrinsic incentives do not work in the long term AND actually remove intrinsic motivation.

Let’s restate that in English.  There is reams and reams of evidence that giving people premiums (i.e. extrinsic stuff) not only fails to deliver the long term performance we require (i.e. positive lifetime values) but even more insidious, destroys the donors innate, natural motivation or incentive to donate.

There is perhaps no greater failing of academics in explaining this to the real world, given a) the degree of consensus and b) the pervasive use of extrinsic rewards in everything from employee performance to child rearing to non-profit fundraising.

The failing to communicate this point does not however, diminish its reality.

This reality is worth re-stating: using premiums actually destroys the donor’s innate, intrinsic, philanthropic motivation. 

Premiums are, in a dark, semi-anonymous bar at the end of a conference, referred to as crack.  This comparison, as it turns out, is literally true.  Using functional magnetic resonance imaging (fMRI) scientists, in controlled experiments, have determined that extrinsic rewards activate the same part of the brain and same chemicals (dophamine to be exact) as does crack cocaine.  The timid, unworthy premium pushers among us may consider this a stamp of approval, a twisted reinforcement of the rationale to use them.

Of course their only focus, like that of the industry, is the short-term – response rate and average gift.  This narrow focus is akin to what happens with donors given a premium.  It literally changes their focus to the self-interested question of what is in it for them instead of the benefit of donating.

This, in a nutshell, is why conversion won’t work.  We changed their mindset and framework, the new mental anchor for the premium donor is self-interest, not altruism.

Other, secondary problems emerge as we replace intrinsic motivation with extrinsic  – these more obviously front and center in, for example, a workplace environment; we become worse at solving for the task at hand, less creative and more likely to take unnecessary risks.

As a supporting data point from our own relationship work we see the percentage of donors who fall into what we call the “Transactional segment” – defined as having a very weak relationship to the organization, and by extension, churning with negative LTVs – being twice as big for premium driven organizations versus non-premium.

So, what the heck do we do about it?  What is the alternative?

The larger answer, which we will be teasing out in subsequent posts, is acceptance and action on the point Daniel Pink, author of Motivation and a source for many of these insights, noted, “nearsightedness and great are incompatible.”  Until the sector, starting with boards and senior leadership, demands performance on long-term metrics and goals it will forever be limited.  All it takes, is the desire and demand to be great, not for great sake or fundraising sake but for outcomes and mission sake.  Alas, this demand is in rare supply at the moment.

But back to motivation….

Here are the high level answers to how to motivate our donors and constituents in ways that preserve the intrinsic benefits of giving,  radically improve the net and grow the relationship, which we can prove increases LTV and retention.

Provide an environment and in turn as ask or offer that gives the donor,

• A sense of autonomy, control and ownership (myriad of possibilities here and yes, directed giving is one, but only one)
• A sense of mastery (think results, progress for the cause but also, the DONOR)
• A sense of purpose (this doesn’t require any explanation, does it?)

As a bonus, the use of “carrots” or rewards can be used in ways that don’t crush the intrinsic motivation and deliver value to the relationship. To do this requires treating the carrot or award as “after and because”, not “if-then”.   For example, send your best donors an unexpected gift, not as part of an ask but instead, a reward for their support.  But, also remind them of the shared purpose and mission and their important role in achieving it.

For the doubters we’ll end this post with the findings from an experiment in the world of blood donation.   Researchers visited a regional blood donation center and found 153 women already there, ready to give blood.  The 153 were randomly assigned to two groups, one who was told the blood donation was voluntary and no payment would be received.  The second group was told they would receive 50 Kroners (about 7 bucks) for their blood donation.

Guess what happened?  Fifty-three percent of the first group, the ones receiving no payment, gave blood.  The other group?  Only 30%.  Offering to pay for the blood nearly reduced the blood collected by half.

The reason?  Giving blood is an altruistic act and the act of giving money (i.e. providing an extrinsic motivator) crowds out the intrinsic desire to do something good.  This is why the Red Cross message of giving blood providing a feeling money can’t buy” works.

There are countless examples in corporate America, workforce compensation, child rearing, politics and non-profit fundraising where premiums crowd out the very act the fundraisers, the premium vendors and the organizations are presumably trying to foster – philanthropy.