The Power and Prison of Defaults

June 12, 2019      Kevin Schulman, Founder, DonorVoice and DVCanvass

Your mind is lazy.Default

I don’t mean that as an insult – mine is too. All ours are.

We humans want to do the minimal amount of thinking and deciding.  So unless there’s a good reason, we go for the default value, whether that’s taking the same route to work, eating tacos for Taco Tuesday, or opting in or out of anything from email newsletters to organ donation.  Fully 42%* of ask string design is setting up the right default amount for donors to slip into like a warm bath.

Much of fundraising can be run the same way.  Take last year’s acquisition budget and add 5%.  Use similar mail pieces to last year’s except swap out the winning tests and test against the worst couple pieces.  Acquire through the same channels in about the same ratios.  Steward your portfolio of 150 major donors like you have in the past.  Ctrl + C, then Ctrl + V.

This works until it doesn’t.  We’ve laid out the scenarios before: the road we’re on is increasingly untenable.

But it’s what we’re used to: the devil we know.  Somewhere in this fundraising world, there are two meetings in two conference rooms right now.  One is debating whether they should get rid of their donor newsletter; the other is debating whether they should add a donor newsletter.  Chances are, the one with a newsletter will end the meeting with a newsletter and the one without won’t.

Despite this status quo result, these two organizations are the progressive ones – they are at least questioning their assumptions.  Asking whether the world is as it should be is the first step, often untaken.

A large part of the challenge is poor frameworks for resolving such discussions.  Fundraising says X increases net revenue, but donor services says it increases donor complaints.  Fundraising says Y doesn’t add any revenue, but donor services says it is beloved by donors.  Net revenue is a poor calculus alone: some tactics like adding another mail piece or sending an email reminder seem to increase revenue but are short-term gain, long-term pain.  And donor services is well meaning, but the plural of anecdote isn’t data.

What’s a person to do?

First, start with a blank piece of paper.  Imagine for a moment you were given your program as an outsider.  What would you question?  Where would you poke?  What sacred cows would have you firing up the hibachi?

Second, decide on your decision calculus.  We’ve argued before, and will do so again, that your focus should be on maximizing lifetime value.  It makes the case for investment in acquisition and retention and shoves aside the quick fixes that don’t fix.

Third, get real data on what adds to, and subtracts from, donor commitment and lifetime value.  It just so happens (not really) that we are doing a webinar on this very topic on June 18th at noon Eastern called Which Half of Your Marketing is Wasted?.  It’s free and you can see how other organizations have gone from having the conference room discussion about whether the newsletter adds value to having actual data on what the newsletter, and a myriad of other donor experiences, add to donor commitment and lifetime value.

Finally, test it.  On the webinar, we’ll highlight organizations who took that look in the mirror, got the data, and took steps to change – most good, some with some lessons learned.

It takes energy to change your default, even more to change other people’s.  But when you arm yourself with data, it becomes that much easier: there’s no sense in fighting a battle to preserve something not worth preserving, for example.

Nick

* This number is made up, but feels about right.

3 responses to “The Power and Prison of Defaults”

  1. Jay Love says:
    June 12, 2019 at 8:20 am

    Oh, the mighty and incredible power of the status quo/default. Case in point for any organization, change the matching 401k funds plan from an opt in on the employment forms to an opt out and see the number of employees taking advantage of basically FREE money for their retirement DOUBLE. (I have personally watch this happen at least a dozen times since 401K matching became available.)
    Great article Nick, now let’s all go back to what we were doing yesterday, last week and most likely last year!

  2. Malcolm Friend says:
    June 14, 2019 at 3:12 pm

    Hi Nick,

    Your posts continue to be required reading from my desk. Please keep up the excellent – thought provoking work.

    On a different topic I received a link to a Guidestar blog about the number of times you can solicit a donor in a given year by mail…

    https://trust.guidestar.org/can-you-solicit-the-same-donor-21-times-a-year-with-success?

    I would love your team to give some inspired thought to this!

    Best,

    Malcolm.

    • Nick Ellinger, VP of Marketing Strategy, DonorVoice says:
      June 14, 2019 at 3:52 pm

      Malcolm, so glad you are enjoying and getting something from these!

      Volume is a highly debated and highly debatable topic. So to set parameters around this, I’m automatically throwing out two arguments:

      1. Reductio ad absurdems. Anyone who says “more” for solicitations is asked “well what about 365 mail pieces per year?” Anyone who says “less” is asked “well what about zero?” Neither question is intellectually honest when we are looking to answer the question “is the average nonprofit mailing too much or too little?”

      The correlary to throwing out this argument is changing volume isn’t a strategy. If you find you can make more money by increasing volume, that will work only to a point. If you find you can make more net by decreasing, that also will work only to a point. So getting “how often” right is less important that getting “who” or “why” right.

      2. We’re also throwing out “I added (or subtracted) a piece and it made (or lost) money; therefore, it was a good (or bad) idea.” The problem is communications interact with each other. If you add a piece, you would have gotten some part of those revenues anyway. As we talk about at https://agitator.thedonorvoice.com/donors-are-ticked-off-by-excess-unrequested-solicitation-who-knew/, there’s research that about 63% of those “new” revenues are cannibalized by other communications. That was when nonprofits were mailing less than once a month, so the number is likely higher. With one long-term test where we looked at revenues across pieces with one client, that cannibalization rate (at 24 mail pieces per year) was about 75%.

      Making money off of one additional communication isn’t that much of an accomplishment. But if you factor in cannibalization, there’s a higher and more appropriate burden of proof.

      With those parameters in place, the proof points become less frequent. As we talk about at https://agitator.thedonorvoice.com/volume-has-been-tested-the-results-are-in/ , there are organizations that:
      – have cut mail and email by 20-30% and had no net loss in year one
      – cut from 12-15 mail pieces to four per year and had net income increase in year one
      – decreased mail by 15% and increased net revenue by 17%

      So there’s some evidence fewer can be better. There’s also other evidence of adding communications increasing net revenues, especially as you are starting up.

      So if this is a topic of conversation for you, I’d encourage a test. The odds that you have the right quantity right now by chance is vanishingly small.

      First, decide which direction to test. That cannibalization information gives us a fun rule of thumb. Let’s say 66% of your revenue from a new piece is cannibalized — that would mean that a mail piece would have to triple its money to earn its keep. If all of your pieces are doing better than that, try more; if you have some that are doing worst, test less. Then test longitudinally. That is, you need to be able to test a group and look at control v test for the period of the year. If you are testing less mail, for example, you want to see if future revenues cover immediate losses.

      There’s one other missing piece here — individual specificity. Tom talks about not worrying too much about complaints; I’m assuming he means that in the aggregate. For the individual, however, the answer is “yes, madam; how and how often would you like to hear from us, madam?” Donors who specify contact cadence can be 6-8x more valuable than those who take what you are giving, so active solicitation of this and listening, along with smart follow-up communications (a person requesting one piece per year is begging for a request to making an annual recurring gift!), can substantially increase revenue.

      And you can see from https://www.linkedin.com/pulse/all-donors-same-hard-tell-looking-sector-best-kevin-schulman that different types of donors need different treatments — in this case, less committed donors need introductory communications; more committed donors are turned off by them. This is another way that “volume (or lack of volume) isn’t a strategy” – instead of testing what the one-size-fits-all volume should be, it is likely more profitable to test what the specific cadence should be for the individual or the subgroup.

      Some summary tips for looking at volume through a more nuanced lens are at https://agitator.thedonorvoice.com/dont-just-turn-down-the-volume/; let me know what you think!

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