Psychology and Crowdfunding: The Mind Tricks Every Fundraiser Should Know
Crowdfunding is communication. With all the hard work and careful planning that goes into nonprofit fundraising, it’s easy to forget that what you’re doing is simple – asking people for help and telling them why you need it.
And there is an art to communicating effectively. Even in normal conversation, it’s not easy to speak to others in a way they’ll listen to. Asking for help should be approached even more carefully. That’s why you need to approach nonprofit fundraising well-informed about human preferences and behaviour. Luckily, there’s a lot of research out there about how fundraisers and marketers can harness the power of psychology in their campaigns.
Using psychology in fundraising isn’t manipulative or shady – it’s just effective communication. It’s even more important when it comes to crowdfunding, since you need to be able to predict how donors will react to your campaign, and design it with them in mind. Knowing some relevant psychology is very helpful under these conditions so you can anticipate likely outcomes and get the results you want!
Let’s go through some basic psychological principles and talk about how they relate to crowdfunding.
1. Your brain wants to hear a story, not a pitch.
Whenever you receive new information, your mind seeks out the story within it. There is a massive amount of information around us at all times, and by organizing it into stories, we are able to make sense of the human experience. No matter what kind of technology you’re using to communicate with donors, the goal is to establish a story in their mind.
The psychological power of stories is immense. They engage the right side of our brain – the imaginative, experiential side of experience. A well-told narrative activates its reader’s sense of empathy so they feel like an active participant.
By contrast, consider a pitch: its goal is to inform the listener and share critical information. While this is a worthy goal, it’s one-directional. Its recipient may be accepting the information, but they’re not empathizing with or placing themselves within your mission.
How it relates to crowdfunding:
In crowdfunding, technology replaces face-to-face interaction since we are reaching so many people. But it’s important to remember that the goal of all these online communications is to share the story of your cause and campaign.
Making storytelling your priority means you’ll hold your audience’s attention, empathy, and engagement – all of which means more donations.
2. Social Proof Theory
People are social animals, and this theory is all about group behaviour. Humans are much more likely to adopt a new behaviour if they’ve seen their peers doing so already, as it builds credibility for the action and makes it seem less risky. This theory is especially relevant if someone isn’t sure how to act in a certain situation – they will look to their peers’ behaviour as guidance.
There are six types of social proof:
- Expert Social Proof: This is when someone who’s recognized as a knowledgeable expert in your field backs your product, service, or charity. For example, a scholar who specializes in South African gender issues could back a campaign raising money to educate South African girls.
- Celebrity Social Proof: This means a celebrity endorses the behaviour you want your audience to replicate. A good example is celebrities showing off ‘I Voted’ stickers to encourage their followers to do the same.
- User Social Proof: This means that current users (or donors) vouch for your organization based on their experiences with you. In fundraising, when we talk about ‘turning donors into advocates’, we are using user social proof. Volunteer-run campaigns for nonprofit organizations would be another example.
- The wisdom of the crowd: This refers to having a large amount of supporters, and the credibility it can lend your brand. For example, a nonprofit with 100,000 followers will be seen as more established and trustworthy than one with 5,000.
- The wisdom of your friends: This is the most literal interpretation of social proof: it means the behaviour has been modeled by the actual people around you. You’ve probably seen this in action: if everyone you know donated to Jessica’s chemotherapy fundraiser, you’re likely to do so too.
- Certification: This means you’ve been legitimized or given formal approval by an industry authority. Examples would be getting Twitter verification, or becoming a “certified organic” farmer.
How it applies to crowdfunding:
Crowdfunding is all about creating a word-of-mouth effect that helps you tap into a larger crowd. Unlike methods like events and recurring donations, some of the people your crowdfunding campaign reaches will be hearing about your cause for the very first time. Therefore, you’ll want to back yourself up using some of these Social Proof strategies. Here’s a few methods:
- Talk about your organization’s past accomplishments within your campaign. Let people know how their donations will make a difference, using examples from how you’ve done it before.
- Make it effortless for donors to share and talk about the cause on their social media
- Try to enlist recognizable people with large networks to share the campaign
- Start with your existing supporter base – it’s bigger than you think! Your crowd includes current donors, social media followers, sponsors and partners, volunteers and employees. Each member of your crowd has their own network of roughly 200 people, and social proof means that their word will matter!
3. Hedonic Adaptation – In Reverse!
From a donor’s perspective, giving to your charity isn’t an isolated decision – donating always means giving up something else. Whether that’s a new pair of shoes or lunch with a friend, you’ll need to convince them that donating will bring them more joy than the other ways they could have spent their money.
The good news is that psychology is on your side. Spending money on helping others may actually feel better, longer than other types of purchase decisions. It’s called hedonic adaptation, and you’ve likely experienced if you’ve ever taken ‘treat yourself’ a little too far. It means that the happiness or satisfaction we feel from a positive event (like buying new shoes) tends to diminish over time. Say you’re having a bad day, so you splurge on some new sneakers for a pick-me-up. That’ll probably make you feel good – but if you make a habit of it, soon buying new sneakers won’t bring you the same positive endorphins that it used to.
But what’s interesting is that altruistic or charitable behaviours seem to be the exception to this rule. That means repeated giving doesn’t lessen the enjoyment your donors get out of helping your cause. For example, donors will feel just as much joy the tenth time they save a kitten from the shelter as they did the very first time.
How it applies to crowdfunding:
The implications for nonprofit fundraising here are pretty obvious; you’ll want to encourage recurring, ongoing donations. But it doesn’t stop there. Stay in touch with your donors, and communicate the impact of their gift on a regular basis. For example, if they’ve agreed to donate monthly to help build a school, share updates every two weeks on all the progress they helped make possible. Seeing these real impacts means that donors will actually feel the fulfillment and satisfaction that comes from giving.
It also means you shouldn’t shy away from smaller, frequent gifts. Even someone who’s giving $5 a month is having a positive experience helping your charity. Keeping them connected to your network of supporters means they’ll advocate for your cause – and keep donating – for weeks, months, or years to come.
4. The Choice Factor and Decoy Effect
These two, connected psychological phenomena are all about options. Presenting your audience with choices is tricky: it’s important to present them with some choices, but too many can actually work against you, and those choices need to be arrived at strategically.
Say you’re fundraising for a community garden, and you want to give donors the option to purchase actual plants and supplies instead of just a dollar amount. Of course, this is a great idea, because it communicates impact and makes giving more of an experience. But if there’s 200 different items you need, you absolutely shouldn’t list all of them!
Too much choice overwhelms potential donors. Time is precious, and if they feel like it’s going to take too long to decide how to support your charity, they’ll probably just abandon it and choose a different campaign. So instead of those 200 options, give them a few carefully chosen ones; say a pumpkin plant, blueberry bush, or a wheelbarrow. That’s the choice factor in action.
Closely related is the decoy effect, which relates to what kind of options you should present, rather than how many. Basically, if you present one option that’s clearly not great value, the other choices seem more appealing by comparison. To build off our garden example, you could offer donors to a choice to buy a pumpkin plant for $40, two pumpkin plants for for $50, or a backhoe for $60. Donors aren’t likely to choose the cheapest option.
How it applies to crowdfunding:
The choice factor is a general role that should guide not just your donation options, but how mission is presented as a whole. Avoid overwhelming your audience – they don’t need a ton of backstory about the history of your organization or the boring, day-to-day side of operations. Just share an engaging story about your mission and give them a few appealing choices about how to donate.
The decoy effect should always be kept in mind if you’re offering perks in as part of donations. For example, the option to donate without receiving a perk would be a good decoy in contrast with receiving a t-shirt or pin.
5. The Halo Effect
The halo effect is especially relevant to nonprofit fundraising. In conventional marketing, the halo effect means that you’re more likely to get sales from returning customers, especially if they had a good experience – the company and its products have acquired a ‘halo’ in the customer’s mind.
The relation to crowdfunding here is clear: it’s all about recurring donations. If a supporter had a good experience donating to your organization, they’re much more likely to give to you again than to find an entirely new charity or cause.
This means that one well-run campaign will cause everyone who participated to see your nonprofit and the work that you do in a positive light. But be careful – the halo effect works the other way, too. Donors who’ve had a poor experience are unlikely to choose to give to your organization again.
How it relates to crowdfunding:
Since nonprofits are already doing good work, the Halo Effect should follow naturally. Like so many other things with nonprofit fundraising, it comes back to communicating impact. Make sure your donors feel included and looped in on the work that you’re doing, and they’ll become invested in your success. Harness the Halo Effect well, and it will pay off exponentially.
Reciprocity is common sense – if someone gives you something, you’re more likely to give them something in return. A good example of reciprocity outside of nonprofits happens in the restaurant industry: have you ever received a couple mints along with your bill at the end of a meal? Those are there for a reason. It’s been proven that if the restaurant gives you something (the mints), then you’ll give them back a higher tip.
You can probably already recognize reciprocity at work in nonprofit fundraising. You’ve seen it as perks in exchange for donations like sweatshirts or coffee mugs. But reciprocity doesn’t need to be this simple or direct to work. Lots of awareness-raising efforts, like free benefit concerts, are examples of reciprocity: by providing a fun experience to the community, organizers hope they’ll one day give something back in the form of financial support.
How it applies to crowdfunding:
We’ve already given a few great examples of reciprocity in crowdfunding, but try to keep this principle in mind throughout your fundraising efforts. What about recurring gifts or perks for recurring donors? Or free, downloadable e-books that are relevant to your cause? If you’re looking for it, you can find lots of opportunities to give something to your audience and supporters – and they will respond in kind.