Cracking the code of mental money quirks for more successful fundraising.
There are two sides to everything, so I suppose I’m no different. If you surveyed friends of mine, I predict half would say I’m cheap and the other half would consider me extravagant. And both would be correct half the time.
When I need something, I buy the best that I can afford. My hope is that I won’t have to replace it ever (furniture) or at least very seldom (clothes). I’d rather have fewer but nicer things.
Then there’s the stuff I try to avoid spending money on. These tend to be temporary (dining out) or transactional (parking). I don’t know what Starbucks charges for coffee, but I do know I’d never pay it. Nor would I spend another five cents a gallon for the convenience of buying gas with a credit card.
We all have differing priorities, but what fascinates me is the behavioral economics concept that drives them, mental accounting. Logically, we know a dollar is a dollar, but we don’t behave that way. Mental accounting is about how people irrationally code, categorize, and evaluate money, leading them to make biased and sometimes irrational decisions. Implemented properly, nonprofits can benefit a great deal from this concept, particularly when it comes to fundraising.
Mental Accounting in Five Acts
1 |
Split Joy into Installments Would you prefer a dozen roses or a rose a week for 12 weeks? Mental accounting research shows that people get more happiness from separate small gains than from one equivalent big gain. To organize and filter information, our brains file it into different accounts: savings, income, entertainment, or windfalls (bonuses, gifts, refunds). Charity: Water’s monthly giving program, The Spring, regularly updates donors by sharing videos and personal stories, creating a steady feed of thank-yous that are more powerful than an annual report or gala. |
2 |
Turn Grievance to Gain Another “account” is one for money people resent or feel is unproductive. This is where we store bank fees, delivery charges and parking tickets. When organizations frame giving to redeem the negative emotions coupled with irritating expenses, the appeal can be compelling. Library fines feel petty, but several libraries have turned this around by holding “Food for Fines” events where overdue charges are waived by donating canned goods. Reframing fine payment as fighting hunger is a win for the library and the community. |
3 |
Ask for Money Upfront Paying in advance decouples the pain of paying with the pleasure we are purchasing, making future consumption feel free. This is the stuff of “all-inclusive” cruises and resorts. It’s not new to nonprofits, museum memberships and public radio pledges operate the same way, but it’s still an under-utilized tactic by nonprofits. |
4 |
Decrease Paying Pain This is the inverse of #1, splitting joy into installments. Losing $20 five times feels worse than losing $100 once. People prefer to combine losses and consolidate pain; the psychological sting is more bearable when absorbed in a single blow. Nonprofits can use this to their advantage by bundling giving into moments when donors are already paying for something else. PetSmart’s inviting customers to “round up” for its support of adoption, food, and veterinary care is a good example. Utilities giving residents the ability to add a small charitable donation to their monthly bill is another. The added cost feels painless. |
5 |
Label Funds for Fun Among our mental buckets for money are those for serious things like savings, mortgage payments, and tuition. These items are sacred. Just thinking about them is enough to quell the thought of a significant donation. Thankfully, we have a frivolous mental account as well. Coffee, movies, dining out and impulse buys all land here. Charitable contributions can too. Take Walgreens’ Red Nose Day, where customers buy a one-dollar bright red clown nose for children’s charities. This playful fundraiser leaves people with a physical token of their participation and provides social proof when they see others wearing red noses, reinforcing the fun and turning the donation from a loss to a gain. |
Money quirks are universal, and they shape donors as much as they shape us. In a season of uncertainty, I hope these insights help you see fresh opportunities. And remember, sometimes the wisest move is a small deposit into your own frivolous account. Maybe I’ll treat myself to Starbucks after all.
Enjoy,
Kevin
