Nudging: Little Change, Big Changes
How do we get donors and volunteers to take the actions we need them to take? It turns out the nudge may be the best way.
Last October, University of Chicago economist Richard H. Thaler was awarded the Nobel Memorial Prize in Economic Sciences. Thaler’s work has persuaded many economists to pay more attention to human behavior and many governments to pay more attention to economics.
Thaler is the rare economist who enjoyed some measure of notoriety before winning the prize. He is an author of “Nudge,” the 2009 best-selling book about helping people make better decisions. He also appeared in the 2015 film, “The Big Short,” delivering a 90-second analysis on the causes of the 2008 financial crisis.
Nudge describes the strategy behind changing the ways consumers view their choices to “nudge” them to the desired decision. The idea is that it is easier to steer a person toward a given decision than it is to rationally persuade them to make a choice. Small nudges can lead to big effects when spread over a lot of people. So popular has this idea become in government, health care, consumer marketing and other areas that it has spawned an annual “Nudge Awards,” the world’s first behavioral change awards.
Why not try to persuade people to make better decisions? One of the fundamental concepts behind nudging is that people are inherently irrational, but in very consistent ways. The notion that people are irrational actors was a problem for economists to explain before Thaler came along. For example, people will buy a coffee mug for $3, and then refuse to sell it for $6. For an explanation, see the mere ownership effect. (When Thaler was asked how he would spend the $1.1 million he won with the Nobel Prize, he responded, “I will try to spend it as irrationally as possible.”)
An example of a consumer nudge is placing a product at eye level on a supermarket shelf to increase the odds that it will be seen and chosen. In government, the British found that people were more likely to pay their automobile registration fees if billing letters included a picture of the vehicle.
We tend to think that big effects require big efforts. Instead, nudges usually involve small changes. They are often Zen-like in their simplicity. The key with a nudge is that it allows people to retain their freedom of choice, even as it steers them in a certain direction.
Nudges have the potential to impact revenue throughout the nonprofit world industry.
Behavioral scientists in the U.K. developed a strategy for the restaurant Fifteen in Cornwall to fund the training of apprentice chefs by “encouraging” diners at the restaurant to make a donation. The idea was to raise as much money as possible but not do so at the expense of the wait staff, who may have lost tips, or the goodwill of the diners, who may have felt put upon by a solicitation.
Several strategies were tested. The one that was successful involved adding a £1 donation (about $1.40) to the bill by default and giving the diners the choice to “opt out” if they didn’t want to contribute. (Notice that they had full freedom of choice.) The outcome? In the following year, around $140,000 was raised with no detrimental effects to servers’ tips or diners’ satisfaction.
The way nudges are crafted is known as “choice architecture.” This is the process of structuring options in a way that they will influence the likely outcome. Most often, choice architecture is not about persuading an individual to make a choice, but instead removing a barrier for them doing so.
In the restaurant example, no one needed to be persuaded about the benefits of funding a chef’s training program. They were asked if they would like the donation to be removed and overwhelmingly chose no—the least difficult option.
Nonprofits stand much to gain by using nudges to “pave the cowpath.” This refers to figuring out what people already naturally do and then clearing out the path ahead of them to make it as easy as possible. The goal is to make whatever you are trying to get them to do to be the easiest decision they never made.
First figure out what behavior you want to nudge, then architect the moment of choice.
Sound simple? It’s not. You have to give up your pre-conceived notions of what works. Then, it takes strategy, testing and an understanding of the constituents you are trying to sway.
What might be worth nudging in a nonprofit? Self-donations might be good. How about asking people to opt out of a self-donation instead of opting in, in the case of peer-to-peer events? Do people donate on your website? How about putting the highest donation amount first in your string of donation options, instead of last?
Finally, measure success in your bottom-line.
Otis Fulton, Ph.D., spent most of his career in the education industry, working at the psychometric research and development firm MetaMetrics Inc., Pearson Education and others. Since 2013, he has focused on the nonprofit sector, applying psychology to fundraising and donor behavior at Turnkey. He is the co-author of the 2017 book, ”Dollar Dash: The Behavioral Economics of Peer-to-Peer Fundraising,” and the 2023 book, "Social Fundraising: Mining the New Peer-to-Peer Landscape," and is a frequent speaker at national nonprofit conferences. With Katrina VanHuss, he co-authors a blog at NonProfit PRO, “Peeling the Onion,” on the intersection of psychology and philanthropy.
Otis is a much sought-after copywriter for nonprofit fundraising messages. He has written campaigns for UNICEF, St. Jude’s Children’s Research Hospital, March of Dimes, Susan G. Komen, the USO and dozens of other organizations. He has a Ph.D. in social psychology from Virginia Commonwealth University and a Bachelor of Arts from the University of Virginia, where he also played on UVA’s first ACC champion basketball team.
Katrina VanHuss has helped national nonprofits raise funds and friends since 1989 when she founded Turnkey. Her client’s successes and her dedication to research have made her a sought-after speaker, presenting at national conferences for Blackbaud, Peer to Peer Professional Forum, Nonprofit PRO, The Need Help Foundation and her clients’ national meetings. The firm’s work is underpinned by the study and application of behavioral economics and social psychology. Turnkey provides project engagements, coaching, counsel and staffing to nonprofits seeking to improve revenue or create new revenue. Her work extends into organizational alignment efforts and executive coaching.
Katrina regularly shares her wit and business experiences on her and Otis Fulton's NonProfit PRO blog “Peeling the Onion.” She and Otis are also co-authors of the books, "Dollar Dash: The Behavioral Economics of Peer-to-Peer Fundraising" and "Social Fundraising: Mining the New Peer-to-Peer Landscape." When not writing or researching, Katrina likes to make things — furniture from reclaimed wood, new gardens, food with no recipe. Katrina’s favorite Saturday is spent cleaning out the garage, mowing the grass, making something new, all while listening to loud music by now-deceased black women, throwing in a few sets on the weight bench off and on, then collapsing on the couch with her husband Otis to gang-watch new Netflix series whilst drinking sauvignon blanc.
Katrina grew up on a Virginia beef cattle and tobacco farm with her three brothers. She is accordingly skilled in hand to hand combat and witty repartee — skills gained at the expense of her brothers. Katrina’s claim to fame is having made it to the “American Gladiator” Richmond competition as a finalist in her late 20s, progressing in the competition until a strangely large blonde woman knocked her off a pedestal with an oversized pain-inducing Q-tip. Katrina’s mantra for life is “Be nice. Do good. Embrace embarrassment.” Clearly she’s got No. 3 down.