What Cognitive Bias Means For Your Fundraising

This is a big week. Some would say the most important week of the year. It’s fantasy baseball draft week. Okay, so it’s really not that important but I’ve been pretty into fantasy baseball for about 12 years now with 10 of those with the same group of college friends. The league is now a way for us to keep connected, have some fun and talk some trash.

Who cares right?

Well in doing my annual ‘read every article written about fantasy baseball in 4 days to prepare’ I came across an interesting article on cognitive bias and how to avoid it in a fantasy draft. The author, Renee Miller, briefly defines cognitive bias this way:

At the core of it, cognitive bias refers to the brain relying on primitive, emotional and/or habitual processing to make decisions rather than on more advanced neo-cortical regions that use logic, reasoning and sophisticated executive processing.

Now there are all kinds of different biases but they are all ways where our decision-making is illogical or not rational often shaped by our own experiences, beliefs, and desires. I love that kind of stuff (armchair psychology) and naturally started thinking of the 4 types of biases covered in the article in relation to marketing and fundraising. In the article, the author discusses these 4 types of biases:

1. Information
2. Recency
3. Novelty
4. Confirmation

I’d like to add a couple of my other favourites — the Gambler’s Fallacy, Bandwagon Effect, and Curse of Knowledge — to come up with…

7 Types of Cognitive Biases & What They Mean For Your Fundraising

1. Information Bias

This is rooted in the belief that more information, even irrelevant information, will help you make better decisions. In the fantasy baseball article, Miller uses a horse racing handicapping example:

A classic study on horse-race handicapping suggests it does not. Participants in this experiment, expert handicappers, were given the chance to use increasingly more pieces of information on which to base their valuations. It was found that the more information they had access to, the more confident the handicappers were in their judgments. However, the accuracy was equivalent among the groups. In other words, more information didn’t lead to better decisions, just to the belief that the decisions were better.

Now I’m all for using data and information in marketing and fundraising but there are times when you have enough information and it’s time to make decisions. More often than not, information bias is about using irrelevant information to make your decision which ends up complicating and slowing down the process.

Page views for your website, for example, is a metric which I believe to be almost completely useless (I’m not alone here…) because it doesn’t tell you enough about the why (are they clicking around because they are engaged or can’t find what they are looking for) and it’s not actionable (if page views are up or down, what do you do about it?). So seeking out this information before you make a decision on a website, for example, is information bias.

That’s just one small example but the key point here is to make sure you are seeking good information to make decisions and there is such a thing as too much information.

2. Recency Bias

This is where we put extra, often too much, weight in recent events compared to things that have happened much earlier. It’s not that far off of the goal-proximity effect where things at the end of a sequence, or most recent, are perceived to be more powerful.

Now this isn’t always a bad thing as that email campaign you did last quarter is probably more relevant to the one you did 5 years ago, but one big issue with recency bias is when projecting or planning into the future. Just because the last appeal did well doesn’t mean that all the next appeals will continue to perform at that rate — that’s dangerous.

Miller points out that:

Sorting out whether recent performance is indicative of future performance isn’t easy. It requires both an examination of past data and the current contextual information, not to mention a suspension of emotional reaction, to make an educated guess as to what’s ‘real?’

Key point here is to use recent successes (or failures) as one data point to base future decisions on but fight the temptation to rely too heavily on it as it may not be ‘real’.

3. Novelty Bias

This is a ‘grass is greener’ type of bias where we will (overly) value something that is new, unique, or different because it is… new, unique, or different. In fantasy baseball, this is often trusting rookies or new players to the league too much because there is only potential and they haven’t let us down yet.

Crowdfunding could be an example of this in fundraising. I’m a believer in crowdfunding but in realistic crowdfunding. Meaning it’s not a silver bullet that will cure all your fundraising problems and it still takes work. Sometimes lots of work. But because it’s ‘new’ (Side Note: This ‘new’ concept is so interesting to me because raising capital from a lot of people giving small amounts of money is fundraising and something we’ve been doing for literally hundreds of years… anyways…) there is a temptation to abandon functioning, albeit difficult to scale strategies, like direct mail or events in pursuit of newer and trendier strategies. Even if it’s not necessarily a great strategy.

I was recently in a meeting where an organization with a largely 60+ donor base was asking about how to get younger and started thinking about ‘Millennials’, social media, and their website. That’s not necessarily a bad strategy, and they do need to make some progress there, but they should probably be more focused on their 40–50-year-old donors, which will still make them younger, and ensure they are being thanked, honoured, and recognized. Because that’s where more revenue and lifetime giving will come from now and in the next decade.

The key point here is to not leap to the new, shiny tool/strategy/person simply because it is new and shiny.

4. Confirmation Bias

This is one of the hardest ones for me to combat but, similar to information bias, it’s where we misuse or skew information to make it say what we want it to say. In the previous example where the organization wants to get more Millennials, you could easily site stats about how large the Millennial demographic is (it’s huge), how generous Millennials actually are (relatively quite), or how valuable they could be to your fundraising in terms of Lifetime Value (could be massive). So if you want to pursue that strategy, you can find the information, sources and experts to back you up.

This is where some checks and balances like goals and metrics (imagine that…), strategy discussions with more people involved (not just CEO and board), and outside help (consultants and volunteers) can help. They can provide more objective points of view, new ideas, and differing statistics (even if they too are falling prey to confirmation bias, at least it’s a different idea they are seeking to confirm which can produce a positive discussion).

One nice little tip from Miller when it comes to confirmation bias is this:

One thing to ask yourself: How hard do you have to look for confirmation? For instance, if you’re in the market for a big dog that doesn’t shed and have to go deep into a reddit thread to find one person claim that her yellow lab doesn’t shed at all, chances are that 1) she’s a liar, and 2) that you really want a yellow lab.

Key point here, you should back up your ideas and strategies with stats and opinions, but be sure to remain open and if you are the only one leading the charge or have to dig real deep for confirmation, it may not be such a great strategy or idea.

5. The Gambler’s Fallacy

I recently learned how to play craps and while it’s a ton of fun, the Gambler’s Fallacy abounds. It is… “the mistaken belief that, if something happens more frequently than normal during some period, it will happen less frequently in the future…” and vice versa. So if a few sevens have been rolled in a row (generally a bad thing in craps) then you believe that there is a smaller chance of a seven being rolled again and may increase your bet. But every roll is a new and independent event where the odds of rolling a seven are the exact same and unchanged. Which means raising your bet based on that information is dumb. You’re so dumb Brady…

A perhaps imperfect application of this bias to fundraising is sending direct mail appeals or emails to people who have not given or opened/clicked for some time — like 3+ years. The Gambler’s Fallacy may lead you to have the view that they are ‘due’ to respond and engage because they haven’t for a while but, in reality, they are not any more likely. In fact, from all the data I’ve seen, they are actually much less likely to engage meaning you are wasting money, in direct mail, and skewing key metrics like click-through rate, for email.

We may fall prey to the Gambler’s Fallacy for things like response rates as well. We may assume that, if they are lower than normal, the upcoming emails or appeals will have higher response rates and bring the average back up. This ignores the possibility that your appeals and emails may not be as engaging anymore or your audience is getting fatigued — things that more appeals and emails won’t solve.

They key point here is that not all events have to average out over time. Assuming they will and betting that they will may not be a smart idea.

6. The Bandwagon Effect

We’ve all seen this with our favourite sports teams. As soon as they start to get good, a bunch of new ‘fans’ come out of the woodwork and are all of a sudden ‘die hard’ fans. This is the bandwagon effect but it can be applied to ideas as well. It is “…a phenomenon whereby the rate of uptake of beliefs, ideas, fads and trends increases the more that they have already been adopted by others.”

The idea that overhead ratios are useful, accurate, and worthwhile in determining the effectiveness and impact of an organization is a great (but terrible) example of the bandwagon effect. Someone determined this along the way and probably preyed on some other biases (like confirmation) to make their case. And as it was accepted (foolishly) it began to spread to the point where, still, it remains one of the first questions well-to-do donors ask and want to know.

That is an example of a bad bandwagon effect. In fundraising, I see this a lot with ‘best practices’ and ‘tools’ which may not be best practices or tools for all organizations. Or maybe they were the best practices and tools 20 years ago but that doesn’t mean that they still are today.

The key point here is that just because an idea, practice, or tool is adopted by a lot of people doesn’t mean that it is a good, or the best, idea, practice, or tool.

7. The Curse of Knowledge

I use this one a lot when I talk about writing and communications as the curse of knowledge makes it very hard for you, once you know something, to imagine a world where your audience does not also know that information. Jeff Brooks has a good post on this as well but the curse of knowledge is often the biggest issue in making fundraising writing and communications just plain bad.

You probably work for an organization you believe in that is solving a problem you care about. You also probably spend a lot of your day thinking, researching, and talking about this problem and your solution. So when you get around to communicating to your supporters and potential donors you kind of bypass some key information like why they should care, in general, and why they should care about you, specifically, and just talk about how cool your new program/campaign/idea is. But they don’t know what you know! And they care about your cause differently than you do!

I fell prey to this when I worked for Opportunity International — an amazing microfinance/development organization. I loved our solution (how we were solving the problem of global poverty) that I would skip the soft stuff, like stories, and not paint the bigger picture, like how many millions of people needlessly live in crippling poverty, and would focus on cell phone enabled agro-financing in rural Rwanda. That is only ‘cool’ or ‘relevant’ to people if they care about the issue and problem in the first place.

The key point here is that your supporters don’t know what you know — and why should they — so you need to be thinking about why they care and what information they need to be more engaged and take action. Not assume that it’s what you need or why you care.

So…

These are just a few of the biases we bring into our work and decision-making all the time. We all fall prey to these all the time and they are not always and unequivocally bad. But hopefully by knowing that they exist and recognizing some of their implications in your marketing and fundraising will be useful when it comes to strategies, communications, and your fantasy baseball drafts. Good luck!

This was originally posted on re: charity and can be found here.