Asking donors to cover credit card fees dramatically reduces conversion rates because it disrupts the flow of charitable thinking.
With the “digital acceleration” in our rearview mirror, everyone is thinking about how to improve their online fundraising. Suddenly, products like “RaiseDonors” and “FundraiseUp” “Donorbox” are household names for fundraisers. What was recently a largely unsophisticated undertaking—online fundraising—is improving by leaps and bounds.
Nonprofits today have dedicated landing pages for their fundraising campaigns. They are setting up drip campaigns for new donors. Direct response is increasingly “multi-channel.” This is all great news, and through all this growth, NextAfter remains an invaluable resource for fundraisers.
ALLOWING DONORS TO COVER CREDIT CARD FEES
As online fundraising increases, optimizing and improving donate pages on your website becomes ever more important (and beneficial). To that end, Jeff Giddens, NextAfter president, shared a valuable study about adding the option to have the donor pay credit card fees on your donation form.
Most donation software makes it very easy to turn this feature on and off. Your donation form can include a check box that gives the donor the option to pay the fees in addition to the gift they were planning to make. This option would add roughly 3% to the gift—a negligible amount in most cases—and is completely optional for the donor. Theoretically, it would help donors give more money, and in more ways, while feeling like they are helping the organization above and beyond their initial gift.
But the data does not bear out that thesis. It turns out that adding the donor-covers-fees option reduces the conversion rate, which ultimately leads to less revenue. At least, that’s what NextAfter found in experiment #82969. The option reduced the conversion rate by 38.5%, and while 60% of donors did cover the fees, the steep reduction in actual donors meant that revenue was down overall.
Those results may be surprising: why are so many donors so turned off by that option? They are there making a gift of $50, $100, or maybe more . . . why is a 3% addition such a turn-off?
DISRUPTING THE DONOR MINDSET
Giddens posed a hypothesis when he shared the study on LinkedIn. Giddens wagers that the fees option changes the donor’s mindset. That checkbox takes them from the “irrational” mindset of giving money away to the "rational” mindset where they consider the benefits of covering fees:
So, when you convince someone to say YES to giving their money away, it's an irrational action. It doesn't make rational sense.
Yet, on an increasing number of donation forms, I see a rational question right at the end of the donation process, RIGHT BEFORE people give.
This is a smart assessment of the situation, but I don’t think Giddens gets it quite right.
Giddens is right that the credit card fees checkbox changes the donor’s mindset, but the shift isn’t from rational to irrational. The claim that giving money away is “irrational” just doesn’t hold water. It doesn’t make sense from a religious perspective (by giving charitably we are becoming like Christ) or a sociological perspective (by giving charitably we benefit ourselves).
Charity, in short, is perfectly rational. It may be surprising, even miraculous, and it's certainly beautiful—charity is all of these things, and it's also rational.
So what is happening when the donor, just before clicking “Donate now,” has to decide whether to cover fees? The “mindset shift” that question provokes is a move from charitable thinking to transactional thinking. A donor makes a charitable gift because of the opportunity to advance a mission and be a part of a cause, a solution, a community that is bigger than himself. Your fundraising efforts are not tapping bad judgment (irrationality), but those efforts also aren't tapping into a tit-for-tat transactional equation.
In fact, the decision not to complete a gift that you were prepared to make simply because of the request to cover fees—that is an irrational decision. Few donors are unable to afford an extra 3% on top of their gift, and if they were inspired to make a donation, that marginal addition is a rational move; stepping away from the gift, on the other hand, is irrational.
But this disruption: forcing the donor to consider something else, to wonder about the transactional value of their dollar, to turn their attention away from the moving and exciting part of their giving—that disruption breaks the rational line of thinking and introduces the irrational decision to cancel the gift altogether. The solution is to keep the focus on the gift and on what they can achieve.
FOLLOW THE DATA
There are two key takeaways from this study. In the first place, the data speaks for itself: don’t offer the option to cover credit card fees on your giving form. Chances are, you’re just going to decrease conversion rates. (Or, if you’re able, run your own A/B test to see if the results are the same with your organization’s donors!)
Second, the problem of shifting from charitable to transactional should be borne in mind in all fundraising communications. Needless to say, there are other ways we could reduce a charitable relationship to a transactional relationship—and while it’s important to help a donor see what their giving will achieve, we must always keep in mind that their gift is just that: a gift.