November 16, 2017; The Conversation
Laura Gee, Ph.D., Assistant Professor of Economics at Tufts University, researches how individual giving is influenced by group dynamics. The Conversation shares news and opinions from the academic and research community. In this article, Dr. Gee shares her findings having to do with matching funds, whether they “really make people more likely to give.”
Gee begins by citing two studies that affirm the effectiveness of matching gift funds, here and here. She notes research showing that matching gifts of whatever ratio make little difference and other research showing that challenge gifts, not matching gifts, positively influence giving.
NPQ regularly examines this fundraising practice, from challenge gift drives and corporate matching gifts in general, to how these giving incentives work (or not) with journalism (and here), building endowments, getting out the vote, and strengthening cultural institutions.
Sharing the results of her recent research, conducted with the help of Mike Schreck, Ph.D., of the Analysis Group, Gee concludes that the appeals “that make potential donors feel that their gift is a key part of what it will take to unlock that extra money work best.” Gee calls this “making people feel important.”
Gee and Schreck worked with an “educational charity” that requested anonymity. The nonprofit’s prospects randomly received one of five letters ranging from offering no match, the traditional $1: $1 match, to being informed that matching funds would be released only if three donors contributed.
Only 1.59 percent of the prospective donors who got the control-group letter with no match made donations, the lowest rate. The second-lowest donation rate was for those who got a letter requiring one person in 10 to activate matching funds, at 2 percent, followed by a 2.34 percent rate for the people promised an unconditional dollar-for-dollar match. The donation rate among prospective donors told that gifts from two in 10 would do the trick was about the same, at 2.35 percent.
For the people told matching funds would require three donors, the donation rate stood much higher: 3.68 percent. That surprised us because we thought the higher goal would discourage donations. Instead, potential donors seemed to be reacting to our raising the bar by themselves rising to the greater challenge. It’s possible that as the goal rose, people felt more needed and so were more likely to give.
There is likely no facet of fundraising studied more often and thoroughly than direct mail, given its responsiveness to randomized testing and the countless choices involved, from mailing list selections and package design to the appeal itself, such as including a matching or challenge gift incentive. Consequently, research like Gee’s can prompt recollections of your past mailings stamped so deeply on the psyche that her new findings feel remembered. But in fundraising a long memory is not always expedient. Society is always changing and this research in the behavioral economics of giving is a gift to our sector.
Gee makes a statement in passing that is worth mentioning here.
Everything we told potential donors was true. There was indeed a generous person who promised to make those matches if the various thresholds were met, along with dollar-for-dollar matches if that’s what a donor’s letter told them would happen across the board.
“Everything we told potential donors was true.” That Gee felt the need to make that statement deserves its own analysis. Do we need to be reminded that integrity always matters? How many nonprofits simply ask a donor who was going to give a big gift anyway for permission to misrepresent it as a matching grant for fundraising purposes? When a challenge or matching grant goal is met, how many nonprofits inform all subsequent donors of that fact with the option of reconsidering giving their gifts with no special incentive? How many nonprofits fully understand that while direct mail is primarily a tool for acquiring and cultivating the “small gift” donor, that some of these people might become major donors? From beginning to end, integrity matters at all levels of fundraising because we are stewards of people’s philanthropy, because we are asking donors to trust us.
Perhaps another key insight Gee offers is that economics can be passionate. Revelatory discoveries about how incentives work can change the way we think about and take action for the sake of our causes. We do not need to rely on assumptions. We can find out what works today, what motivates people to give and why.—Jim Schaffer