Study shows donor incentives don’t always mean more charitable giving

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Published: Aug. 14, 2020 at 5:41 PM CDT
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LAWRENCE, Kan. (WIBW) - A University of Kansas study shows donor incentives may not always mean more charitable giving.

The University of Kansas says one of the most common ploys used by charitable organizations is the “coin trick” in which charities often send money in donation request letters in order to inspire recipients to give back.

KU says a new study it has conducted looks at whether this strategy proves effective.

“There’s a big thing in marketing called reciprocity. And that means if I give you something — even something small like a free sample – then you’re more likely to comply with my request,” said Yexin Jessica Li, associate professor of business at the University of Kansas. “This might be the case with a for-profit business but not for these charities.”

Li says her article, “Coins are Cold and Cards are Caring: The Effect of Pregiving Incentives on Charity Perceptions, Relationship Norms, and Donation Behavior,” appears in the Journal of Marketing.

Li says she co-wrote the study with KU AT&T Foundation Professor Surendra Singh and recent doctoral graduate Bingqing “Miranda” Yin, whose dissertating integrates the content, the article is based on seven studies, including two field experiments. She says she admits to being surprised how incentives affected donors.

“It’s not as simple as incentives are good or bad,” she said. “It’s more looking at what the goals of your organization are and seeing if a pregiving incentive (PGI) aligns with the goal. For example, we initially thought it would be a waste of money to send both monetary and non-monetary incentives. And what we found repeatedly is that people, on average, donate less after receiving a monetary incentive, compared to receiving no incentive.”

Li says the study found that if the primary goal of the campaign is to maximize contributions of each donor, results show monetary PGIs actually decrease the amount given. She says non-monetary PGIs perform about the same to no incentives, and somewhat better than monetary ones. She says results also show a PGI makes people see the charity as less communal and more focused on money, harming donations.

According to Li, if the goal of the campaign is to help charities gain visibility and raise awareness, sending money appears to be a good strategy. She says one of the studies showed it pushes recipients to both open the letter and read it.

Li says she is now in her eighth year at KU and is constantly receiving pregiving incentives from charities.

“Sometimes organizations will send a nickel, but sometimes they’ll send a check,” she said. “I’ve gotten a check for $2 or $3. I’ve gotten a really wide variety of non-monetary incentives as well. The Humane Society and ASPCA — which I tend to donate to — have sent calendars, cards and a couple pairs of socks with my donation request.”

Li says she believes charities are always trying to one-up each other through the amount and type of gifts they send.

“The highest sum I’ve seen is a $5 check. At an individual level, that doesn’t seem like a lot. But if they’re sending these letters to tens of thousands of people, you can imagine how the cost will add up for organizations,” she said.

According to Li, the approach does not look like it will fade any time soon, especially since the COVID-19 pandemic has disrupted in-person fundraising.

“Charities find this to be a relatively effective and economical way of fundraising, even though a lot of people throw away their mail,” Le said. “It might just have something to do with the demographics of those who tend to donate. They are more comfortable and more used to donating through the mail than younger millennials.”

Li says her research focuses on the interpersonal reasons for consumer behavior. She says she is also interested in the nonprofit sid of such behavior, which can prove quite different.

Ultimately, Li says she hopes “Coins and Cold and Cards are Caring” can help charities save resources and achieve goals in the most efficient way possible.

“There are a lot of people who need help, and some charities are being spread quite thin in our current climate,” Li said. “Most rely on individual donations. We would like them to be able to use this research when making these critical decisions about fundraising.”

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