Purdue University held its second annual “Day of Giving” last week, breaking the record for the biggest single-day fundraising campaign in higher education. Purdue raised nearly $14 million dollars from over 9,500 gifts in just 24 hours. That’s nearly $60,000 every hour. I’m proud to call Purdue my alma mater!
How did they do it? Purdue used a number of proven approaches to both increase donations and make giving fun. You can see their results at http://dayofgiving.purdue.edu
Directed Giving Opportunities: When you give on Purdue’s Day of Giving, you can easily direct your gift to any number of different recipients. Your gift can go to a college, the Purdue scholarship fund, student organizations, or athletics. According to a recent research paper by SPI friends Catherine Eckel, David Herberich and Jonathan Meer, allowing higher education donors to direct their gift significantly increases donation amounts. We saw this at play at Purdue this week as well.
Reducing Hassle Costs: The interface to give was straightforward, and donors had the ability to select one or multiple units to send their gift. In a recent paper my colleague David Reiley and I have been working on, reducing hassle costs is key for increasing the number of people who give (there, we reduce hassle costs by offering payroll deduction, but the idea is similar).
Leaderboard: The Leaderboard is also important. Not only could donors direct their gift, but each participating unit at Purdue was ranked on the website in real-time based on total donations and number of donors. Units were ranked based on overall donations and on participation, creating a sense of competition among donors. We know from research in the lab that competition between teams generates increased effort – in this case, the competition starts with the Leaderboard and the increased effort is greater giving.
Matching Gifts: The Leaderboard didn’t just come with a prestige factor – Purdue put money behind each ranking. Units with the highest overall donations split a total of $100,000 in bonus gifts, depending on the share of donations; while units with the highest number of donors split a total of $50,000 in bonus gifts. Moreover, certain units offered additional matches – the Purdue Scholarship Fund was matching donations $1 for $1. SPI research shows that matches both increase overall donations and the number of donors, regardless of the size of the match. Related research by Steffen Huck and Imran Rasul suggests that the power of matches comes from signaling the value of the gift, and that some matches may actually crowd out donations. This is why bonus gifts combined with a Leaderboard might work quite well – since the final level of match is based on number/total number of donations, crowd out should be minimized. Read our summary of matches here.
Social Media: Social media was used before and during the event. Prior to the Day of Giving, Purdue, and each organization who participates contacted their alumni base for maximal exposure through e-mail, Twitter, Facebook, and Instagram. For example, I learned about the Day of Giving both from Purdue directly and from the Krannert School of Management, where I received my degrees. Spreading the word is important, but what came next is even more meaningful. After making their gift, donors were encouraged to share the fact that they gave, with a request for others to give, on their Facebook wall or Twitter feed. As SPI friends Ragan Petrie, Marco Castillo and Clarence Wardell will tell you, “Two main reasons why people donate to charity are that they have been asked and asked by someone they care about.” Ragan, Marco and Clarence’s paper provides some interesting data on how to maximize the power of friends asking friends, and you can read about it here.
I’m delighted to see all of these strategies used in combination. And looking forward to what Purdue comes up with for 2016!
Fundraisers know that some appeals work and others don't. Sometimes conventional wisdom offers answers about why, but are those the right answers?
Now, using the tools of a comparatively new academic field, we are learning exactly why some of that wisdom is right - and some of it is plain wrong. These studies lead to a better understanding of why people give again and again. The longer-term aim of scholars working on this research is to help charities raise more to accomplish more good in the world.
At the Science of Philanthropy Initiative, which I lead at the University of Chicago, we’re working with nonprofits to take the economic theory out of the university lab and test what works in the real world. Our approach involves an exciting area of study known as behavioral economics. Behavioral economics is not specifically about maximizing returns, although books like Nudge and The Why Axis show what works to increase how much people save for retirement or the number who enroll in health-insurance programs or adopt energy-saving technologies.
Mostly, though, what we look at is how people make choices - and how we can encourage them to make choices that benefit society.
Behavioral economics starts from the premise that behavior is not purely rational or entirely random. All of us operate within constraints while we seek any objective, whether it is picking a restaurant for a family dinner, finding a life partner, or making a gift to charity. There are limits on what we can do, so each individual balances (often unconsciously) personal aspirations within the environment.
Using the tools of behavioral economics, we gather data by combining experiments in the laboratory and work with nonprofits in the real world. . Each piece of research explores what happens when we change a specific fundraising approach. We alter the constraints for a given altruistic act and measure the change in giving. Or we alter the environment slightly to explore how different information changes the way individuals make decisions.
For instance, when we inform donors that someone will match their gift, they like the fact that they give just $100 for a charity to get $200. That is a nice one-time benefit for the donor and a good result for the charity, but it does not change the donor’s long-term motivations to give.
To change the person’s charitable objectives, you probably have to change how people view the charity or its beneficiaries. Many nonprofits use stories or pictures to convey the need and the capacity of an individual donor to make a difference. But just why do stories and pictures work? Are they all equal or are there approaches that help bridge the gap between the donor and the intended beneficiary more effectively?
In one of the projects the Science of Philanthropy Initiative supported, researchers Nichole Argo and Tamar Krishnamurti at Carnegie Mellon University worked with the nonprofit Benevolent to answer some of those questions.
Benevolent works with social-service charities to find people in need, vet the legitimacy of their desire for charitable aid, and then tell their stories using essays and video. Donors can go online to read about each individual and decide whom to support.
Ms. Argo and Ms. Krishnamurti found that contributions arrived more quickly when recipients appeared clearly in images (with good lighting and an uncluttered background) and showed their best appearance (good grooming and smart clothing choices). Donors gave more rapidly to recipients who narrated a story of personal crisis and specified a concrete need that, if fulfilled, would allow them to achieve a short-term goal. All of these aspects - a beneficiary's appearance, the story of that person's progress and specific need - help overcome the psychological distance between the donor and the recipient. An example is a man who sought $600 to buy the tools he needed to do carpentry and with that job he would support his family and help others.
Another way to change how much people give is to help them understand what other people around them are doing.
One of our other studies looks at whether donors seek to "avoid shame" (by giving even small amounts when charities publish a list of all of their supporters) or "gain prestige" (by giving higher amounts when only the top donors are listed).
So far, in the lab, we find that more donors give and charities raise larger sums when they share the entire list. Charities often publish the highest gift amounts, recognizing that for some donors, prestige is associated with making larger gifts. In some settings, publishing all gift amounts might help raise more. We do not know yet what the impact would be for very large donor lists, but we hope we can find a charity willing to let us test that theory.
Our work with charities shows repeatedly that incentives like tax benefits and matching-gift challenges matter to donors. Statements that remind donors that they "get" something for giving, even something intangible like a "warm glow," raise more money when compared with statements that focus only on the social good a charity can achieve with a donor’s money.
The research we do with nonprofits is not the same as a nonprofit organization’s A/B tests, although there are similarities. We set out to explore a very specific question and alter just one or possibly two conditions. This approach allows us to go beyond A/B testing and permits us to answer why A is better than B.
For example, research we supported explored whether a single line — "Warm your heart" or "Make Alaska better" - raised more. Because of the random selection of people getting each card and the careful design with only one line different in the two cards, Michael Price of Georgia State University and the team at Pick. Click. Give in Alaska could see clearly that the "Warm your heart" message lifted giving by raising the response rate and the average donation. We find repeatedly that donors do give more and are more likely to give when they are told they will benefit, even indirectly through their "warm glow" feelings.
Experiments work on a large scale, but before we do them we usually do our work in a more controlled setting.
In one of our projects, Szu-Chi Huang of the Stanford Graduate School of Business and Ted Raymond of Allegra Marketing (for the United Way) tested whether when we are surrounded by people who are younger than we are, we feel subjectively older and focus more on others’ welfare than on our own.
They found first in the lab and then in the real world that when people perceived themselves to be older than others around them, they gave more. United Ways and other nonprofits could apply this finding in their print materials, for example, using different text or pictures to highlight younger beneficiaries, volunteers, or even donors.
As we look at the next step in our work to increase how much people give, we realize we must look at impact. That is what major donors say they want, what all of us want along with the "warm glow" of doing the right thing.
We also wonder how we can apply the tools of behavioral economics to improve charitable-program effectiveness. With improved effectiveness, would donors give more? Could programs achieve more impact with the same in contributed funds? Might there be aspects of character development and motivations that can be supported in childhood that will help those children grow into more charitable adults?
These are big questions with a big stake for society. We look forward to bringing scholars and nonprofits together to find answers that are backed up by science, not just received wisdom.
Photo Credit: Jason Smith, University of Chicago
Left to Right: Orsola Garofalo (University of Copenhagen), Menusch Khadjavi (University of Kiel), Marina Schröder (University of Cologne), Anya Samek (SPI / UW-Madison), Roel van Veldhuizen (WZB Berlin), Boris van Leeuwen (University of Toulouse), Karina Gose (University of Magdeburg) and Kristina Bott (Norwegian School of Economics).
Last week, SPI friend and sub-award winner Uri Gneezy (University of California – San Diego) organized the 2nd annual Conference on Experiments in Policy. I had the opportunity to attend and learn about exciting new research conducted by fellow academics. I presented recent work with my SPI friend and co-author David Reiley (Pandora) on reducing hassle costs in charitable giving (more on that in a later post).
SPI was also pleased to award 7 travel awards to young researchers to attend the conference, including awards to Roel van Veldhuizen (WZB Berlin), Marina Schroder (University of Cologne), Boris van Leeuwen (University of Toulouse), Menusch Khadjavi (University of Kiel), Karina Gose (University of Magdeburg), Orsola Garofalo (University of Copenhagen) and Kristina Bott (Norwegian School of Economics).
The young researchers also presented their papers. Boris van Leeuwen (University of Toulouse) presented a study on how competition for status can affect contributions to public goods. The study was conducted in the laboratory. Participants decided on how much they wanted to contribute to a public good themselves and which contributions of others they wanted to use. The main take-away of Boris’ work is that when status is associated with the use of public good investments, people will compete to be the one who provides the public good.
For practitioners or policy-makers, Boris’ work means that emphasizing status can increase public good contributions. One possible way to do this is by making the number of users more salient, for instance by providing access statistics on online platforms. However, when status rents and/or groups are very large, competition may be costly to the group. In this case, competition can become so intense, that people overinvest in the public good. A good example would be more people than optimal working on a crowd-sourced website like Wikipedia. As far as I see it, a big problem that online communities struggle with is how to increase contributions by members – and so far, I don’t see too much ‘over-competition’ happening in the real world. In summary then, online communities should think about doing more to encourage competition in providing public goods.
Menusch Khadjavi (University of Kiel) presented his study on the adverse effects of transparency in public policy, a collaboration with co-authors Andreas Lange and Andreas Nicklisch from the University of Hamburg, Germany. Menusch’s idea was to conduct a laboratory environment mimicking a real-world setting to understand what kinds of policies deter embezzlement by beurocrats – where the money embezzled comes from voluntary contributions by citizens.
Menusch’ and co-authors’ study points out possible disadvantages of transparency in public policy when bureaucrats cannot be sanctioned (sufficiently). They argue that this may be the case in democratic and especially authoritarian states, e.g. due to inflexible government employment. Having a bad reputation as a bureaucrat may be accepted more easily if embezzlement is profitable and inevitably detected due to transparency, i.e. when hiding embezzlement is not possible.
Menusch concluded that for policy-makers, this means that there is a need to advocate good governance in which both transparency and accountability are introduced side-by-side, as transparency alone is not a sufficient instrument for fighting corruption - in fact, their study finds that transparency alone may undermine good governance.
It was great for SPI to fund these great researchers and participate in the 2nd Annual Conference on Experiments in Policy. If these talks sound intriguing, then be sure to put September 11-12th 2015 on your calendar, and come to the University of Chicago for SPI’s 3rd annual conference to learn more about the work our researchers are doing.