Proving What Works in Fund Raising: Scholars Dispel Myths

Few fund raisers have heard of John A. List, a University of Chicago economist who has spent a career figuring out how charities can increase contributions and — in some cases — proving conventional fund-raising wisdom to be flat-out wrong.

But now, as the recession makes winning contributions harder than it has been in decades, fund raisers are beginning to take an interest in Mr. List’s work.

He has recently started working with charities such as the Smile Train, which has invited him and one of his students to help it experiment with different approaches to direct mail and phoneathons. They are testing varying scripts that callers use in an effort to maximize contributions. The charity hopes to expand free surgery to children in poor countries who suffer from facial deformities.

Mr. List is one of a growing number of scholars in economics, psychology, business administration, and marketing who are conducting research with the potential to change how charities seek money. Some of the researchers are motivated to study fund raising because of the rapid expansion and increased visibility of American charities. Others, like Mr. List, are intrigued that fund raising has become a thriving profession but one still based largely on anecdote rather than proof from rigorous, large-scale studies.

Abandoning Anecdotes

Scholarly research on fund raising is likely to expand in coming years. In 2006 the first endowed fund-raising professorship was created at the Center on Philanthropy at Indiana University. That position was filled by Adrian Sargeant, a British marketing professor and researcher who has studied fund raising in Australia, England, and the United States. The center also started the nation’s first Ph.D. program in philanthropic studies to produce a cadre of scholars capable of teaching and studying charitable issues. The first four graduates in the program, one of whom did her dissertation on fund raising, received their degrees last year.

“We’re moving from anecdotal to more scientific research and experimental approaches to test hypotheses” about giving and fund raising, says Patrick Rooney, interim executive director of the Center on Philanthropy.

The budding field of study is also helping to inform broader debates about giving. Peter Singer, a professor of bioethics at Princeton University, draws on some of the new fund-raising research in a new book in which he argues that people should give more — and explores the psychological underpinnings of why they do not.

Among some of the recent academic research with implications for fund raisers:

• Giving styles of men and women. At the University of Pittsburgh, Lise Vesterlund, an economist, and James Andreoni, another economist at the University of California at San Diego, designed an experiment to examine how giving by men and women differed as they played a game in which they were given money to allocate between themselves and a partner.

  The men and women were also given different amounts of money to match what they already had in their stash, and the more they received in matching money, the less they had to give from their own dollars to meet the requirement to give money to their partners.

  Men were much more generous than women when the matching donations reduced the amount they had to spend from their own stash. Women tended to divide the money the same way regardless of how much they received from the match.

  “This suggests that men are more likely to respond to incentives like tax breaks or matching gifts than women,” says Ms. Vesterlund.

• How a prize offer affects donors. A study with more than 12,000 blood donors invited to participate in a blood drive in Zurich found that donations increased among those offered a free lottery ticket, especially if they had donated blood infrequently in the past.

  The study by Lorenz Goette, an economist now at the University of Geneva, and Alois Stutzer of the University of Basel, found no evidence to back up a fear long held by Red Cross officials: that offering rewards increases the number of blood donors with diseases or other problems that make their blood unusable by others. The study found that the lottery offer didn’t make any difference at all in how many usable blood samples were donated.

• The appeal of exclusive events. Holger Sieg, an economist at Carnegie Mellon University, led a study that examined donors who had made gifts to 10 cultural institutions in Pittsburgh. The study found that donors who gave the most were wealthy individuals who had been invited to exclusive, high-profile events such as dinner parties and other special gatherings. “Individuals with high levels of wealth…place a much higher value on the private benefits associated with their giving,” says Mr. Sieg. Charities, he added, could raise more money by increasing the exclusive benefits they offer to wealthy people.
• The value of publicity. Several studies have suggested that donors give more when they know a charity plans to announce their contribution publicly. But revealing how much people give can backfire: If donors know other people will find out that they benefited personally from making the publicly announced gift, they are less inclined to give, according a study by Stephan Meier, a Columbia Business School scholar who did his research as an economist at the Federal Reserve Bank of Boston, with two university colleagues. In their experiment, college students were asked to give money but offered a choice of whether to publicize their gift or not. Their responses were compared with those from students offered a reward in exchange for a gift. They also had a chance to choose whether they wanted it known that they had received a reward for their gift. The share of people who made a gift increased among students whose gifts were publicly announced, but only if they were offered no incentive or one that no one else knew about.

  “Incentives foster donations, but sometimes they do not work so well,” says Mr. Meier. In the case of publicly announced gifts, he adds, “it is more effective to give an incentive that is private.” For example, in the case of a donor who gives $2-million for a building at a university, the public announcement of the gift should not mention the fact that the donor’s child was accepted at the university, says Mr. Meier. Such an announcement, he adds, would be a disincentive to that donor and others.

Like Mr. Meier’s work, much fund-raising research has been based on laboratory experiments that simulate charitable giving with games, surveys, or other methods in a classroom or other setting. But Mr. List at the University of Chicago and other researchers are increasingly inserting themselves (unbeknownst to would-be donors) into actual fund-raising campaigns.

That enables researchers to test different approaches among actual donors — and produce research that is more relevant for fund raisers.

“The lab stuff is useful in giving us some initial qualitative insights, but most of the time people are giving away money that is not theirs or not real,” Mr. List says. “After the first qualitative insight, it is important to test how well it works in the field.”

Giving Incentives

So Mr. List has made efforts to get outside the laboratory, and his results have sometimes proved that the principles fund raisers hold dear are erroneous. For example, fund raisers have long believed that matching donors’ gifts dollar for dollar will work even better if they can offer a better incentive, say $2 or $3, for every dollar donors give. But in a study of more than 30,000 direct-mail donors, Mr. List and his colleagues found that offering more-generous matches doesn’t result in bigger gifts than a dollar-for-dollar match.

“This result refutes the integrity of using larger match ratios and stands in sharp contrast to current fund-raising practices,” they wrote.

In another study conducted last year, Mr. List and four colleagues examined how different incentives for giving worked in a door-to-door fund-raising campaign and a direct-mail appeal, both seeking contributions for a new research center at East Carolina University, in Greenville, N.C. Some of the donors in both groups had been previously solicited for the same purpose.

All of the would-be donors were divided into three groups: people simply asked to make a donation; those offered a bookmark as a token gift; and others offered a “large” gift, a copy of Freakonomics, the popular book on economics.

When people were asked for money and not offered any gift, those who had given previously tended to contribute more. In the door-to-door drive, for example, such donors were nearly 20 percent more likely to give again, and their average gift was twice as large as contributions from first-time donors.

But among donors in the study who were offered the book, first-time and repeat donors behaved similarly. In fact, the book prompted first-time donors to give more — and more often than in other situations. The smaller token prize — the bookmark — didn’t produce any difference at all in giving patterns.

That result led the researchers to conclude that when a charity can offer would-be donors something they might value, such as a book, it is better to approach as many donors as possible, regardless of whether they have given in the past. But when charities cannot offer such a prize or other incentive, fund raisers would do better to focus on previous donors.

Mr. List is conducting several other real-world tests, some suggested by charity officials. For example, he is doing research for a Wisconsin technical college that wants to know if it is wise to move away from focusing on asking wealthy donors to make large gifts in exchange for putting their name on a classroom. Mr. List will see if the university can raise the same amount or more by asking donors of more modest means to give $500 to $1,000 to buy a ticket in a lottery. The winner of the lottery will have a chance to name the classroom.

Radio Fund Raising

As a leader in fund-raising scholarship, Mr. List pauses for a moment when asked who he most admires among other scholars pursuing fund-raising research. “Jen Shang,” he says finally.

Yue (Jen) Shang, a Chinese psychologist, was the first person to earn a Ph.D. in philanthropic studies from Indiana University’s Center on Philanthropy last year, with a dissertation describing her studies to figure out how to increase giving by donors to public radio stations.

Part of Ms. Shang’s research examines whether people who donate in response to on-air pledge drives will contribute more when they are given details about other donors’ gifts.

For her first experiment with donors, Ms. Shang determined the average, median, and highest gifts to pledge drives by an East Coast public radio station. Then she tested whether telling donors about the amounts other people gave would have any effect on their donations, either to the next pledge drive they heard on the air or over the following year. Ms. Shang told some donors that a previous caller had donated $75, others that the caller had donated $180, and others $300. Some were told nothing about the previous caller.

Donors told of the $300 gift make the highest average contribution, Ms. Shang found. In fact, donors who received information about any amount given by another person were 23 percent to 32 percent more likely to make a repeat contribution in the following year than were donors who received no such information. What’s more, people who learned of another donor’s contribution gave higher average amounts ($93.97 to $121.12) than those who did not ($86.11).

In another test, Ms. Shang sought to find out whether contributions would increase if donors were told about a person of the same gender who made a gift that was 5 percent or 10 percent lower than the highest gift made in another pledge drive. She took that route because her studies have found that telling donors about others who gave the largest gift in a recent drive leads them to give less. She says an overly high amount seems to scare off people who feel like they can’t compete in the same league.

In the gender study, Ms. Shang compared how donors reacted to the news that a $240 contribution was made by a person of the same or opposite sex. Those told of the gift by a same-sex donor contributed more, $141.88 on average, than the $105 average among those told of the same gift by the opposite sex.

Ms. Shang has estimated that public radio stations could raise $65-million more nationwide each year by applying her findings. She has been invited to speak at public-broadcasting conferences about her research, and she says that some public-broadcasting groups have expressed interest in getting her to train them in using her ideas.

A few stations, she says, have already started to use appeals that describe other donors who have made a larger-than-average gift — although Ms. Shang is frustrated that they have been unable to gauge whether the change leads to higher returns.

If Ms. Shang’s dissertation suggests ways to raise more money, it also reflects her strong interest in the social and psychological factors that make people behave in certain ways.

Now, with her doctorate in hand, it may be possible for her to blend those interests in a new research profession.Says Ms. Shang: “I want to be the first philanthropy psychologist.”