Studies Detail How Operating Costs and Grim Statistics Affect Donor Behavior

Two new studies shed light on donor behavior and may help fundraisers improve their success rate.

The first study provides insight into the impact of administrative costs on donor decisions. Another study provides fresh academic support for the notion that powerful stories may be better at spurring gifts than overwhelming statistics.

Operating Costs

In the first study, people who were told that all of the administrative expenses for a group they’d been asked to support had been covered by another person generally were willing to give much more than those offered other enticements, like matching gifts.

Some nonprofit leaders were quick to criticize the study, saying it contributes to a widespread but misguided notion that low or no overhead is desirable, when fundraisers and their organizations should educate donors about the necessity of supporting adequate administrative costs. But Uri Gneezy, a University of California at San Diego economist who led the study, said the research he did with two colleagues was simply an effort to understand what motivates people to give.

Mr. Gneezy and his colleagues gave 449 undergraduates the chance to give $100 to one of two charities, along with a variety of overhead scenarios.
With the first charity, the students were told there was no overhead and 100 percent of their gift would go to the organization’s charitable work. For the second charity, different groups of students received differing information about overhead expenses, including scenarios in which other donors paid some overhead expenses.
Taking the donor’s payment of overhead out of the equation entirely made a big difference, the researchers found, with students far more likely to make a gift when told that none of their donation would be used for administrative costs.

In a second part of the study, the researchers mailed an actual solicitation to 40,000 people from a nonprofit educational organization, which was not named in the report. The recipients were people who had given to similar groups in the previous five years.

Differing groups of solicitations were sent, with varying overhead scenarios. The appeals asked recipients to make donations of $20, $50, or $100.

Once again, eliminating administrative costs was a powerful motivator. For example, respondents were 80 percent more likely to donate when all of the overhead was covered by someone else than they were in response a solicitation stating that another person had provided a “seed fund” of $10,000, half of what the organization was seeking.

Also, those who were pitched the no-overhead scenario were 94 percent more likely to give than a group enticed by a matching-gift offer.

The mailings containing the no-overhead offer raised $13,220, or 64 percent more than the $8,040 given by the control group.

Mr. Gneezy said he hopes the research will encourage nonprofits to understand donors and help them find fundraising methods that work.

“Try to educate people about overhead, but don’t tell them they are wrong,” he said. “Find a solution people are happy with.”

Story Power

In another study, one group of participants was told about a starving young girl in a developing country and shown her picture, with no additional information provided. A second group was shown the same photo and given statistics about millions of others suffering from starvation. The group given the extra statistical information donated about half as much as the other group.

People who were shown a picture of one child who could be helped and photos of other children who could not be helped were also less generous than those invited to help a single child.

Competing Feelings

Paul Slovic, a University of Oregon psychologist and one of three researchers who conducted the study, said donors’ decisions reflected a competition between feelings. The warm glow of helping others is lessened by depressing information about others who can’t be helped.

“Even our best efforts cannot help everyone in need,” the researchers wrote. “Thus, it would be unfortunate indeed if we let this ‘incompleteness’ deter us from accomplishing what is within our grasp.”

The researchers suggested “teaching individuals to be compassionate and helpful through moral arguments.” For example, as the work of philosopher Peter Singer suggests, nobody would hesitate to rescue a drowning child just because another child out of reach was also drowning.