The Art of Raising Money

Recently the New York Times brought an article about new research concerning the economics of philanthropy. John List and Dean Karlan, both economics professors at the University of Chicago and Yale respectively, conduct real-world experiments in order to find out what works in philanthropy and what doesn’t.

One of the experiments concerned matching gifts, the idea that a donor agrees to match any gift, dollar for dollar or dollar for 2 dollars etc. The idea seems to work and is common practice in many fundraisers, but nobody really knows if matching gifts really are effective.

In order to find out, Karlan and List drew up different solicitation letters for a fundraising group. The letters were similar except for the part that mentioned (or didn’t mention) a match. In one letter they announced a dollar for dollar match, in another the match was increased to two to one, in a third one it was three to one. A control group received letters in which no match was offered.

What did they find out? The existence of a matching gift did matter very much, Thus 2.2 % of people who recieved the match offer made a donation, compared with only 1.8% of the control group, resulting in a 20% gap between the two responses. But surprisingly, the size of the match didn’t have any effect on giving. “Donors who recieved the offer of a one-to-one match gave just as often, and just as much, as those responding to the three-to-one offer.”

In another experiment, List set out to see whether donors cared about so-called seed money. In a letter to potential donors, they varied the amount of money that supposedly had already been raised for a cause. The results were striking: The more upfront money the charity claimed to have on hand, the more additional money it raised. When paired with the matching-gift research, the study suggests that seed money is a better investments for charities than generous matches.

Interesting stuff, no?


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