Donor Giving Increases With Incentives That Appeal to Sense of Social Status
PITTSBURGH, March 16, 2009 — When it comes to donor giving, what triggers big spending are benefits that convey social status and offer visibility through opportunities to connect with other affluent and influential people, according to new research from the Tepper School of Business at Carnegie Mellon University.
Exclusive or high-profile benefits, such as invitations to dinner parties and other special events, are by far the strongest incentives for donors to support charities, above and beyond the so-called "warm glow" of giving. The study analyzed donor and related demographic data for 10 of Pittsburgh's largest cultural and environmental organizations, unearthing compelling evidence that appealing to donors' sense of "status" is essential for effective fundraising.
"Individuals with high levels of wealth or who tend to support political candidates -- people who may have greater incentive to seek occasions for social networking -- place a much higher value on the private benefits associated with their giving levels," said Holger Sieg, professor of economics at the Tepper School and co-author of the study. "These individuals are key to the sustainability of nonprofit organizations, so it is more important than ever to appeal to what motivates such donors to give."
For the study, Sieg and co-author Jipeng Zhang of the University of Pittsburgh compiled a list of donors from 2004-2005 for 10 prominent nonprofits in the Pittsburgh metropolitan area, including the Ballet Theater, Children's Museum, City Theater, Pittsburgh Opera, Phipps Conservatory, Public Theater, Pittsburgh Symphony, Western Pennsylvania Conservancy, and Zoo and PPG Aquarium. The data was analyzed using a methodology never before employed in philanthropy research: one that classified individual tiers of giving as "prices" associated with different bundles of benefits.
Exclusive Benefits Have Big Impact
Sieg and Zhang also simulated the potential effects if the organizations were to change their donor benefit strategies. For example, adding one dinner party for donors in the highest tier of giving for the Carnegie Museum, the largest organization in the data sample, would raise an additional $197,425 annually. But the Children's Museum, a much smaller organization with a lower profile, would gain only about $11,019 from an additional donor event. According to the researchers, this variation underscores the power of a charity's status in the community as a central influencer of donor contributions.
