Acquisition: More On Counterintuitive Effects Of Premiums
Just to keep the pot boiling here’s a follow-up on my Premiums, Crack Cocaine and Nonprofit Suicide post that spawned some helpful comments.
I was particularly interested in the comments of readers with experience in public broadcasting, where the use of back-end premiums or ‘thank you’ gifts continues — after 30 or more years — to be hotly disputed.
As most public broadcasting viewers and listeners know, the stations’ periodic fundraising drives tend to employ modest rewards for their donors – contribute $50 and get a Car Talk mug, $200 for a Masterpiece Theatre DVD, etc. etc.
For years I’ve consistently — and clearly all too mildly — railed against the practice, believing that the intrinsic value of giving was in conflict with the extrinsic reward of merchandise/gift/goodies, call ‘em what you will.
The push back from premium proponents was/is that these benefits are a nice touch, certainly not a reason to give in the first place, but perhaps enough to upgrade the donor to a higher level.
Now comes fresh research revealing that these types of ‘gifts’ can actually reduce contributions.
In a paper appearing in the Journal of Economic Psychology, “The counterintuitive effects of thank-you gifts on charitable giving”, two Yale University behavioral scientists describe a series of experiments showing that, contrary to expectations, rewarding contributors cuts donations in most circumstances.
The Yale researchers who conducted the study, George Newman and Jeremy Shen, found that the most likely reason for the negative effect on contributions was “crowding out”. In essence, the prospect of receiving a gift activated a feeling of selfishness which, in turn, reduced altruism and consequently cut the average donation.
The key takeaway from this study is that promising donors a thank-you gift can be hazardous to a nonprofit’s income!
However, according to the researchers, there are approaches that can produce positive results!
There are several ways to reward donors that are far less likely to hurt donations, and which may even increase them.
- Reframe the Context. One experiment conducted as part of the study described the thank-you gifts not as rewards but as a means of furthering the charity’s goals. For example, a tote bag was said to have “our charity’s logo printed on the side, and when other people see the logo, it will raise awareness for our cause.” By making acceptance of the tote bag seem like a means of helping the charity, this description eliminated the negative effect on donations. BUT…it did not increase or improve donations.
Example: The fund drive script might read, “When you put this Car Talk mug on your desk, your co-workers will be so jealous they’ll want to support our station too! So, help us reach the people around you by donating at least $75, and then put your mug where everyone will see it!”
- Send a Social Signal. The paper does suggest that a gift that sends a social signal about the donor might have a positive effect. The authors cite previous work on this, and use examples like an invitation to an exclusive dinner or lecture, or membership in an elite group.
If you’re into neuroscience, evolutionary psychologists believe that altruistic behavior is a way of signaling ‘fitness’ to others, and thus, they argue, public recognition of donations is often desirable.
- Surprise the Donor. Since the “crowding out” effect occurs when the donor is thinking about the thank-you gift at the same time as the donation, a gift sent after the donation has been given obviously won’t affect that donation. This study didn’t look at the beneficial effects on subsequent donor behavior from such gifts, but it’s reasonable to expect that an appropriate thank-you gift might leave a positive impression with the donor without a crowding out effect at the time of the next solicitation.
Among the other findings (the headlines are mine, the analysis is quoted directly from the study):
Type of Gift, Type of Organization Not Important
“We observed this pattern across a wide array of different charities and types of gifts, regardless of whether the donations were hypothetical or real, the gift was desirable or undesirable, the charity was familiar or unfamiliar, or the gift was more or less valuable. Moreover, we were able to rule out alternative explanations for this effect such as inferences about the charity’s quality (e.g., either their efficacy or current wealth), the undesirability of the gift, or simple anchoring effects.”
Quid Pro Quo Is a Lousy Motivator
“With respect to previous research on incentives and charitable giving, it appears that making the gift conditional (rather than unconditional) appears to reverse any positive effects of gifts on charitable giving. Rather than increasing feelings of reciprocity … a thank-you gift creates ambiguity about whether one is donating to support the charity, or instead to receive the item. In turn, our data suggest that such external motivations seem to undermine or crowd out people’s intrinsic motivation to donate, resulting in lower donation amounts overall.”
Price, Monetary, Value and Other Factors
“Additionally, we observed that removing a reference price for the gift reverses any positive effects of non-monetary gifts on donation amounts. And finally, while we did find that non-monetary gifts reduced donations similar to cash, we did not find direct support for the hypothesis that external incentives reduce donations because they have a negative social signaling value to others. In the present studies we observed a negative effect of thank-you gifts on donations even in a private donation context. However, a failure to find such effects may be due to several differences in experimental paradigms. The present studies employed a single donation request while, [other studies], employed a task in which donations were determined by the amount of effort over time.”
On the One Hand This…On The Other Hand That…
“In sum, the overall spirit of this paper is by no means to suggest that thank-you gifts are universally bad. Rather, it is our aim to robustly demonstrate what we feel (and our data suggest) is a counterintuitive finding. In the current studies we chose to focus on one very specific context, which we feel is perhaps the most prevalent and direct way in which thank-you gifts are employed. This paper has systematically ruled out potential alternatives, while also providing support for a crowding out hypothesis. However, our hope is that, overall, these results may find their greatest value in generating further empirical interest into when gifts may or may not be useful, as the current studies suggest that charities may not always benefit from employing them.”
Given that last paragraph these guys might want to audition as consultants.
What’s your experience with ‘surprise gifts’?
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