How category reporting can improve fundraising

What is it about?

Many fundraisers publicise the donations they receive. In some cases the exact amount donated by each individual is published; this is common, for example, on donation websites such as JustGiving.com. In other cases donations are publicised using categories; to give some of the many examples: the University of Warwick sends its alumni a brochure containing a list of donors giving more than £1,000. The University of Glasgow’s donor wall has six category thresholds ranging from £250 to £10,000. Donors to the Royal Opera House are listed on the Supporters’ Board as Platinum, Gold or Silver Patrons with the fee ranging from £22,200 to £5,200. In the article we ask two questions: (1) Is it best to report the exact amount donated or to publicise donations using categories? (2) If donations are publicised using categories then what are the optimal category thresholds to use? We answer these questions using a theoretical model of giving that assumes people give, in part, to signal something good about themselves such as generosity or wealth. The reward for being perceived as generous is prestige, esteem or good will. To simplify the analysis we assume that there are two types of player who you can think of as generous, who intrinsically want to donate a lot, and not generous, who merely would like to appear generous. Our approach builds on previous empirical work that has shown that category reporting results in donations become highly clustered around category amounts. With this clustering effect in mind, consider the introduction of category reporting. To fix ideas, suppose that the names of all those donating £1,000 or more will be published. This can have three basic consequences: (a) Someone who was going to give, say, £800 increases her donation to £1,000. (b) Someone who was going to give £1,200 decreases her donation to £1,000. (c) Someone who was going to give, say, £400 decides to not give at all, because £1,000 sounds too much. With these conflicting effects it is not clear whether overall donations will increase or decrease. There is an inevitable trade-off between increasing the donations of some while decreasing the donations of others. So, how to maximize total donations? We first looked at the consequences of setting a relatively high category threshold. By high we mean an amount that only the more generous donors will consider giving. We demonstrate that a high threshold can increase donations. It does so by forcing generous donors to give more in order to earn the esteem and prestige that comes from having their donation publicly recognised. It turns out, however, that a high threshold is unlikely to be the best option. This became clear when we explored the consequences of a relatively low category threshold. By low threshold we mean an amount that many donors are willing to give, not just the most generous. A low threshold increases donations and typically increases them by more than a high threshold. The low threshold works by making the prestige and esteem that comes from public recognition more easily accessible. It consequently attracts many more donors. This somewhat dilutes the prestige from public recognition, but not enough to matter. A low threshold has another benefit, namely, it is less risky. More specifically, we demonstrate that a high threshold can lead to an unravelling of the incentives to give. Thus, even the most generous donors may choose to donate less than the threshold. Such outcomes are not likely with a low threshold. To put the results in context consider an example. Asking university alumni to donate £1,500 might be considered a high threshold. It may incentivise someone who would ordinarily have given £1,200 to give £300 more. But the threshold will not appeal to many and may even alienate the person willing to give £1,200. A low threshold of £200 is more affordable. It does nothing to incentivise the person who was going to give £1,200 but it can incentivise those who would ordinarily give £100 to give £100 more. Getting four people to increase their donation by £100 is better than getting one person to increase their donation by £300. The low category threshold works by a numbers effect – it appeals to more donors. Our results highlight the need to judge the merits of category reporting on two dimensions – how much donors give, and how many donors there are. The key attraction of a low category threshold is that it can increase the number of donors. If one focuses only on existing donors a higher threshold may look appealing. This, however, overlooks the opportunity that a lower threshold gives for attracting new donors. In answer to the questions that motivated our study we conclude: (i) Category reporting can increase donations but only if the category thresholds are set appropriately. The more uncertainty there is about the willingness of donors to give then the safer it may be to have many categories. (ii) If category reporting is used then it will typically be best to set low category thresholds. What constitutes low will depend on context and people’s willingness to give. In one context it may be £2 and in another £2,000 or £200,000. The logic, however, is always the same. A category threshold works best because it appeals to more people.

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