What we’re learning about philanthropy
- November 26, 2014
- CBR - Behavioral Science
What we’re learning about philanthropy
Former US President George W. Bush accepted the ALS Ice Bucket Challenge. Leonardo DiCaprio, Mark Zuckerberg, and Kermit the Frog joined in. UK Prime Minister David Cameron and US President Barack Obama paid to avoid it.
The informal fund-raising campaign to fight Amyotrophic Lateral Sclerosis, in which participants posted online videos of themselves being doused with a bucket of ice water, went viral after Chris Kennedy, a golfer in Sarasota, Florida, reportedly poured ice water over himself in the name of ALS because his wife’s cousin’s husband had been diagnosed with the disease. Kennedy nominated his cousin-in-law to do the same. She filmed her drenching and posted the video to Facebook to challenge her friends.
By September 2014, the Ice Bucket Challenge had raised more than $100 million from 3 million donors, an unprecedented sum that dwarfed the $2.8 million received during the same time period the previous year.
There are more than 1 million charities in the United States alone, all competing for donations. But raising money is expensive: bringing in $300 billion in a year requires spending $50 billion, on average, on costs such as employees, posters, and postage. One key to improving charitable funding is to increase that donations-to-expenses ratio.
And there’s a way to do that with little up-front time or cost, according to Christopher K. Hsee, Theodore O. Yntema Professor of Behavioral Science and Marketing at Chicago Booth, and his collaborators, University of Oregon’s Jiao Zhang, University of Wisconsin’s Zoe Y. Lu, and Xian Jaotong University’s Fei Xu.
Their research combines two well-documented psychological effects—scope insensitivity and scope consistency. Scope insensitivity refers to people’s inability to grasp the magnitude of a problem when the problem is presented alone. For instance, it can be difficult for a prospective donor to figure out how much it costs to help one person overcome breast cancer, as opposed to how much would be needed to help a group of breast-cancer patients. “When asked how much to donate to help one victim or how much to donate to help 10, people would give roughly the same amount,” says Hsee.
But “if asked how much to donate to help one victim, and how much to donate to help 10, people would give more for 10 than for one,” says Hsee. That’s due to the other psychological phenomenon Hsee and his colleagues build on—scope consistency, whereby people crave mathematical consistency when making comparisons.
Using these two effects, the researchers devised what they call “unit asking.” “Suppose there are 10 victims in need of help,” says Hsee. “We propose that first asking donors to think hypothetically about how much they would donate to help one of the victims, and then asking them to decide how much they would actually donate to help all 10 victims, will elicit more total donations from the donors than if directly asking them to decide how much they would donate to help all 10 victims.”
Experiments suggest this two-step approach has a big impact. The researchers asked participants in one study to imagine being solicited to help a school buy Christmas gifts for the children of low-income families. When they asked participants to consider how much they’d give to the entire group of children, the participants gave $18, on average. But when researchers asked participants to first consider how much they would donate to one child before considering the class as a whole, donations rose to an average of $49.
The method also worked when applied, in a field test, to a company’s internal fund-raiser to buy school supplies for students in a rural, earthquake-stricken region. Using the unit-asking method, fund-raisers saw donations increase by nearly 70 percent.
The method works best, says Hsee, if charities indicate a specific number of people in need—saying, for example, “30” rather than “many”—to give potential donors a better sense of the scope of the situation.
Unit asking belongs to a growing repertoire of “nudging” strategies that use subtle psychological effects to influence people’s behaviors. Employing the method in online fund-raising, through direct mail, or at live fund-raising events has the potential to hugely increase donations.
Another nudge that could help increase donations: set different default amounts. Defaults are often used in areas where people may be unsure of what to do. In 401(k) planning, companies may provide default paycheck deductions, and when it comes to organ donation, the default presented is typically an agreement to donate. “Small changes can impact people’s choices, especially for people who aren’t sure what their actual preferences are,” says Oleg Urminsky, associate professor of marketing and Charles M. Harper Faculty Fellow at Chicago Booth, who is conducting research with Booth PhD student Indranil Goswami.
Urminsky and Goswami are finding that setting higher default donation rates can sometimes increase giving. The researchers invited participants to take an online survey for which they’d be entered into a lottery with a potential $20 payoff. They asked participants if they’d like to donate a portion of their potential winnings—from 25 cents up to $19—to a particular charity. The higher the default, the more the participants were willing to donate. But when offered low defaults, participants gave 10 percent less than others who weren’t offered defaults.
For people who are already planning to donate, Urminsky says, higher defaults have an anchoring effect, “where people tend to choose options similar to what they start off thinking about, because confirming evidence about why an option is a good idea comes to mind more easily.”
But for people who are undecided about whether to donate, the default functions more like a suggestion to donate. The challenge is knowing at what level to set that suggestion, as a too-high amount could alienate people. “If they’re not chosen carefully, defaults might actually reduce donation by reducing the number of people who donate,” says Urminsky. “So there’s a delicate tradeoff. It’s a more complex policy prescription than just, ‘use defaults.’”
The University of Chicago’s John A. List, principal investigator of SPI, had similar findings, in a project with University of Chicago graduate student James Edwards. Presenting potential donors with a default amount can increase the number of people who give, but may also pull the average donation down to the suggested amount for those who might have given more. “The trick is understanding what people would give on their own,” List says. “Once that is understood, the suggested amount can enhance contributions.”
People like to help others out, but they don’t like to think they’re losing something in the process. So framing supporters’ involvement as helping, rather than giving, can increase what people will do for the charity and how meaningful the involvement feels.
Giving and helping rely on two distinct psychological processes. Some studies have discovered that altruism—acting purely to help others—is not a particularly important motivator for adults. In the lab, for example, when asked to dole out a pot of money, most only give 10–30 percent of the total away, and this number goes way down when controlling for ulterior motives. Some psychologists even argue that if we were to ignore social pressure to give, donations would fall to zero. Helping, on the other hand, feels a lot better than giving. And unlike giving, it has been linked in studies to a range of positive effects, from better physical and mental health to a sense of meaningfulness.
Booth graduate student Adelle X. Yang, working with Urminsky and Hsee, teased apart how people’s desire to give, and their separate desire to help, impact their donations.
The research team conducted a study in which participants fished coins out of a bowl. They asked one group to perform the task for charity, and they asked another group to perform the task for themselves, but with the option of giving any money they made to charity. The first group was essentially tasked with the option of “helping” a charity through their actions, and the second with the option of “giving” money to the charity.
“We expected them to work harder to earn money for themselves, particularly since they could also donate if they wanted to,” says Urminsky. “So it’s surprising that we found the same thing over and over again: that people actually worked much harder for charity.”
People preferred to help the charity rather than simply give to it. More evidence of that: in a related experiment, the researchers again asked a group of participants to do a task for charity—in this case to punch holes in a card, for 1 cent per hole punched—but they told these participants that others in the same situation had received the option of keeping the money for themselves. This time, people doing the task for charity seem not to have worked as hard, as they punched fewer holes than those not told of an alternate situation. Did priming them to feel selfish drown out their selfless impulses? “In a sense,” the researchers write, “the ‘warm glow’ shines brighter on its own—once self-interest enters into consideration, the cold glint of gold can outshine the ‘warm glow.’”
Other research has found that self-interest rears its head as monetary stake’s get higher. Carnegie Mellon’s Alex Imas found, as Urminsky did, that people are initially more willing to undertake tasks for charity than for themselves. But when the amount at stake—either to be donated or kept—grows, people work much harder for themselves.
Knowing what the payoff is ahead of time influences whether people choose to work for themselves or for charity. When study participants were told they’d either be working for high or low stakes, and then were asked whether they wanted to keep or donate the money they earned for participating in the study, people in the high-stakes group chose to work for themselves more often, while those in the low-stakes group chose to work for charity.
“I found that people work harder for greater incentives when that money goes to them directly, but do not respond to an increase in incentives when the cash is donated to charity,” says Imas. “This results in a pattern where at low incentives, people work harder for charity; at high incentives, they work harder for themselves.”
He also points out that the study is good evidence for warm-glow motivation, where people give because giving feels good, not to achieve a better outcome for the recipients. One implication of warm-glow giving: when the stakes grow larger, people work less hard for charity.
The message for fund-raisers may be that it’s important to keep the notion of helping at the forefront. Urminsky says whatever you do, don’t frame the act of donating as a monetary sacrifice. “If I can just do it without thinking about what I’m giving up, it’s much better.”
If keeping selfish thoughts at bay is one important factor, a related aspect of that is removing the “self” from the donation equation, or manipulating how we view it. Daniel Bartels, assistant professor of marketing and Neubauer Family Faculty Fellow at Chicago Booth, and his collaborators, Trevor Kvaran and Shaun Nichols from the University of Arizona, asked people how much they felt their life and identity would change over time. Then they asked people how much of a bonus payment they’d want to donate to the Save the Children foundation. People who anticipated a lot of personal change over the next year were more charitable with future funds—bonus payments slated to be received in a year—than people who felt they’d be largely the same.
In other studies, the researchers manipulated how much personal change the participants could anticipate by having them read studies about how personalities either change or remain stable over time. People induced to believe that people change over time were more likely to give future funds—paid out in a year—than people induced to believe personalities remain stable. And people who anticipated feeling more connected to other people in the future, as opposed to their future selves, were also more likely to donate. “For example, if I think I’m more connected to Jane now than I am to myself in 30 years, then I’ll be more likely give more to Jane now,” says Bartels.
Asking people to think about the future self is a recurring theme in Bartels’s work, and in this research, thinking about personal change diminishes the role of self-interest and, thus, helps people act on their other, more selfless values.
Bartels suggests that foundations could ask potential donors to think further out: “Either placing an allocation out in time, or suggesting to people that their future self is, in some sense, not exactly like their current self might potentially increase people’s willingness to give these future funds away to others.”
Abigail Sussman, assistant professor of marketing at Chicago Booth, along with Eesha Sharma of Dartmouth College and Adam Alter of NYU, finds that minor differences in the way a charity frames its donation plea, as either a regular occurrence or an exceptional one, can make a big difference in how likely people are to donate.
When it comes to everyday budgeting, people have a difficult time seeing some expenses, such as birthday presents, as fitting into any one category of expenses. Sussman finds that this makes people spend more on those items—if something doesn’t fit neatly into an existing budget category, people are more flexible in terms of how much they’ll spend on it.
In the context of charitable giving, the researchers altered the wording in online ads for the Alzheimer’s Association’s annual charity walk, so that one ad read, “Held annually for Alzheimer’s,” while another read, “Only once a year for Alzheimer’s.” The first indicated the walk was a regular occurrence, while the second indicated it was an exceptional event.
People were more likely to click through and donate for the latter, when the walk appeared to be an exceptional rather than a regular occurrence. Follow-up studies showed the same phenomenon, and when participants were queried about their budgeting process, “people reported being less likely to consider the impact on their budget when the event seemed to be exceptional,” says Sussman.
These findings support a fund-raising strategy different from the “pennies-a-day” strategy, which encourages people to give a very modest amount on a daily basis, rather than a larger amount all at once. This daily breakdown works well when the total can be divided into small amounts that people essentially round to zero, says Sussman. But it is generally ineffective for larger sums. For those, framing the donation as a one-off occurrence may be more productive.
Since charities rely on continued donation, how exceptional can each event seem over time? Sussman suggests that when trying to recruit new donors, highlight what is new and unlikely to recur. If you find yourself promoting an annual charity walk for the 27th time, for example, consider highlighting a particular band that will be performing during the event.
Thomas Piketty, the Paris School of Economics professor whose Capital in the Twenty-First Century was an unexpected best seller, argues that we’re living in a second belle époque. Concentrated wealth has created a new class of philanthropists, some of whom have signed a pledge to give away their fortunes during their lifetimes. But unfortunately for fund-raisers, that may be an anomaly: some research suggests that wealthy individuals are less likely than people with moderate incomes to donate money. A report released in October from the Chronicle of Philanthropy provides more supporting evidence of that: the Chronicle found that Americans earning $200,000 or more annually reduced the share of income they donated by 4.6 percent from 2006 to 2012, while Americans earning less than $100,000 raised theirs by 4.5 percent.
Having more money—or even just thinking you have more money—has been linked to less giving. One study in the journal Science found that participants who had been primed to think about money, by unscrambling money-related words and phrases, doled out smaller portions of a pot of money to charity than those who hadn’t been primed. Another study by researchers from the University of California, Berkeley, and the University of Toronto found people of higher socioeconomic status tend to believe in donating a lesser percentage of their annual salaries than people of lower socioeconomic status.
This phenomenon can be manipulated: when people who had less were induced to feel wealthier, they then believed in giving away less of their salaries. This may be because wealth, or the sensation of wealth, generates a feeling of autonomy and self-sufficiency, or what behavioral scientists term “agency,” suggest Eugene M. Caruso, associate professor of behavioral science at Chicago Booth; University of British Columbia’s Elizabeth W. Dunn; and University of British Columbia graduate student Ashley V. Whillans. They say this feeling of agency may make a person less likely to think about others, and therefore less likely to donate to charity.
Since charity is fundamentally a community-focused activity—for the good of society—the idea that wealth may be linked to the absence of community-mindedness creates a hurdle for charities.
Caruso and Whillans suspected that if they pitched the “ask” differently, things might change. The pair looked at how wording influenced giving among people with average and above-average wealth. One set of ads contained the text, “Let’s Save a Life Together. Here’s how.” Another read: “You=Life-Saver. Like the sound of that?” Wealthier people were more likely to give when they were shown the second type of ad, which suggests a sense of agency may be more important for this group of people. “While it’s very natural for charitable organizations to emphasize how we want to work together to solve a problem, this might backfire among higher-income donors,” says Whillans. “Our studies provide suggestive evidence that they might want to emphasize a donor’s individuality instead.”
This differs from Bartels’s finding that fund-raisers could benefit from taking the self out of the equation. Perhaps for wealthier people, it’s more important to highlight the sense of self, rather than diminish it.
Other research finds that individuals—of all income levels—may donate money to gain prestige and win accolades from their community. A recent study by SPI’s co-investigator Anya S. Samek of the University of Wisconsin-Madison, and Roman M. Sheremeta at Case Western Reserve University, found that people will donate more money when their names and pictures are made visible to others—even if there’s a small likelihood anyone will see those names and pictures. This suggests that even a slim chance of recognition is enough to make a person want to donate.
And the doppelgänger of prestige, shame, is also a powerful motivator. In the same study, the researchers looked at what would happen when people were told only the group who donated the least would be recognized. This threat of public shaming was just as effective at increasing donations as the promise to recognize all donors, leading the authors to conclude that “shame is a greater motivator than prestige in this setting, and that the risk of being identified is sufficient to increase contributions.”
Whether charities should use this phenomenon is a delicate issue, since it wouldn’t be practical (or ethical) for foundations to call attention to those who didn’t donate. Perhaps charities could adopt a subtler method, such as offering to recognize the upper echelons of donors in increasingly flattering ways. Samek points out that many organizations use a star system, where the names of donors have stars next to them, or may even be featured on a separate page in, say, an alumni magazine. “This, in effect,” says Samek, “provides a shame mechanism to nondonors without directly signaling them out.”
List says that while the first goal of SPI “was broadly to introduce scientific method to the industry, the next is to show why people give and what keeps them giving, cross-culturally and across a lifetime.” He hopes that as researchers learn more, charities will integrate the findings into practice.
And as study progresses, science may help measure the effect of giving. Donors increasingly view their donations as investments in society and in the future, and as such, they want to know their return on investment, says List. Historically, it’s been hard to quantify how successful a charity is in helping alleviate the social or environmental problems it sets out to address. Which charities are most efficient, and most effective? A number of organizations and websites are analyzing and rating charities to guide donors’ choices, but can you evaluate charities without discouraging donations? Chicago Booth’s Social Enterprise Initiative, among other groups, is encouraging researchers to look at questions such as these, as well.
Charities vary greatly in their effectiveness, as do campaigns. The millions of people who made or watched Ice Bucket Challenge videos in 2014 are unlikely to do it again this year, or next. Science can help charities develop new strategies, refine older ones, and get money flowing to their causes.
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