How to make sure the experience you deliver to donors makes their giving feel worthwhile

Dr. Russell James

May 02, 2022

Charity managers’ perspective
How should a gift be structured? For charity managers, the answer is easy. The donor should just write a check. Write it immediately. Write it for as much as possible. And then go away. Let the managers get on with the job.

Yet, that isn’t how large gifts work. Large gifts come with instructions. They can be complicated. For charity managers, this can be frustrating. They may think, “Why do donors need to be so complicated! Why do we need gift agreements, restrictions, campaigns, pledges, trusts, or donor advised funds? Oh, and it gets worse! These days one set of headaches isn’t enough. Now we need ‘blended gifts’ that stack these complications together. Why can’t they just give us the money?”

Perspective shift: Delivering value
It’s a good question. Why can’t they just give us the money? Why are large gifts so complicated? Understanding this starts with a simple reality. It’s a reality that charity managers often miss. It’s this:

• Donations don’t come because the charity “deserves it.”
• Donations come because the donor’s experience is worth the gift.

Getting big gifts means delivering big value to the donor. It means delivering a compelling donor experience.[1] Many small nonprofit managers dream of the million-dollar donation. Few dream about delivering a donor experience worth a million dollars.

Moving beyond simple checkbook gifts can work. It works by delivering more value to donors. It does this through the power of math. Not just the math of accounting, but the math of story.

Simple math: Auctions
Let’s start small. Charity auctions are everywhere. A charity auction is a fragmented gift. One donor gives an object worth $100. Another donor buys it for $200. At the end, the charity gets a check for $200.

Why go through all this? Couldn’t each donor just write a check for $100? Yes, they could. But they won’t. Writing a check doesn’t deliver the same donor experience. It doesn’t deliver the same value.
Consider the story. In math, each donor has made a gift of $100. But not in story. In story, each donor has benefited the charity by $200.

Story of Donor 1:

“I donated this object. As a result, the charity got a check for $200. Because of me, the charity now has $200.”

Story of Donor 2:

“I gave a check to the charity. It was for $200. They gave me an object that cost them nothing. Because of me, the charity now has $200.”

Each is a story of a $200 gift. And each makes sense. The gift experience has been multiplied.

Multiply the feeling of being generous: Auctions
Consider the value delivered to the first donor. The auction is public. The donor of every object is known. Gifts of objects are communal.[2] They provide greater enhancement to the donor’s reputation.[3] Often, the object reflects the donor’s identity, either as a person or a business. Their generosity, and their identity, is on display. It’s on display in an approved, communal, shared process.

The second donor also receives high value. The bidding is also public.[4] Bidders can display wealth, generosity, and commitment to a shared cause. Although bidding does involve cash, it’s more fun than finance. It uses objects as the medium for transfer. The object benefiting the donor costs the charity nothing. It doesn’t reduce the impact of the donor’s cash gift. A good-natured bidding war is common. Often this is for an item tied to the identity of its donor. Ms. Mary Lou’s pie makes the cash bid very social.[5]

So, is a pie auction the road to major gifts success? No. But the concepts are useful. In a charity auction, two donors can claim the same gift. This multiplies the gift experience. But each donor’s net cost of giving is less than the total amount. This divides the gift cost.

These concepts are powerful. They can also apply to modern gift structures. These don’t require two donors. Instead, they apply to one donor at different times. The simplest example is the charitable pledge.

Multiply the feeling of being generous: Pledges
Even more common than the charity auction is the charity pledge. This breaks the gift into two steps:

Step 1: Donor makes a pledge to give $100 in the future.

Step 2: Donor fulfills the pledge and transfers $100.

Why would this raise more money? It works by multiplying and dividing. First, it multiplies the gift experience. The donor gets to feel like a hero twice.

In step 1, the donor gets to be charitable. The donor is charitable by committing to a pledge. In step 2, the donor gets to be charitable again. This time the donor actually writes a check. The steps multiply the charitable experience.

Researchers explain it this way: “The pleasures experienced at the time of the giving decision may be re-experienced later when focus is brought to the giving decision, such as when the gift is transacted. Hence, spreading a single giving decision into two distinct social interactions is like giving a person a larger audience, even if the audience is the same people, and even if the audience is simply themselves (as with self-signaling).”[6]

Divide the feeling of cost: Pledges
Pledges also divide the gift cost. In the first step, the cost of being charitable is a pledge. A pledge for future money feels less painful than paying now. The cost feels smaller. This changes the decision. It’s no longer a choice of: “Give now or don’t give.”

Instead, it’s a choice of: “Give later or don’t give.”

This makes giving easier.

In the second step, the donor writes a check. But the decision is easier. Now, it’s just paying the bills. The decision is not a choice of “Give now or don’t give.”

Instead, it’s a choice of “Give now or break my pledge.”

This makes giving easier.

In one experiment, researchers found a way to increase pledge fulfillment. Saying “thank you” after the pledge worked.[7] It worked because it increased the pain of breaking the pledge. It made the second decision easier.
A pledge splits the gift into two steps. The donor gets to feel charitable twice. This multiplies the gift experience. But the cost at each step feels less painful. This divides the gift cost.

Divide the feeling of cost: Experiments
Giving later makes the decision easier. This doesn’t work only in theory. It also works in experiments.

One tested 1200 donors to an international relief charity.[8] All were giving monthly by automatic bank withdrawals. Fundraisers called and thanked the donors for giving. They gave examples of projects made possible by the gifts. They asked donors to increase their monthly donation by a set amount. The only difference was this: Some were asked, “Can you consider increasing your monthly contribution with [X Amount]?” and others were asked, “Can you consider increasing your contribution with [X Amount] starting in [month Y], which means that the first increase will be on the 28th of [Month Y]?” Month Y was two months later than the current month.

What happened? The average increase in giving was 1/3 larger for the second group. Large increases (more than double the median) occurred 80% more often in the second group.

This increase in giving was long lasting. A year later, the differences still persisted. The donors could have reduced their giving at any point. But they didn’t.

Pledges also work in the lab.[9] Partly, this comes by reducing the feeling of cost. Paying with future money feels less painful than paying now. In fundraising, giving later feels less painful than giving now.

Divide the feeling of cost: Sharing gains
This feeling of cost can be lowered even more. Even easier than paying with future money is paying with future gains. Losses are painful. But giving from a gain doesn’t feel like a loss. It just feels like a smaller gain.

This is powerful in retirement savings. One plan allowed people to commit part of their future raises to retirement. Allowing this more than quadrupled savings.[10]

An experiment with donations found similar results. People were entered into a lottery. Each person was asked to commit part of their winnings to charity. Some were asked before they won. Others were asked after. Those asked before they won were 23% more likely to give. And when they gave, they gave 25% larger amounts.[11]

Cost can be a barrier to donating. But the less painful the cost feels, the easier the donation becomes. Changing the timing of the cost from now to later lowers the pain. Changing the cost from “taking a loss” to “taking a smaller gain” does the same. Doing both at the same time is doubly attractive.[12]

The attraction of sharing future gains matches the rise of new corporate structures. These combine profit and charitable goals.[13] It can also match donors’ stories about their legacy giving. Billionaire T. Boone Pickens commented,

“I’m not doing this to make money. Whatever I make from this will go to my estate, and all of my estate will go to charity when I go.”[14]

Multiply the feeling of being generous: Experiments
In one experiment, some people were asked to donate from payments being made today. Others were asked to donate from payments being made in a week. Giving was 50% higher for this second group.[15] No surprise. Giving tomorrow feels easier than giving today.

But the researchers found something else. There was more to the story than just cost. Those who gave from later payments experienced being charitable twice. They were charitable once when they pledged to give. They were charitable again when they made the gift.

The researchers then copied the experiment, but with one change. They added an audience. This increased attraction to the future gift more than the immediate gift. [16]

Why? Because now the future gift was seen twice. It was seen once when the pledge was made. It was seen again when the gift was made. But the immediate gift was seen only once. It was seen only when it was made. The future gift multiplied the audience. The donor got to be a hero twice.

Conclusion
Auctions are useful. Pledges are even more so. But more important is understanding the concepts that make them useful. Multiplying the donor’s giving experience works. Dividing the giving cost does, too.
The real power of these concepts, in the real world, shows up where the real money is. It’s not in auctions. It’s not even in pledges. It’s in the world of massive donations. It’s in foundations, funds, trusts, and endowments.

Footnotes:
[1] A formal economic model incorporates this idea, with the explanation, “A charitable contribution is a social interaction not a market exchange. Stated differently, giving is an experience rather than a consumption item.” Andreoni, J. & Serra-Garcia, M. (2019, December). Time-inconsistent charitable giving. NBER Working Paper No. 22824, https://www.nber.org/papers/w22824

[2] Cheal, D. (1987). Showing them you love them: Gift giving and the dialectic of intimacy. The Sociological Review, 35(1), 150-169.

[3] Gershon, R., & Cryder, C. (2018). Goods donations increase charitable credit for low-warmth donors. Journal of Consumer Research, 45, 451-469.

[4] Even in a silent auction, the bids may be written publicly or the winners may be announced publicly.

[5] The “pie supper” charity auction was popular in 19th and early 20th century Ozark Mountain culture. See Gilmore, R. K. (1990). Box and pie suppers. In Ozark baptizings, hangings, and other diversions: Theatrical folkways of rural Missouri, 1885-1910. University of Oklahoma Press.

[6] Andreoni, J. & Serra-Garcia, M. (December, 2019). Time-inconsistent charitable giving. NBER Working Paper No. 22824, https://www.nber.org/papers/w22824

[7] Andreoni, J., & Serra-Garcia, M. (2021). The pledging puzzle: How can revocable promises increase charitable giving? Management Science. Advance online publication.

[8] Breman, A. (2011). Give more tomorrow: Two field experiments on altruism and intertemporal choice. Journal of Public Economics, 95(11-12), 1349-1357. Field experiment 1: Diakonia.

[9] “In generalized dictator games, subjects behave more altruistically towards others when deciding in advance rather than in the present” Kölle, F., & Wenner, L. (2018). Present-biased generosity: Time inconsistency across individual and social contexts (No. 2018-02). CeDEx Discussion Paper Series. https://www.econstor.eu/bitstream/10419/200421/1/1019128569.pdf

See also, Powell, E., Jung, M., Vosgerau, J., & Pe’er, E. (2018). Donate today or give tomorrow? Adding a time delay increases donation amount but not willingness to donate. ACR North American Advances. https://www.acrwebsite.org/volumes/v46/acr_vol46_2411255.pdf

[10] Thaler, R. H., & Benartzi, S. (2004). Save more tomorrow™: Using behavioral economics to increase employee saving. Journal of Political Economy, 112(S1), S164-S187.

[11] “participants are 23% more likely to commit to donate from the winning income and commit 25% more when asked before the lottery’s outcome is determined—relative to those asked to donate after they learn they have won” Kellner, C., Reinstein, D., & Riener, G. (2019). Ex-ante commitments to “give if you win” exceed donations after a win. Journal of Public Economics, 169, 109-127. p. 127.

[12] A religious charity might use this framing to encourage entrepreneur supporters to “take the Melchizedek challenge” by committing, in advance, to donate a portion of their future winnings from a new business venture to the charity. In Genesis [14:17]-20, Abraham gave a tenth part of the spoils of victory to the priest Melchizedek.

[13] Kurland, N. B. (2017). Accountability and the public benefit corporation. Business Horizons, 60(4), 519-528.

[14] Faerstein, I. (2008, August). Pickens on decline in price of oil: ‘It’ll go up again.’ The Hotline: National Journal’s Daily Briefing on Politics, cited in James, R. N., III. (2010). Charitable estate planning and subsequent wealth accumulation: Why percentage gifts may be worth more than we thought. International Journal of Educational Advancement, 10(1), 24-32.

[15] Andreoni, J. & Serra-Garcia, M. (2019, December). Time-inconsistent charitable giving. NBER Working Paper No. 22824, https://www.nber.org/papers/w22824

[16] “Exogenously varying the information about intertemporal giving decisions known to others strengthens the time-inconsistent charitable giving puzzle, and these audience effects are broadly consistent with the dynamic model of image concerns.” Andreoni, J. & Serra-Garcia, M. (2019, December). Time-inconsistent charitable giving. NBER Working Paper No. 22824, https://www.nber.org/papers/w22824

Even outside of the charitable context, the desire to use a commitment device, such as one that creates a financial penalty if one doesn’t follow through on a commitment, is higher when the use of the device is visible to others. In other words, the public commitment to future action is an additional means of signaling to others beyond simply the action itself. Exley, C. L., & Naecker, J. K. (2017). Observability increases the demand for commitment devices. Management Science, 63(10), 3262-3267.

Related Resources:

• Donor Story: Epic Fundraising eCourse
• The Fundraising Myth & Science Series, by Dr. Russell James
• How To Use Numbers To Inspire More Giving (and How You Should NOT Use Them)
• The number one reason why people give is not what you think

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