When Rewarding Your Donors Can Backfire

Fundraising April 09, 2009

Lori Halley

By Lori Halley

Technology can make it much more convenient for people to follow through on pledges and donations, but what motivates donors to reach for their wallets or credit cards in the first place? What’s in it for your donors?

Rewards for donation may be tangible (discounts, gifts, access to special events, etc. - anything that can be assigned a monetary value) or intangible (the good feeling that comes with doing good, for example, or fulfilling the need to contribute to a cause that has personal meaning); and both types of rewards may be public (visible, attributed to the donor, perhaps even publicized) or kept private; the donor may even choose to remain anonymous.

Tax breaks, pure altruism, personal commitment to a cause, and “image motivation” are all significant contributors to charitable giving, and the influence of each will depend on the individual donor.

It’s no surprise that people tend to be most generous when those acts of generosity bring them either public approval or a tangible reward — paying people to donate blood, for example, or giving volunteers a percentage of the income from raffle tickets they sell. But rewarding donors in the wrong way can actually discourage altruism, according to a recent article in The Economist, Looking Good by Doing Good.

As much satisfaction as donors enjoy from a feeling of altruism, they also find it rewarding to have their generosity seen and acknowledged.  Image building through charity is a powerful motivation to give — witness the number of endowments to universities that carry the name of the benefactor — and less than 1% of private gifts to charity are anonymous.

The crucial thing about charity as a means of image building is, of course, that it can work only if others know about it and think positively of the charity in question.

It seems reasonable to expect that adding a tangible reward would be a spur to greater giving, doesn’t it?  On the contrary: a monetary reward can actually undermine the “image motivation” if the reward is publicized.

A recent study by Dan Ariely of Duke University, Anat Bracha of Tel Aviv University, and Stephan Meier of Columbia University confirmed that the addition of a monetary incentive had “much less of an impact in public (where it muddles the image signal of an action) than in private (where the image is not important).”

Public acknowledgment and tangible rewards, then, both have their place in motivating generosity and charitable acts — but giving both types of reward at the same time may backfire for non-profits.

The trio also raise the possibility that cleverly designed rewards could actually draw out more generosity by exploiting image motivation. Suppose, for example, that rewards were used to encourage people to support a certain cause with a minimum donation. If that cause then publicised those who were generous well beyond the minimum required of them, it would show that they were not just ‘in it for the money’.

It’s an interesting idea, given the out-of-pocket costs of rewards-based fundraising and the continued pressure on charities to cut their overhead expenses.  How might “behavioral economics” shape your non-profit’s relationship with donors and volunteers?

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Sorry, this blog post is closed for further comments.


  • Jana Byington-Smith:

    Nice summary.  Some of the most interesting work on donor loyalty and motivation, especially as it relates to donor retention, is being done by Adrian Sargeant, Ph.D., the Robert Hartsook Professor of Fundraising at the University of Indiana's Center on Philanthropy.  Also, Willie Cheng's "Doing Good Well" is a good book on internal and external motivation.  

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