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The Role of Seed Money and Threshold Size in Optimizing Fundraising Campaigns: Past Behavior Matters!

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Author Info

  • G. A. VERHAERT
  • D. VAN DEN POEL

    ()

Abstract

Fundraising appeals often announce that some funds have already been raised in order to reach a certain threshold. This article reports results from a field experiment examining the role of seed money (i.e., no, 50%, and 67%) in combination with threshold size (i.e., low versus high) in fundraising appeals across different targets (i.e., prospects, low fidelity donors, and high fidelity donors). Based on a 2x3x3 between-subjects design we investigate charitable behavior of 25,617 households. Findings reveal a novel qualification of using seed contributions as well as the necessity of a communication differentiation by considering past behavior. We show that seed money works well if the threshold is high but with a low threshold it could have a baleful influence. More specifically, in campaigns targeted at prospects and low fidelity donors, the announcement of seed money increases donations regardless of the threshold level. However, in campaigns targeted at high fidelity donors, seed money is an effective strategy only when the threshold is rather high.

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Bibliographic Info

Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 12/815.

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Length: 35 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:rug:rugwps:12/815

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Related research

Keywords: Charitable giving; Differentiated communication; Field experiments; Fundraising; Seed money; Threshold size;

This paper has been announced in the following NEP Reports:

References

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  1. Rondeau, Daniel & List, John A., 2008. "Matching and Challenge Gifts to Charity: Evidence from Laboratory and Natural Field Experiments," IZA Discussion Papers 3278, Institute for the Study of Labor (IZA).
  2. John List, 2008. "Introduction to field experiments in economics with applications to the economics of charity," Experimental Economics, Springer, vol. 11(3), pages 203-212, September.
  3. John A. List & David Lucking-Reiley, 2000. "The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign," Vanderbilt University Department of Economics Working Papers 0008, Vanderbilt University Department of Economics.
  4. J.-J. Jonker & N. Piersma & D. Van Den Poel, 2003. "Joint Optimization of Customer Segmentation and Marketing Policy to Maximize Long-Term Profitability," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/214, Ghent University, Faculty of Economics and Business Administration.
  5. Rachel Croson & Enrique Fatás & Tibor Neugebauer, 2004. "Reciprocity, Matching and Conditional Cooperation in Two Public Goods Games," IESA Working Papers Series 0409, Institute for Social Syudies of Andalusia - Higher Council for Scientific Research.
  6. Roland T. Rust & Peter C. Verhoef, 2005. "Optimizing the Marketing Interventions Mix in Intermediate-Term CRM," Marketing Science, INFORMS, vol. 24(3), pages 477-489, December.
  7. Eckel, Catherine C. & Grossman, Philip J., 2003. "Rebate versus matching: does how we subsidize charitable contributions matter?," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 681-701, March.
  8. Dean Karlan & John A. List, 2007. "Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment," American Economic Review, American Economic Association, vol. 97(5), pages 1774-1793, December.
  9. repec:feb:natura:0053 is not listed on IDEAS
  10. Rachel Croson & Jen Shang, 2008. "The impact of downward social information on contribution decisions," Experimental Economics, Springer, vol. 11(3), pages 221-233, September.
  11. Verhaert, Griet A. & Van den Poel, Dirk, 2011. "Empathy as added value in predicting donation behavior," Journal of Business Research, Elsevier, vol. 64(12), pages 1288-1295.
  12. Vesterlund, Lise, 2003. "The informational value of sequential fundraising," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 627-657, March.
  13. W. Buckinx & E. Moons & D. Van Den Poel & G. Wets, 2003. "Customer-Adapted Coupon Targeting Using Feature Selection," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/201, Ghent University, Faculty of Economics and Business Administration.
  14. repec:feb:artefa:0105 is not listed on IDEAS
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