Commentary 13th Nov 2014

Who gives a franc? The importance of understanding donor motivations

As the world struggles to deal with global humanitarian crises, from the Ebola outbreak in Africa to the conflict in Syria and Iraq, charities scramble to raise funds to help improve the quality of life of those who are affected.

A key challenge faced by charities in raising funds is understanding how, and why, people choose to give. Economists argue that at one extreme are pure altruists, donors motivated solely by concern for the wellbeing of the recipient. At the other end are pure egoists, donors giving because it makes them feel good, to avoid guilt or to win prestige.

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Motivations for giving

Charities use a range of different techniques to get us to reach into our back pockets for a good cause: from compelling imagery that tugs at our heartstrings to rubber bracelets as social proof we're helping fight AIDS.

For those of us who are pure altruists, pictures of deprived children accompanied by sad stories may stimulate empathetic concern and drive us to donate as our means of helping. This may also work for those among us who are a little more egotistical, appealing to our guilt and allowing us to resolve that guilt by giving. Alternatively, pure egoists may very well prefer to film themselves throwing buckets of ice water over their heads, which they can then share on social media to signal to their friends what great people they are.

In my study, I examine giving to disadvantaged recipients at the Salvation Army's Melbourne 614 project. In this context, donors are found to have a wide range of motivations for giving: from the 36 per cent pure altruists who want to help the recipient, to the 20 per cent pure egoists who are entirely interested in the personal benefit of giving, and the remainder who are a combination of the two.

Donors like control over their donations

Independent charity evaluators (eg Charity Navigator) have become increasingly popular as a means for charities to demonstrate their commitment to transparency in how their donations are spent. Charities such as Oxfam have increased donor control by allowing supporters to directly target their donations through buying guitar lessons for children in Vanuatu or goats for families in Mozambique.

If a donor chooses to target their donation, or place restrictions on how their donation can be spent, they may care more about the consumption of some goods over others. Alternatively, they may believe they know better than the recipient about how their money can be best spent.

Our research suggests that donors like to have control over their giving, with the majority of donors choosing to restrict their donations to food and necessities rather than providing recipients with cash. The extent of concern, we find, depends on the underlying motivations for giving. Pure altruists are much more likely to want assurance that donations are spent "appropriately" – and they are willing to pay to get it. In this study, two-thirds of the pure altruists chose to restrict their donations to food and necessities rather than money, when it was free to do so. Furthermore, almost half were willing to pay to impose the restriction, paying 64 cents on average to do so. By contrast, pure egoists were significantly less likely to place restrictions on their donation; less than 25 per cent chose to do so and none were willing to pay to do so.

Our research suggests that donors like to have control over their giving, with the majority of donors choosing to restrict their donations to food and necessities rather than providing recipients with cash.

Ms Kristy Jones

Department of Economics

A third of the people in our study chose not to give at all, and while we may think that these people are just self-interested, this is not always the case. Those who didn't give at all in our study were just as likely to restrict others' donations, and were willing to pay the highest amount to do so, despite not having given themselves. These non-givers were also more likely to argue that poverty is due to a lack of effort by the poor, indicating that choosing not to give might be based more on fairness than selfishness.

Understanding donor motivations is crucial as it directly impacts the efficacy of fundraising practices. Effective charities need to take into consideration the different motivations of donors and tailor their fundraising appropriately, as a one-size-fits-all approach is likely to be unsuccessful.

Kristy Jones is a PhD candidate in the Department of Economics at Monash Business School and is a guest speaker at the annual PhD Conference in Economics and Business currently under way and hosted by Monash Business School.

By Kristy Jones

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    Ms Kristy Jones

    Department of Economics Monash Business School

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