At first glance, online fundraising and crowdfunding are old-new avenues for nonprofits to raise more funds. Unlike traditional online giving, Intelligent Fundraising is more than an art; it’s a science.
Imagine being told that restricting contribution ranges can bring in more donors and boost donations and that shortening campaign time frames will result in reaching your goals sooner. Sound counterintuitive? Welcome to Game Theory, which explains many human behaviors and, over the past decade, became an essential strategy used by governments, banks, hedge funds and Fortune 500 companies. As the saying goes, if a game theory recommendation sounds intuitive, it may not be the best strategy.
give2gether incorporates a decade of game theory donor behavior research with thousands of hours of experiments at the UC Berkeley XLabs to harness science to do good: maximizing online nonprofit fundraising.
While setting optimal gift levels or saying “no” to high net-worth donors might seem counterintuitive when every dollar counts, game theory has shown that by optimizing minimum and maximum thresholds, campaign duration, total funds raised, etc., the probability of reaching the goal can increase 2-3 fold.
Similar to game theory mechanisms deployed by Google in 2002 (“second best bid price” auctions), these recommendations seem odd at first, but have the potential to revolutionize this space.
Imagine, as a nonprofit, you limit the amount of money an individual can donate. Game theory explains that people are given the sense that their donation is “pivotal” (both meaningful and makes a difference), and are more willing to give when they believe that they are doing something good with other like-minded people.
Research has also shown that there is a direct correlation between the amount the nonprofit is looking to raise, and the feeling a donor gets from participating in that campaign. Each donor places a monetary value on the success of the campaign. The “warm glow” benefit is only received if s/he has contributed and the campaign goal was met.
However, when you allow one person to close the campaign by making one very large donation and the goal is met, other donors feel left out. Each donor wants to feel the “warm glow” of contributing to the success of the campaign.
Imagine sitting next to Mark Zuckerberg at a fundraising event for a cause close to his heart. Even if you are very charitable, your sitting next to him will likely result in your giving less, because, without even thinking about it, you presume that Mark will write a 50- or 100-thousand-dollar check. Under such circumstances, our tendency to give is diminished. We call it “the free rider” problem, hence, the monetary limit on individual donations.
It’s important to note that there isn’t a “one size fits all” for online fundraising. Optimal minimum and maximum gift levels, campaign duration (weeks/days), and default gift size is based on various parameters:
- Campaign type (saving animals, children, scholarships)
- Financial goal
- Time of year (holiday/back to school)
- Size of donor constituency (email/social)
- Seed money
- Minimum and maximum contribution levels
- Previous average gift size
- Email open rates
- Click-through rates
- Facebook engagement rate
How is this different from other online optimization algorithms?
Determining recommendations which will result in an optimal donor landing page is based on this being a multi-participant game of doing good, with only partial information to each potential donor.
But the decision of a single donor depends on the decisions of all the visitors, whereby their decisions in turn depend on the probabilities of success. Decisions and probabilities must be determined simultaneously, making the equilibrium very tough to compute and requiring an algorithmic, game theory mechanism to resolve.
The key inhibitors to the exponential growth of online charitable giving are the inability to orchestrate charitable activities among large groups (coordination failure) and individuals pledging less than their potential giving capacity (free-riding). However, knowing the science behind what makes people give helps reduce these inhibitors, resulting in better results through online fundraising.
Arnon Shafir is the co-founder and CEO of give2gether, a simply intelligent online fundraising platform, one of the “top 100 crowdfunders” (Forbes), “the Google Analytics of philanthropy” (Mashable). give2gether has helped charities fund over 1,200 projects through over 22,000 personal fundraising pages; email@example.com.
This article is reprinted from Issue #4 of Nonprofit Performance Magazine. Subscribe today so that you won’t miss other actionable articles that will help you run your nonprofit organization with less pain and more gain!
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