Does 1+1=2? The Ripple Effect of Challenge Gifts

Posted , by Wendy McGrady, Executive Vice President. Topic: Donors, Fundraising, Gift Solicitation, Major Donors.

Previously printed 3/18/19 in The Experts column in Inside Business  

 
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At The Curtis Group, we believe that 1+1 can equal much more than 2 when we leverage gifts to encourage and motivate others. We like to call it the ripple effect, when one gift has the power to spread far beyond a single donation.

 

In our work, we have witnessed firsthand how an effective challenge gift can create momentum and raise more dollars.  Recently, we saw an anonymous donor’s year-end matching gift raise $500,000 for one of our campaign clients and propel them to within sight of their campaign goal.

 

The fundraising world defines a challenge gift as a donation in which a large contribution is announced in conjunction with a solicitation for support.  These types of gifts can be used in a number of different ways. They can be announced as leadership gifts to kickstart a program or campaign. They can be announced as donations to cover overhead costs for a new initiative or campaign. And they can also be used as matching gifts, when a donor offers to match some or all gifts up to a set dollar amount.  In recent years, these challenge gifts have been a popular fundraising strategy and have been very effective. More than likely you have heard of, if not given as a result of a challenge gift.

 

With the increased use of challenge gifts in the nonprofit sector, there has been a simultaneous increase in research to understand the impact of these gifts. Research has been published in the Journal of Public Economics, the Science of Philanthropy Initiative, Science Mag, and the American Economic Review.

 

Rather than inundate you with experimental design, stats, mathematic formulas and standard deviations, we want to offer four key takeaways from the research that should encourage you in your philanthropy.

  • Inside Business title shot 3.18.19 2Your gift matters – We can all motivate others to give. Whether you are giving in response to a match, making the lead gift to challenge the broader community, or leveraging your personal gift to encourage your neighbor or friend to give, we are all inspired to give more when we see others step up in meaningful and sincere ways.
  • Challenge gifts inspire more giving – Each article and study concluded that a challenge gift of any kind has the power to raise more dollars, have more participation and a higher average gift than fundraising campaigns without this strategy. So, if you are a donor, think about how your gift could cause ripples.  And, if you are a nonprofit, consider this research in asking your donors to participate.
  • Keep it simple – Research shows that donors are the most likely to give larger gifts in response to a leadership gift that covers seed funding or organizational expenses. These types of gifts are simply announced and promoted as the kickstarting gift to a fundraising effort. They make it clear that the initiative is off to a strong start, or they allow all remaining dollars contributed to go directly to the “cause” or program supported by the campaign.The second type of gift most likely to boost fundraising results is a 1:1 matching gift. Interestingly, matching challenges using the ratio 2:1 or other non-linear matching ratios are not any more effective and tend to only confuse donors trying to maximize their giving impact.
  • Participation is key – Once you have made your gift, your support shouldn’t end there. Just as a challenge gift can motivate others in the community to give, your contribution can be your motivation. Once you have found an organization you believe in, look for programs or components of their mission that spark your passion. Tell the staff, ask questions, learn more, volunteer, share the organization’s story. Your donation can spark others’ interests as well as their giving.
In conclusion, there will be no ripples if we don’t spread the word about the power of giving. Nonprofits should be thanking donors often and as visibly as possible when they receive a transformational gift to cover seed funding for a new program or a matching challenge gift. It will help the nonprofit you are supporting if you are willing to share your experience, the nonprofit’s mission, and boldly challenge your neighbors and colleagues to support it.

Let’s make ripples.

If you are interested in reading the research behind these conclusions, below are some additional resources.

Huck, Steffen and Imran Rasul (2011). “Matched Fundraising: Evidence from a Natural Field Experiment.” Journal of Public Economics, 95(5-6), 351-362. https://doi.org/10.1016/j.jpubeco.2010.10.005.

Karlan, Dean and John A. List. “Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment.” The American Economic Review, 97(5), 1774-1793 Published by American Economic Association.

Gneezy, Uri et al. “Avoiding Overhead Aversion in Charity.” Science, 346(6209), 632. https://rady.ucsd.edu/docs/Science-2014-Gneezy-632-5.pdf.

List, John and David Lucking-Reiley. “The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from University Capital Campaign.” Science of Philanthropy Initiative. http://spihub.org/site/resource_files/publications/spi_wp_014_list.pdf.

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