The arena of fundraising is crowded with competitors. The National Center for Charitable Statistics reports that more than 1.5 million nonprofit organizations are registered in the United States, with a majority of them vying for a share of the billions of dollars donated each year from individuals, foundations, corporations and grants.

How Fundraising Incentives Can Undermine Persuasion
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Fundraising Incentives

Monetary contributions are key to the success and survival of many charities, and that means the pitch is paramount. A powerful message from a compelling advocate can persuade potential donors to dig deep and give generously. With that in mind, it seems a reasonable practice to offer incentives to those advocates as a way to make them work harder for the cause.

But new research from Wharton indicates that incentives can have the opposite effect, specifically when donors perceive that the advocate’s intentions are self-motivated. Wharton marketing professor Deborah Small and two former Wharton doctoral students — New York University marketing professor Alixandra Barasch and London Business School marketing professor Jonathan Z. Berman — examine this contradiction in their paper, “When Payment Undermines the Pitch: On the Persuasiveness of Pure Motives in Fund-raising.”

“Our research asks: Can incentives impede communications?” Small says. “We argue that the best advocates for a cause are those whose motives are pure —untainted by self-interest.  We test whether incentives crowd out pure motives and render individuals unable to convey sincerity.”

Based on the results from three separate experiments, the answer is a resounding “yes.”

In the first experiment, the professors chose participants from a breast cancer awareness event. The participants, called “persuaders” for the purposes of the study, were asked to record a short video message designed to elicit donations from viewers. They were given no time to prepare and were asked to speak extemporaneously about the cause. However, some of the persuaders were also told that for every $10 donated, they would receive $1 to keep for themselves.

“We argue that the best advocates for a cause are those whose motives are pure —untainted by self-interest.”

Potential donors were assigned a random video to watch. They were informed only that the videos were for charity and impromptu. They were not told about the incentives condition in place in some of the pitches. After watching the videos, the target donors were given a $10 participation fee to keep and an additional $3 they could donate in whole or in part to the cause.

The second experiment was similar to the first, although a larger sample was used and the persuaders came from a wide variety of service organizations. Once again, the target donors were unaware of the incentives offered to some of the persuaders.

In the third experiment, some of the persuaders were told that they would receive $10 to keep for every $10 donated. Yet another group of persuaders were told that for every $10 donated, the sponsors of the study would match that amount for the chosen charity. As in the first two experiments, the incentivized persuaders were instructed not to reveal their incentives in their video messages.

After each experiment, both persuaders and donors were given a survey to gauge their feelings on the sincerity of the persuaders’ pitches.

“The test was designed to take effort out of the equation and just look at how incentives affect how people persuade or advocate for a cause,” Small says.

The results were quite telling. In each study, the donors gave less after watching video messages from incentivized persuaders. The donors also judged those incentivized persuaders as less sincere, even though the donors did not know that select persuaders were being compensated. Interestingly, when surveyed, the incentivized persuaders did not view themselves as any less sincere than their unselected counterparts.

Only matched contributions didn’t have a diminishing effect on the donations.

“The incentive is having the opposite of the intended effect,” Small notes. “Yet the crowding out effect is not a function of the persuaders’ effort. The people who are incentivized are not working less hard; it’s that they are communicating less effectively.”

The ‘Million-dollar Question’

However, it’s not clear from the study what accounts for the change in communication. How are the potential donors able to perceive an incentivized message when they are blind to the condition?

“The people who are incentivized are not working less hard; it’s that they are communicating less effectively.”

“That is the million-dollar question that we don’t have the answer to,” Small says. “Do [the incentivized persuaders] say different things? Do they use different words? Do they have different nonverbal actions?”

In an effort to unravel the mystery, the professors are studying the videos to derive different data points. They are looking at video without sound, sound without video and other alternatives.

“So far, what we found is that it seems to be a little bit of everything,” Small notes, adding that the work is continuing.

The main takeaway from the research is that negative consequences can result from using incentives to encourage generous behavior. But Small wants to make it clear that incentives aren’t all bad. She believes it’s important to use incentives to attract talented people into the nonprofit sector.

“What I don’t want the takeaway to be is, ‘pay people in nonprofits less,’” she notes. “You can pay people for a good job to get them in the door, but beware that if you are paying people for a task for which sincerity matters, you should not make their pay hinge on the ability to do it well. It’s a tough balancing act.”

Sincerity Matters

Ultimately, the research supports the idea that altruism is incompatible with observable self-interest. That’s why sincerity matters, why the message matters, and why the spokesperson matters. Messages are always more effective when the speaker has a personal connection and true passion for the cause.

Small points to the example of Oprah Winfrey. The popular entertainment icon is known for having almost a Midas touch — whatever she recommends or advocates for is as good as gold.

“She can say anything and people will follow. It’s not that she works harder than anyone else,” Small said. “When you see [that sincerity] you should know that is really powerful for advocating for causes.”

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