Monetary Incentives Increase Donations.
Research of 10,000 Donors Reveals Offering a Monetary
Incentive is Both Effective and Cost-Efficient.
Donors Asking Friends to Donate Pays for Itself.
Social interaction, rather than stats and information efficiency, appears to be an important mechanism behind the success of peer-to-peer fundraising.
Indeed, one of the top reasons donors cite for giving to charity is they were asked by a friend (Van Slyke and Brooks, 2005). This reason suggests that a potentially effective fundraising strategy for charities would be to ask donors to ask their friends to give.
Businesses and marketing professionals stress the importance of referrals and word of mouth campaigns to promote and sell products and services, and studies examining this phenomenon in the context of charitable indicate the same (Kumar et al 2007) .
Asking a friend is the most effective method at raising additional donations -- the percent of solicitations that result in new donations is 5.1%, double that of asking many friends via a public Facebook post.
Sending a private message to a friend generated no new donations. Given the donation response to asking one friend asking a friend, offering incentives to a donor to ask a friend can pay for itself and can produce large returns on the extensive margin.
Under certain assumptions, a charity can double each dollar spent on incentives for donors to ask friends to donate.
While asking a friend in front of his friends to make a donation is used the least, providing the donor an add-on donation increases this type of solicitation by almost 50%.
Social pressure is an important mechanism and may be more palatable when sweetened with cash or a gift.
Results suggest that offering a monetary incentive to donors to ask a friend to donate pays for itself by returning about $2 for every $1 spent on solicitations.
Offering a cash incentive to encourage a donor to ask a friend almost triples solicitation rates.
Offering 5 x the incentive amount increases the solicitation rate by 11.5%.
There is direct evidence that friends asking friends to donate generates new donations.
This complements previous results showing that asking for a donation, in general, and by peers, has a strong effect on giving (Andreoni and Rao, 2012; Carmen, 2003; Meer, 2011; Sanders and Smith, 2014; Sanders et al, 2014; Smith et al, 2014).
It also confirms that providing incentives to solicit friends does spur donors to voluntarily ask more and generates more new donations (Castillo et al, 2014).
Giving money to charity can be a social activity, and individuals can enjoy donating with and among friends. Friends can provide important information on the existence and quality of charities that might be of common interest.
Indeed, friends may have a strong influence on donation behavior, and surveys on why individuals give suggest that being asked by a friend are important (Van Slyke and Brooks, 2005).
Not all giving is welfare enhancing for the donor, and the existence of gifts are important to spur friends to ask friends to induce other friends to give.