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The Role of Seed Money and Threshold Size in Optimizing Fundraising Campaigns: Past Behavior Matters!

Author

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  • G. A. VERHAERT
  • D. VAN DEN POEL

Abstract

Fundraising appeals often announce that some funds have already been raised in order to reach a certain threshold. This article reports results from a field experiment examining the role of seed money (i.e., no, 50%, and 67%) in combination with threshold size (i.e., low versus high) in fundraising appeals across different targets (i.e., prospects, low fidelity donors, and high fidelity donors). Based on a 2x3x3 between-subjects design we investigate charitable behavior of 25,617 households. Findings reveal a novel qualification of using seed contributions as well as the necessity of a communication differentiation by considering past behavior. We show that seed money works well if the threshold is high but with a low threshold it could have a baleful influence. More specifically, in campaigns targeted at prospects and low fidelity donors, the announcement of seed money increases donations regardless of the threshold level. However, in campaigns targeted at high fidelity donors, seed money is an effective strategy only when the threshold is rather high.

Suggested Citation

  • G. A. Verhaert & D. Van Den Poel, 2012. "The Role of Seed Money and Threshold Size in Optimizing Fundraising Campaigns: Past Behavior Matters!," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/815, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:12/815
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    File URL: http://wps-feb.ugent.be/Papers/wp_12_815.pdf
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    References listed on IDEAS

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    Cited by:

    1. Minguez, Ana & Javier Sese, F., 2022. "Why do you want a relationship, anyway? Consent to receive marketing communications and donors’ willingness to engage with nonprofits," Journal of Business Research, Elsevier, vol. 148(C), pages 356-367.
    2. Matthew Donazzan & Nisvan Erkal & Boon Han Koh, 2016. "Impact of Rebates and Refunds on Contributions to Threshold Public Goods: Evidence from a Field Experiment," Southern Economic Journal, John Wiley & Sons, vol. 83(1), pages 69-86, July.
    3. Corina Haita-Falah, 2021. "Bygones in a public project," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 57(2), pages 229-256, August.
    4. Diana Barro & Luca Barzanti & Marco Corazza & Martina Nardon, 2023. "Machine Learning and Fundraising: Applications of Artificial Neural Networks," Working Papers 2023: 33, Department of Economics, University of Venice "Ca' Foscari".

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    Keywords

    Charitable giving; Differentiated communication; Field experiments; Fundraising; Seed money; Threshold size;
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