Does 1+1=2? The Ripple Effect of Challenge Gifts
Friday, October 4, 2019
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, mathematic formulas and standard deviations, we want to offer four key takeaways from the research that should encourage you in your fundraising.
- Every gift matters – We can all motivate others to give. Whether a donor is giving in response to a match, making the lead gift to challenge the broader community, or leveraging a personal gift to encourage neighbors or friends to give, your donors are inspired to give more when they 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, create 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 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 a donor gives, make sure their support doesn’t end there. Just as a challenge gift can motivate others in the community to give, a donor’s contribution can be his/her motivation to get more involved. Encourage your donors to look for programs or components of your mission that spark their passion. Connect them with program staff, ask them questions, demonstrate impact, encourage them to spread the word about upcoming events or programs and request that they volunteer.
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 if donors are willing to share their experience, the nonprofit’s mission, and boldly challenge their friends 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.
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.
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.