Fundraiser Events: How to Raise Money Like an Economist

When trying to come up with ideas how to raise money, event planners rely heavily on conventional wisdom, habits and traditions, and rarely look at scientific study.

But in order to raise the most funding possible, it’s time event planners started looking at it from an economist’s point of view.The guys from the Freakonomics podcast recently tried to look at the question from an economist's stand point and tried to find out how do we get people to donate or in their own words, “how to raise money without killing a kitten." This is what they learned.

It’s All About the Economics

Freakonomics Fundraiser events zkipster resized 600Economists are always trying to figure out why people do what they do. Everything is about the incentives. For them, once you figure out why, it becomes easier to get people to continue with or desist in their behavior. For the event planner during fundraising season, the behavior we'd like to increase is the donation of money.In the United States, people give away 2.2% of their income to charitable causes on average. It is extraordinary to think that Americans give away that much of their hard earned cash at all. Knowing this, it is the job of the event planner to figure out how to get the most money possible. In our case, we need to figure out what it is that drives people to give away their own money? What are the incentives for why people give, so that we may then keep them committed to the cause.

Reasons Why People Give

Mother Theresa Fundraiser Events zkipsterThe first reason people like to think they give is because of pure altruism. That’s the idea that a person gives out of the pure goodness of their heart. They just have an unselfish concern for the welfare of others. Think Mother Theresa. But the truth is very few people are Mother Theresa and very few people give for purely altruistic reasons.More likely the primary reason why is the idea that people give because of something called warm glow altruism. People are, sad to say, driven to do things out of self-interest, therefore people give because it gives them a warm feeling, it makes them feel good. According to the guys at Freakonomics, this means you should be focusing on convincing the donor of what the benefits are for them personally, not for example, what the benefits are for the recipient of the money donated.Another reason why people give, and one that seems obvious, is because of guilt or social pressure. In the podcast Stephen Dubner, journalist and co-author of Freakonomics, and John List, an economics professor at the University of Chicago, give the example of a girl scout at your door selling cookies. Confronted with the girl scout you will find yourself hard pressed to say no, but, they ask, had you known beforehand what awaited you as you opened the door, would you have opened it in the first place? Dubner and List think no, you would not. Once the door is opened though you feel obliged. That social pressure affects us all.The last reason they mention is the idea of herd mentality or information cascades. People are much more likely to give if they see or hear that someone they know, or a person of influence is giving to a cause, thus acting like a herd. People using herd mentality are influenced by their peers to adopt certain behaviors, follow trends and/or, in our case, donate money.Something else of note is that after a study done at East Carolina University, John List found that attractive people (as rated by their peers) sent out to collect money did much better than unattractive people. Although this only works when men are doing the donating and beautiful women are doing the collecting. Otherwise, women don’t give any more or less to good-looking men or women. So, if your donors are heterosexual men, it could be a good thing to keep in mind.

How to Raise Money

According to John List, donors love lotteries. They love having the chance to win a big prize for donating a little money. Considering how many email newsletters I sign up for, solely for the chance to win a trip to the Caribbean I can see how this is true. He also recommends offering matching grants, remarking that a 1-1 ratio will be enough to encourage higher donor participation.Another thing donors like is the power of control. Offer donors control in some shape or fashion and they will be more enticed. This could mean giving to donors the power to control communications. An article published by Hubspot, Donate to Opt Out: The Secret to Smile Train's 46% Increase in Fundraising, also extoled this method. In the article they profiled a non-profit, SmileTrain, who sent out a "one-and-done" mailer stipulating that if the recipient would donate money once they would never have to hear from SmileTrain again to half of their contacts and a regular donor request mailer to the other half. They found that they received almost twice as much money from the “one-and-done” mailers and only 39% of those donors even chose to opt out of future mailings. Their campaign was a definite success in my book.So to wrap it up, we've learned that people do things mainly for their own self interest, they can be guilted into giving, convinced to give by seeing their friends or other influencers give, male donors are weak to good-looks, and donors love lotteries and control. As an event planner going forward, I think it's always important to test and go over your methods and techniques. Don't be afraid to try your own experiments to see what really works best! Use them at your next fundraiser!