Overhead Aversion

We avoid donating to charities which dedicate a high percentage of expenses to administrative and fundraising costs (overhead). As overhead increases, the amount donated decreases. This aversion is due to a decreased sense of personal impact, which reduces the positive emotions associated with giving.

Example

People react strongly to salaries of non-profit executives even though they’re dwarfed by the salaries of for-profit executives.

Fundraising opportunity

Charities could mitigate the negative effect of overhead on giving, if they emphasize the supporters’ impact and thus increase their happiness.

Keenan, E., & Gneezy, A. (2016). Understanding and Overcoming Overhead Aversion in Charity.

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Behavioral Science Q & A

Q: Do you have any insight on whether integrating an individual giving appeal with other comms from the charity in both appearance and messaging can uplift results? Or does the actual appeal become ‘lost’ for lack of stand-out?

Integrating an individual giving appeal with other communications from a charity can have both positive and negative effects, and the outcome largely depends on how it’s executed. Advantages of Integration Brand Consistency: Maintaining a consistent appearance and messaging across all communications can reinforce the org’s brand identity and strengthen brand recognition and trust among your […]

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Q: Is there any research on response rate impact in direct mail when referring to a sustainer gift as ongoing or recurring (catching all frequencies) v. monthly or annual?

I’m not aware of any in-market tests specifically comparing recurring vs. gift frequency language. I suspect the answer might not be the same with all gift frequencies, nor with all people. It sounds like a great opportunity for you to test and find out what works for your audience. Based on the literature, here’s a couple […]

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Q: A major conservation nonprofit sends me lots of mail, many of which have on the envelope “time to renew” or “2nd notice.” I find this practice deceptive, especially as I haven’t given to said organization since 1997. It must be effective or they wouldn’t do it. But is it ethical?

Based on what we know from existing data, those renewal notices can actually be pretty effective in getting people to donate. They tap into our psychology – creating a sense of urgency, reminding us of past support, and using personalization to make the message hit home. They’re playing on our natural tendencies to feel obligated […]

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Q: I find it irritating when some nonprofits accept my “gift” and then ask me to cover their credit card fees separately. It feels like a practice that does nothing to help win donors and runs the risk of turning others off. Is there any data on this either way?

Interesting question. I had a quick look at the testing done on this topic. On the positive side, in all cases, over half of donors decide to cover the fee. In some cases, it goes as high as 65%. Not a negligible percentage at all. Here’s another test from iRaiser showing consistent results (see point […]

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Q: What are the three most important things to consider when designing a brilliant supporter journey?

There’s just one thing to consider when designing a supporter journey: the supporter. More specifically, you need to take into account: Who the supporter is i.e. their identity, which is the reason they support this cause, and their personality, which describes the way they “see” and process the world. These will determine the kind of […]

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Q: Is there any evidence that changes to the tax laws in the USA changed end of year giving behaviors? Previously, ~30% of US taxpayers filed itemized tax returns allowing them to receive a deduction for charitable giving. Tax law changed in 2017 so that now only ~10% itemize. This should mean tax year-end giving should not matter to millions of people for whom it used to matter. Is there any data evidence to support this?

I’m not an expert in this but a quick search surfaced this article on the effect of tax reforms on 2019’s charitable giving. The researchers didn’t find a reduction. Actually, they observed an “increase in charitable contributions in 2019, even with the lower tax rates and the dramatically smaller number of taxpayers who itemize their […]

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