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Donor Behaviour and Charitable Budgeting

Resource Center - Foundation

By Monica LaBarge, Ph.D.

Monica LaBarge, Ph.D.I’m always surprised to be asked “why would a Marketing professor be interested in charitable giving?” For those of us who study consumer behaviour, it seems totally obvious: we are interested in how people spend their time and money the way they do. So, trying to better understand what factors affect why and how much people volunteer and give to charity seems quite logical to us. 

In that pursuit, my co-author (Jeffrey Stinson) and I recently published an article in the Non-Profit and Voluntary Sector Quarterly (NPVSQ) in which we tried to answer a question that had come up in Jeffrey’s previous research on giving to academic versus athletic programs at major American universities. He (and his co-author, Dennis Howard) had discovered that people described their giving to those targeted funds in very different ways. Higher education donors making gifts to athletic programs in order to secure season tickets to football or basketball games indicated that they did not consider those gifts as charitable as gifts made to academic programs or other non-profit organizations. Instead, they reported that they considered their gifts to athletic programs to be in competition with various leisure and entertainment opportunities.

On the surface, this didn’t make much sense, since both types of gifts were considered to be (and were pitched as) “philanthropy” by the fundraisers themselves, and were treated the same for tax purposes. We puzzled over what could be the underlying reason why the donors perceived the “gifts” as being so different.

By drawing up existing research in consumer psychology, we identified that this perceived difference was perhaps rooted in the theoretical idea of “mental budgeting,” which suggests that individuals create mental categories of “accounts” or “budgets,” and then allocate the expenditures they wish to make to those different budgets. In theory, once a budget is exhausted, expenditures that belong in that account should stop, since they are supposed to be fixed—otherwise, what is the point of having a budget? But other researchers (Dilip Soman and Amar Cheema) have found that if someone REALLY wants to make an expenditure, they will find creative ways to reallocate that expenditure to a mental budget that isn’t full, and quite easily justify these mental accounting “tricks” to themselves.

Clearly this can be problematic if the expenditures you are trying to reallocate are things like Louboutin heels or bottles of Dom Perignon, and the budget you are reallocating them to (instead of your entertainment or clothing budgets) is your mortgage or tax budget. But what if you have maxed out your charitable giving budget for the year but yet you really want to make an additional contribution to a cause? Will/do people dip into other budgets to do so? And if so, why?

To start to answer those questions, we conducted interviews with 42 individuals, all of whom self-identified as having made charitable donations in the past and had varying financial capacities and cause preferences. All of them identified that they have some sort of a “charitable giving budget” – for some it was quite formal (i.e. “a percentage of our non-registered assets”), while others described their budgets as “loosey-goosey” and “not scientific or mathematical.”

Interestingly, regardless of how the budget was determined, nearly all of our donors identified that their charitable gifts tend to work out to somewhere around 10 percent of their annual income—the historical percentage advocated as tithing by the Old Testament (and the modern-day Christian church). What was most remarkable to us is that it was true even among donors who explicitly identified themselves as non-religious!

Donors also spoke about the importance of giving even when other budgets were strained (as was the case for many in the recent economic downturn): “…for my own soul it was the most important thing to continue to keep doing, because in tough times there is a lot of stuff that challenges your humanity” and “we know that we can’t take it with us.”

When we asked them about spending outside of their identified charitable budget, many respondents reflected a relatively sophisticated and strategic perspective, referring to things like “having a plan…a strategy,” “[the amount I give] is driven by what I’d like to get done more than from any particular target amount,” and “if I think I can have a real impact, if doing it will get them there.” The more intrinsic the motives a donor had, the more likely they seemed to expand outside of their original charitable budget—this finding is consistent with our analysis of data from the Canadian Survey of Giving, Volunteering and Participating.

For more about our findings, you can access the article online at http://nvs.sagepub.com/content/early/2013/09/25/0899764013489776.abstract. You never know, the findings might surprise you!

Dr. LaBarge was born in Ottawa, Ontario and earned a B.Comm. and a M.Sc. in Marketing at Queen's University and a Ph.D. in Marketing at the University of Oregon.  Her research interests centre around public policy issues in marketing, charitable giving, and how marketing can positively affect consumer well-being. Contact her, Mlabarge@business.queensu.ca



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