Why Matching Gifts Work
(Jan. 4, 2011) One reason why fundraisers tend to overlook matching gifts is that the evidence for their success has been largely anecdotal. However, that is now changing thanks to recent research, and the findings are encouraging.
John A. List, an economics professor at the University of Chicago, has conducted natural field experiments to help develop a baseline for assessing the performance of matching gifts. "People underestimate the importance of matching gifts," List says. "If you can say to people that their dollar is worth more than before, then a matching gift becomes more important."
In one study, which solicited responses from more than 50,000 prior donors to a single nonprofit, List and his colleague Dean Karlan found that matching gifts increase not only the revenue per solicitation, but also the response rate. (Interestingly, the study also found that larger match ratios-for example, offering $2 or $3 in matching funds for every $1 donated-did not spur donors to give more.) List's other experiments have shown that challenge grants increase the amount of contributions in door-to-door and direct-mail fundraising campaigns that he studied.
List cautions that his research on matching gifts predates the economic downturn, and he has seen one significant post-meltdown change already: a decline in the power of social pressure, which his research has shown plays an important role in fundraising drives. "The onset of the recession was right in the middle of our capital campaign," List says. "What's pretty stark in our data is that, after the onset of the recession, people didn't have a problem saying ‘no.'"
Even so, List remains optimistic. "My first guess is to say that what we found before is what we'll find afterwards. I think what we're finding is that having a match matters a lot, and that varying it doesn't affect the giving rate."
People give for the "warm glow," which is independent of economic conditions. This is clearly seen when comparing stock market performance to aggregate individual giving over the past 35 to 40 years, List says. When the S&P has a good year, giving rates also go up, but when the S&P goes down, giving declines at a shallower pace. "Giving seems to be stickier downward and more flexible upward," List explains. "But people generalize from the positive case to the negative case, and that's not right."
James Andreoni, an economics professor at the University of California, San Diego, says that matching gifts are an effective way of lowering the barrier to an initial gift from reluctant donors. "A match encourages people who gave zero before to give a positive amount," he says. "And the evidence from fundraisers is that once you get people to start giving, it's easier to maintain them as contributors."
This is certainly an argument that fundraisers can take to their boards to persuade them to try a matching-gift program.
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Editor's note: Portions of this article were adapted from an article in Advancing Philanthropy.