Charity Appeals That Mimic Business Pricing Backfire

It’s a familiar pricing trick: Gas stations offer fuel for $1.99 a gallon to suggest to drivers that they’re paying just a bit more than a buck, rather than nearly $2.

But charities are ill-advised to try such a ploy when suggesting gift amounts, according to a recent study.

A big reason is that pricing a gallon of gas is different than suggesting a donation. Drivers are looking for a good deal when they fill their tanks. Charitable donors, however, aren’t necessarily value hunters. Donors don’t want to spent too much time mulling over the optimal donation amount, because they have a certain “bliss point” that determines how much they want to give, according to David Reiley, co-author of the report. When they encounter numbers that aren’t commonly used, it demands what Mr. Reiley calls a “cognitive cost.” Rather than make the donation, the potential contributors are more likely to set the solicitation aside.

Mr. Reiley and his co- author, Anya Samek, tried out different “ask strings” — a series of suggested donation amounts — in a pitch for Tucson public broadcasting stations.

They found that when people were presented with a choice of giving $35, $50, $75, $100, or $250, 12.3 percent of those who were solicited made a donation. But when the $100 option was replaced with $95, the response rate declined to 11.4 percent. The average gift size also dropped, falling nearly 18 percent.

“If giving $100 is your ‘bliss point’ and someone suggests you give $100, you check the box,” he says. “But if you ask for $95, hmmm, it doesn’t sound quite right. It looks weird.”

Using round numbers is simple enough, but how should charities determine the range of suggested donations in the first place?

The answer isn’t clear, Mr. Reiley says. In a separate experiment, he and Ms. Samek tailored suggested gift amounts to donors’ previous contributions to see what would happen when the suggested amounts were ratcheted up. The result was a significantly lower response rate. That doesn’t mean that asking donors for more than they have given in the past won’t work. The question is how much the suggested donation amounts can be inflated. More research is needed, Mr. Reiley says, to see if there is a sweet spot for such increases that won’t scare away donors.

“How Do Suggested Donations Affect Charitable Gifts? Evidence from a Field Experiment in Public Broadcasting,” by David Reiley, Pandora Media and University of California at Berkeley, and Anya Samek, University of Southern California.