Saturday, July 23, 2011

Investing in Younger Donors

How much sense does it make to spend time attracting young donors?  In terms of quick payoffs, younger donors leave a lot to be desired.  They have less income.  They have fewer assets.  They have student loans, childcare costs, and new mortgages.  These financial realities can make philanthropy a distant concern.  So, it is no surprise that younger donors rarely appear on major donors lists.

Yet, some argue that investing in young donors can payoff later.  Fundraisers who develop young donors may create a charitable habit that can persist throughout life.  Dr. Jonathan Meer of Texas A&M University presented results from his investigation of this question at the 2010 American Economic Association conference in Atlanta, Georgia.  Following over 8,000 alumni of a private university for up to 27 years, he explored whether or not giving when young created lifetime giving habits.

Measuring how giving when young affects giving when older is difficult.  It is easy to show that people who give when they are young also give when they are older.  (Indeed, in Dr. Meer’s results, those who were frequent donors soon after graduation were much more likely to still be donors 20 years later.)  But, this is not necessarily useful for the development officer.  This association doesn’t prove that generating gifts from the younger donor actually causes generosity in later years.  It may just reflect that that generous people are generous throughout their lives.

Dr. Meer’s study attempted to overcome this problem.  He investigated the impact of a fundraising “shock” to the normal pattern of giving.  Here the “shock” was whether the alumnus’ freshman-year roommate was a volunteer solicitor during the first five years after graduation.  About 23 percent of alumni were solicited by a former roommate during this time.  Previous studies have shown that being solicited by a former roommate dramatically increases the likelihood of making a gift to one’s alma mater.  By measuring the long-term effect of this one-time high-impact solicitation, the study was able to isolate the results of the fundraising activity itself.  The statistical results implied that frequent giving to the university when young - due to an outside fundraising “shock” - later resulted in giving about 6.5 times more money when older.  Thus, encouraging the giving habit in the first five years after graduation paid large dividends decades later.  Dr. Meer concludes, “… it seems evident that the pursuit of frequent gifts from young alumni, even if the university suffers a loss in the process, is justified.” 

Interestingly, these long-term effects were caused by the frequency of giving.  The amount of giving didn’t matter.  This makes sense if we think in terms of habit formation.  Making ten gifts of $100 may ingrain the giving habit far more than making a single gift of $1,200. 

This study provides unique evidence that charitable giving when young is habit forming.  The effects of giving when young appear to last well over 20 years and can ultimately result in substantial donations.  Investing in fundraising today can result in substantial gifts far into the future.

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