College students turn HOPE fundraiser into an economic experiment
MIDDLEBURY — A Middlebury College course in economics has enlightened more than a dozen students on the subject of philanthropy and paid some nice financial dividends for a local nonprofit that serves Addison County residents in need of food, shelter and clothing.
The course, called “Economics of Philanthropy,” was taught this past spring by Jeffrey P. Carpenter, the James Jermain Professor of Political Economy at Middlebury College. He explained the course called upon students to study literature associated with philanthropy, as well as design and implement an experiment to enhance their understanding of the subject.
The students and Carpenter picked an interesting challenge for their field experiment: Could they redesign the standard charity raffle in ways that might increase participation, and result in donors giving more? They decided to put that question to the test in a door-to-door fundraising campaign, with all proceeds going to the local nonprofit organization Helping Overcome Poverty’s Effects, known as HOPE. The students split up into teams that tried four different raffle sales pitches during a door-to-door campaign that reached out to around 2,000 Middlebury-area homes and yielded $4,210 in raffle proceeds for HOPE.
“It’s unbelievably satisfying to see how this can impact people’s lives,” Carpenter said of the door-to-door effort. “It is super-practical.”
And the exercise also yielded some interesting findings that should help HOPE and other charitable organizations as they plan future fundraisers. Carpenter explained that each of the four different raffle pitches the student teams used offered a $500 gift certificate as the payoff.
FOUR DIFFERENT PITCHES
The first was what Carpenter described as the “standard raffle.” Buyers were sold tickets at $1 each. The more tickets you bought, the more chances you had to win the prize.
“This is the way that most charity raffles are run,” Carpenter noted.
The second strategy involved giving buyers a “quantity discount” on tickets when they were willing to buy more. So while $5 would get you five tickets, $10 could get you 13 and $20 could get you 30.
“To an economist, this just means that we are making the raffle more ‘efficient,’ such that the person who values the prize the most is by far the most likely person to receive it,” Carpenter said.
In the third pitch, student groups simply implemented a “quantity penalty.” Here, $5 bought you 5 tickets, $10 yielded 9 tickets, $20 yielded 15 tickets and so on, up to $60 buying just 30 tickets.
The fourth strategy offered prospective donors leeway in paying what they wanted for raffle tickets. Buyers received five tickets for any donation of $5 or more.
“We simply told people that they could pay what they wanted for the five tickets — and that every donor would have exactly the same chance of winning the prize,” Carpenter noted of the final option.
The students, Carpenter and his 10-year-old son, Henry, divided into nine groups of two to conduct the survey. Here are some of their findings:
• Someone answered the door at around 850 of the 2,000 homes that were visited.
• People donated the most — an average of $6.37 — when presented with the fourth sales pitch: Pay what you want for an equal chance of winning the raffle. Folks paid an average of $6.23 for the quantity discount (pitch No. 2); an average of $4.35 for the standard raffle (pitch No. 1); and an average of $3.59 for the version that imposed a “penalty” the more tickets you bought (pitch No. 3).
“Putting it all together, we learned some valuable lessons for charities,” Carpenter said. “With incentives, you can get people to donate more and with the right framing, you can get more people to donate.”
Based on the class’s findings, nonprofits would be best served abandoning the standard raffle format for one that either gives a quantity discount or that allows people to pay what they want for an equal chance at winning.
Carpenter said some of his future classes will also do field work related to philanthropy, which is alive and well in Addison County. One person gave $100, while a couple of people gave $60 and $40. The largest percentage of donors (15 percent) gave $5. Some people decided to donate while declining the raffle tickets. Carpenter thanked The Lobby restaurant in Middlebury, which provided three of the $500 gift certificates. The college sponsored the fourth.
“Not one person who opened the door was rude,” Carpenter said. “Not everyone donated, but they all listened and sent us on our way with a smile. In fact, many of our visits turned into great conversations and after dreading the first shift, we all looked forward to the next because it was a great experience.”
Jeanne Montross, executive director of HOPE, gave much thanks to Carpenter and his students for their efforts.
“We are so pleased that the students raised so much money,” Montross said. “Contributions such as these are extremely valuable to us as they can be targeted for use where most needed, unlike grant funds which have restrictions. This funding we have targeted toward our work to increase low-income households’ access to healthy produce, and will assist us as we work to revamp the Addison County Gleaning Program.”
Reporter John Flowers is at [email protected].
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