The Power of Matching Gifts and Challenge Gifts
By Joseph Bornstein | CEO & Founder of CauseMatch.com
“[N]ever underestimate the power of a challenge gift. [People] love the ‘buy one, get one free’ concept, and the ability to leverage a gift is an irresistible temptation for many.”
~ Kent E. Dove, Conducting a Successful Annual Giving Program
Matching gifts have been statistically proven to increase the rate at which people donate and their average gift size.
According to Yale University Economics Professor, Dean Karlan and his study on matching funds, simply mentioning matching gifts make a significant impact:
MATCHING FUNDS INCREASES THE REVENUE PER SOLICITATION — BY 19 PERCENT. IN ADDITION, THE MATCH OFFER INCREASES THE PROBABILITY THAT AN INDIVIDUAL CHOOSES TO DONATE BY 22 PERCENT.
The psychology of why matching gifts motivate giving are as follows:
(1) Empowerment: We all want to make a difference and make a positive impact on the world. Matching funds provide a vehicle for amplified impact. Through matching funds, each dollar contributed has 2x, 3x, or 4x the impact.
(2) Self-esteem: Sometimes donors want to donate but they feel that their gift is only a “drop in the bucket.” As such, rather than creating a sense of fulfillment and pride, their small gift becomes a symbol of the donor’s limited financial ability. Matching funds help solve the psychological barrier by assuring the donor that they gift is that much bigger thanks to the matching funds.
(3) Limited-time Opportunity: Matching Fund campaigns only happen once or twice in the fundraising cycle of most nonprofits. As such, they are a unique opportunity to “get a good deal” and make a bigger difference for the nonprofit. By telling a donor that “right now” they have the chance to double, triple, or quadruple their impact, you are creating a sense of urgency to seize the limited-time opportunity.
It is for this reason that matching gifts motivate people not just to donate at higher frequencies but also to donate a larger gift. People both feel that now is the key time to donate and that now is the time to make a considerable gift as an investment during the limited-time matching opportunity.
What is the best matching funds ratio?
The majority of matching campaigns are either 1:1, 2:1 or 3:1. Sometimes nonprofits also run 1:2 matching campaigns e.g. the matcher gives $1 for every $2 donated by the “crowd.”
Larger match ratios don’t affect subsequent gifts.
A 2:1 matching ratio (each dollar you donate will be matched by $2) or a 3:1 matching campaign will in no way be more effective than a 1:1 matching campaign. This has been proven across multiple studies and reinforces CauseMatch’s own direct experience (1, 2).
While the match treatments relative to a comparison group increase the probability of donating, contrary to conventional wisdom, larger match ratios (2:1 and 3:1) relative to smaller match ratios (1:1) have no additional impact. This result directly refutes the rationale for using larger match ratios, and stands in sharp contrast to current fundraising practices. ~Dean Karlan; John A. List “Effect of Matching Ratios on Charitable Giving in the United States”
Given that matching ratios beyond 1:1 do not improve rates of giving, CauseMatch recommends that nonprofits do what is authentic to their organization. This means that if they cannot raise matching funds beyond a 1:1 ratio, they should not pull-in pre-existing gifts to inflate the matching campaign’s goal. Not only will it fail to improve fundraising results, but it will also hurt the organization as outlined below.
Firstly, staff morale will decrease because staff members will feel like they participated in something not fully real. Secondly, the public and other philanthropists will believe you raised much more new money than you actually did, which will make your annual fundraising more difficult. People will have the perception that you secured a larger portion of your annual budget than is reality, and thus will be less inclined to give since they think you are better endowed than you actually are.
As such, I recommend that you do an honest evaluation of the realistic (yet ambitious) prospects for securing your matching funds, and use that as the basis for your campaign. This needs to be compared to the level of “crowd dollars” you think you can raise through smaller donors. By balancing those two factors, you will determine your goal and your matching campaign ratio.
We do not recommend running campaigns with a matching ratio below 1:1. For example a donor offers to give 50 cents for every dollar donated from the “crowd.” Above, I provided three reasons why matching funds motivate giving: (1) empowerment; (2) self-esteem; (3) limited-time opportunity. Doing a campaign at a ratio less than 1:1 does not have the traction to significantly fulfill these drivers.
Matching campaigns that are less than 1:1 have…
Low Boost in Donor Empowerment
Saying that you will multiply a gift by 1.5x just feels much less impactful than saying “We’ll DOUBLE your gift.” Or “we’ll triple your gift.”
Low Boost in Donor Self-esteem
Multiplying a gift by 1.5x just doesn’t have the same punching power as a 2x, 3x, or 4x gift. It doesn’t create the same sense of dramatic improvement upon the original gift and so it doesn’t significantly boost the self-esteem of the donor.
Poor Sense of Limited-time Opportunity
The fuel to make a limited-time opportunity feel compelling is the donor’s sense of boosted empowerment and boosted self-esteem. Without those ingredients, the limited-time opportunity doesn’t have the same degree of urgency for the donor.
Matching campaigns that are 1:2 or a lower ratio are also confusing and risk creating high website bounce rates
Perhaps most importantly, a 1:2 matching ratio is simply confusing. The word “matching” means at least 1:1 e.g. “I’ll match each dollar you give.” The American English Oxford Dictionary defines “match” as “to be equal to something in quality or strength.” The idea of being equal is the heart of the definition. Saying, “I’ll match you by half” doesn’t register in the same way and it cuts against the simple definition of the word.
In the world of online fundraising, where you have less than 3-seconds to capture a viewers attention, simplicity and clarity is key. You need a simple, easy-to-understand message that will resonate with the viewer immediately. 1:2 matching campaigns are confusing, take a little time to grasp, and are thus not good solutions for online campaigns.
In our own research as well as first-hand experience running online fundraising campaigns for hundreds of nonprofits across tens of millions of dollars raised — having at least a 1:1 matching ratio is vital to a successful matching campaign.
91.6% of prospective donors report that a 1:1 matching ratio is more compelling than a 1:2 matching ratio.
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In summary, we recommend securing at least a 1:1 matching ratio. Securing matching funds beyond this ratio is not necessary. Numerous studies prove that 1:1, 2:1 and 3:1 boost giving rates equality. However, going below a 1:1 matching ratio is not advisable. When considering your matching funds campaign ratio, you need to factor the ambitious but reasonable amount you can raise both from matching donors AND “crowd” donors and to use that as the basis for how much matching funds you raise and your matching funds ratio.
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- “Matching and Challenge Gifts to Charity: Evidence From Laboratory and Natural Field Experiments”: 2008, Experimental Economics, Daniel Rondeau, John List
- “Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment”: 2007, American Economics Review, Dean Karlan, John List.
