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Demotivating incentives and motivation crowding out in charitable giving

Significance Many nonprofits solicit contributions by offering thank-you gifts, such as mugs, in exchange for donations. However, these gifts may have counterproductive effects by drawing a prospective donor’s attention away from altruistic motives and leading him or her to use a more cost–benefit mindset. This study tests for the effect of thank-you gifts during a nonprofit’s direct-mail fundraising campaign and finds that gifts reduced donation rates in this campaign. A complementary online experiment confirms that thank-you gifts can reduce donation rates but only when the gift is visually salient and thus more likely to occupy the donor’s attention. Nonprofits should consider their donor’s psychological incentives carefully before implementing these types of extrinsic incentives. Research has shown that extrinsic incentives can crowd out intrinsic motivation in many contexts. Despite this, many nonprofits offer conditional thank-you gifts, such as mugs or tote bags, in exchange for donations. In collaboration with a nonprofit, this study implements a direct mail field experiment and demonstrates that thank-you gifts reduced donation rates in a fundraising campaign. Attention-based multiattribute choice models suggest that this is because prospective donors shift attention to the salient gift offer, causing them to underweight less salient intrinsic motives. Attention to the gift may also cause individuals to adopt a more cost–benefit mindset, further de-emphasizing intrinsic motives. Consistent with these hypotheses, crowding out was driven by those who donated higher amounts in the previous year (i.e., those who likely had higher intrinsic motivation). In a complementary online experiment, thank-you gifts also reduced donation rates but only when the gift was visually salient. This corroborates the mediating role of attention in crowding out. Taken together, the laboratory and field results demonstrate that this fundraising technique can be demotivating in some contexts and that this may occur through an attention-based mechanism.