Thursday, December 29

Should charities threaten potential donors?

Earlier this year, I blogged about my dislike for charities who try to guilt donors by mailing out unsolicited gifts. While I find this to be an offensive practice, my friend Tom recently received a mailing from a charity called Smile Train that may have topped this. (In case you're wondering about the picture below, Smile Train "is dedicated to helping the millions of children in the world who suffer from cleft lip and palate").

When taken literally, I don't think the mailing is particularly offensive. I don't particularly like receiving mail asking me for money (especially when it comes with jarring pictures), but there isn't much I can do about that. So I expect charities to mail me, regardless of whether or not I donate to them. If Smile Train is offering to stop contacting me if I make a donation, it's an unexpected bonus.

The offensiveness comes when you think about what Smile Train is really saying. If they are promising not to contact me anymore if I send them money, this begs the question of what they'll do if I don't send them money. The implication is that they'll keep contacting me. The implicit statement is, "Donate money or we'll keep harrassing you with annoying letters." It's bordering on an (albeit quite mild) form of extortion.

As an economist who has done some research on charitable donations, I'm curious whether this tactic will have much success. I'm skeptical. Let's think about what happens for two different types of people: those who like Smile Train, and those who don't.

If I like Smile Train, there's a good chance I'll donate, regardless of whether or not they promise not to contact me again. But evidence shows (not surprisingly) that past donors are more dependable than new donors. By not being able to contact past donors who like Smile Train again, Smile Train is losing out on potential revenue in the future. Sure, these sympathetic donors can still contact Smile Train on their own to donate, but people are generally more charitable when they are asked for money.

If I don't like Smile Train, I probably won't donate under normal circumstances. But with their offer not to contact me again, I might make a very small donation just to get them off my back.

Is the benefit of receiving a little bit of money from reluctant one-time donors worth the trade-off of not being able to ever solicit sympathetic donors again? Probably not. It seems like a very steep price to pay in the long run in order to get a short-term gain.

But in this case, it might actually make sense. Smile Train Canada's liabilities are three times greater than its assets, which suggests it desperately needs money to pay its bills. The charity may be so concerned about drumming up change today from otherwise reluctant donors that it's willing to sacrifice more stable donations down the road.