The role of seed money and threshold size in optimizing fundraising campaigns: Past behavior matters!

Fund raising appeals often announce that some funds have already been raised in order to reach a certain threshold. This article reports results from a field experiment examining the role of seed money (i.e., no, 50%, and 67%) in combination with threshold size (i.e., low versus high) in fundraising appeals across different targets (i.e., prospects, low fidelity donors, and high fidelity donors). Based on a 2 × 3 × 3 between-subjects design we investigate charitable behavior of 25,617 households. Findings reveal a novel qualification of using seed contributions as well as the necessity of a communication differentiation by considering past behavior. We show that seed money works well if the threshold is high but with a low threshold it could have a baleful influence. More specifically, in campaigns targeted at prospects and low fidelity donors, the announcement of seed money increases donations regardless of the threshold level. However, in campaigns targeted at high fidelity donors, seed money is an effective strategy only when the threshold is rather high.

► Effects of seed money and threshold size on charitable contributions are shown.
► This effect is revealed across donor segments.
► Need for differentiation in direct-mail appeals by past donations is shown.
► Results are obtained in a real-life experiment including 25,617 households.
► Results hold across two charities, adding to external validity.