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Giving for altruism? Many people just want free stuff

*High-quality gifts seem to inspire more giving
*But they don't come close to paying for themselves

Thank you gift
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It's not always the thought that counts.

Today is "Giving Tuesday," which kicks off the time of year when Americans dig deep in their wallets and donate to charities and nonprofit organizations. Individual donations are hugely important for a lot of them, making up the majority of revenue for most nonprofits and charities.

There are a lot of things donors are looking for: A reduction in taxes, a sense of doing good in the community, and the satisfaction that comes from donating to causes that go against the opposing political party (so-called "rage donating.") But it turns out what people really want is stuff.

According to fresh research from economists at Texas A&M University, donors are far more likely to give if they receive a gift — or "donor premium" — in return. And when they're presented with the option of donating with or without reciprocity, they'll usually take the gift. There are caveats though, and the gifts almost always end up costing more than the charity gets from the increase in donations.

"The preponderance of the evidence is starting to show that these unconditional gifts are not doing what you want them to do," said Jonathan Meer, an associate professor of economics at Texas A&M and a co-author on the paper, which is currently under peer review. Catherine Eckel of Texas A&M and David Herberich of payment services firm Marqeta are also co-authors.

The researchers worked with the Association of Former Students at Texas A&M to test the donation responses of alums who were solicited for money during a regular direct-mail fundraising campaign. The experiment was designed to test whether donor premiums — in this case, a luggage tag branded with the school's logo — would influence giving patterns.

The researchers tested whether people were more likely to give if they received the gift at the same time that they received the solicitation, or the promise of a gift only if the alum donated. That first group — which was called "unconditional" — was further divided into those who got a cheap plastic luggage tag and a more expensive leather luggage tag. The group that was promised a gift if they donated — the "conditional" — was divided into groups in which the donor had to either opt in to receive the gift or opt out to specifically not receive the gift.

For the experiment, 140,642 alums were randomly divided into these different groups.

The only group of donors that saw a real effect of the gifts was the one that received an expensive gift along with the solicitation letter. Nearly 1 percent of the donors who received an expensive luggage tag (which cost $3.59) donated during the fundraiser, nearly twice the next highest rate of return. That might seem really low, but it's within the normal range of responses for this type of solicitation. That 0.97 percent was far higher than the control group, of whom 0.47 percent donated. That result was statistically significant.

The unconditional plastic gifts (the less expensive ones, costing $0.74) generated slightly more donations than the control, but not by a lot.

Still, the high-quality gift wasn't ultimately worth it for the school. More donations are great, but they didn't cover for the investment cost of the gift itself.

"Getting half a percentage point more of giving is not going to make up for the extra costs," Meer said. "It's not going to be able to make up for the extra costs of sending all those people the additional item."

To go a level deeper, the researchers tested how many donors would choose to receive the gift if they had to request it ("opt in") compared with those who would receive it unless they specifically asked not to ("opt out"). This portion of the experiment was meant to test the true altruism of the donors.

"A rational person thinking through this might say 'I want them to take this money and spend it on programming, not on a gift,'" Meer said. In fact, both groups strongly preferred to receive the gift in both cases.

In the group that could opt in and receive a gift after they donated, 60 percent chose to the receive the gift and 40 percent declined. Of the group that had to specifically opt out, 88 percent chose to receive the gift.

'Crowding out'

Studies have shown mixed results when it comes to charities and other non-profits offering thank-you gifts as donor premiums. In a noted study from 2012, Yale scholars found that people were less likely to donate to a charity when they were offered a thank-you gift. The paper, which was published in the Journal of Economic Psychology, posited support for the "crowding out" theory, which suggests that offering gifts can change the mindset of potential donors. Basically, if someone is feeling altruistic and goes to donate, the possibility of getting something in return puts them in a more economic mindset.

It's possible that the 2012 results differ from Meer's because the prior study focused on gifts sent after a donation is received. Those conditional gifts generated about half the donations that high-quality unconditional gifts did, according to the recent study. Just 0.45 percent of donors in the conditional group donated, which was very close to the control group at 0.47 percent.

It's also a matter of context for any particular group soliciting donations, Meer said. Donors to Texas A&M could want to show off the logo for social reasons. In the context of the 2012 paper, the charities could have developed a donor base that's opposed to gifts.

"It may just be that donors to that charity have an aversion to receiving donor premiums," Meer said. "There could be more a context of 'we use our donations for a cause.'"

As far as Giving Tuesday goes, it's really up to the individual organization to decide the best way to raise funds.

The event, which was founded by the 92nd Street Y, doesn't have a specific policy on donor premiums, it said in a statement: "#GivingTuesday is an open-source movement, and we encourage organizations and individuals around the world to come up with all kinds of creative ways to do fundraising."