Setting Donation Tiers for Crowdfunding Campaigns

Setting the right donation tiers for crowdfunding campaigns is a delicate balance between art and science. By offering pre-determined donation amounts, or tiers, you are creating a "social norm" that gently suggests appropriate giving levels for potential donors. Donation tiers also provide benchmarks, essentially guiding donors on how much they should give while showing them the impact of their contribution. The success of your donation tiers depends on several factors, such as the nature of your nonprofit, the giving behavior of your typical donor, your organization's fundraising history, and the context in which you are asking for the gift. In this article, we will discuss the importance of social influence, the impact of tiered donation lists, leveragign data on donation history, using industry best practices and how to focus on the impact of the donations to drive donations further. We will also provide some helpful tips on defining impact through various methods and incorporating recognition and rewards for your donors. Social Influence Effect and Social Norms Tiered donation lists and suggested donations are based on the social influence effect, which influences an individual's decision-making based on social norms or information provided to them. Researchers Jen Shang and Rachel Croson found that suggesting donation levels increased average contributions by 12% by telling donors what is an 'appropriate' level to give. Moreover, these increased donation levels were sustained with higher donor renewal rates in subsequent years. Humans are social beings, and it makes sense that we tend to take our decision-making cues from the actions of others, especially when it comes to philanthropy. One person's contribution can be influenced by seeing how other people contribute. By providing donors with suggested giving levels, you are effectively guiding their decision-making and increasing the average donation amounts. Focusing on Impact to Further Drive Donations Tiered donation lists can be even more effective by providing context and impact for each donation level. This allows potential donors to understand how their money is making a difference. Researchers found that highlighting details about a charity's impact significantly increased a donor's generosity. By combining details about your nonprofit's impact with suggested donation levels, tiered donation lists use a multiplier effect to increase the generosity and giving probability of potential donors. To make sure you are providing a compelling fundraising appeal, use the SMART approach (Specific, Measurable, Attainable, Relevant, Time-Based) to create your impact goals. For example, Organization ABC aims to raise $50,000 by December 31st to help provide an education for 2,000 children in Cambodia's most hard-to-reach communities. The tiered donation options can be structured as follows: $100 will buy an all-terrain bicycle that will help a Cambodian child attend their nearest school that is 5 miles away $350 will pay for a full year of middle school tuition for a Cambodian child to continue their education $700 will provide 100 Cambodian children with school uniforms and supplies they need to be successful in school Notice that each donation option speaks to something relatable to your target audience. Additionally, setting a timeline is crucial to convince donors as to why donating now is necessary. Many organizations have found success with providing matching donation incentives for donors if they donate within a specific time frame (NPR fundraising as an example). Defining Impact There are several ways to define the impact of each donation tier, such as: Number of people impacted: This approach works well for campaigns providing a specific service to a certain number of people. Describe how many people are impacted for each amount to help shift donors' focus from the donation amount to the number of people they want to impact. Quantity based: This can be implemented when your organization provides specific, tangible items, materials, or experiences that are distributed directly to the people it supports. For example the number of meals donated. Time based: Consider time based metrics for long-term projects like capital campaigns or when raising funds for a service. This involves breaking up the tiers into units of time like hours, days, weeks, or months of work that the funds will provide Titles and recognition: If your organization's impact doesnt fall into any of the categories above, consider using recognition and rewards in your tiers to drive donations. Different levels of recognition can be assigned to donors at different giving levels. Assign related titles to donors via tiers to make the donation more personalized and encourage donors to choose their donation tier not just based on the amount but the label they're assigned along with it. This approach is particularly useful when the campaign is not quantifiable in easy-to-consume terms. Have fun with the tier names and make it related to your organization. Knowing your Donor and Donor Analytics In addition to mentioning impact, to set effective donation tiers, it’s important to analyze donation history, understand your donors, and tailor tiers to different groups and giving situations. Analyzing donation history is a scientific approach to setting donation tiers. By looking at past giving and giving within the sector, nonprofits can create benchmarks and set realistic giving tiers. A nonprofit can learn about its typical donor through its CRM system and by interviewing donors about their giving behavior. However make sure to take into outlier months such as larger donations in December and how donors donated. Donors who give through a website’s donation page are different from those who sign up for a monthly giving program or attend fundraising events. Once you know your donor’s average giving amount, it’s wise to research industry averages to compare and create a strategy for donation tiers. According to Nonprofit Source, the average online gift amount for Giving Tuesday exceeded $134. However, if you’re counting on donations received through peer-to-peer fundraising campaigns, your average might be lower. This is because many of the donors acquired via peer-to-peer fundraisers are new to your organization and are participating in a joint effort, so they tend to give at a lower level. The average gift made through a peer-to-peer fundraising page tends to hover around $70. Setting your Tier Amounts To make donation tiers effective, it’s essential to keep in mind the technique of anchoring, which relies on the brain’s tendency to heavily rely on the first piece of information offered when making decisions. By adding a default option to your tiered donation list, it can cause people to tend to give closer to the anchored value than they otherwise might have. Marketing researchers Indranil Goswami and Oleg Urminsky suggest that fundraisers might be overly apprehensive about using defaults in their donation campaigns. In their 2016 study, they found that setting donation defaults increased donation revenue in two ways: (1) by setting a lower default, it increased the number of smaller donors that gave to an organization; and (2) by setting higher defaults, it increased the average giving of each donor but reduced the total number of donors who gave. The anchoring strategy you choose should be dependent on your priorities. If you want to enlarge your pool of donors, then go for a lower anchor. Wheras a higher anchor may increase your average giving amongst current donors, but make it harder for you to attract new donors. Thought leaders in this space suggest the following as a guideline: For current low/mid-level donors: Set suggested donations at 1x, 1.5x, and 2x their average amount and offer an “other” option. For current higher-level donors: Set suggested donations at 1.5x – 1.75x, 2x – 2.25x, and 2.25x – 3x their average amount and offer an “other” option. Also limit your donation tiers to 3-5. This allows your donors to easily select between a few options and minimizes the risk of overwhelming them. It also reduces any “guilt” about choosing a lesser donation tier. Also, keep your tiers simple. This goes for everything from the tier descriptions to the reward scales. If you make the giving process too complicated, you’ll limit your potential donors. Rewards Rewarding donation tiers is another way to encourage giving. Upgrading repeat or legacy donors to higher tiers, offering gifts as recognition for each donor level, and publicly recognizing donors can all increase donation amounts and generate repeat support. It’s important to tailor recognition levels and rewards to your donation tiers and organizational goals. Lastly, make sure to get feedback and iterate on donation tiers. Constantly keep track of how your fundraisers are performing and adjust donation tiers as necessary. Create 3-4 donation tiers, set different donation tiers for different fundraisers and different groups of donors, and make sure the suggested donation amounts make sense for the fundraising campaign you’re planning. In conclusion, setting effective donation tiers requires careful analysis, understanding of your donors, and tailoring to different groups and giving situations. The right donation tiers can encourage donors to give at higher levels, resulting in a successful crowdfunding campaign. At Panxpan, we work closely with our fundraising organizers to help understand their goals and craft the right tier amounts. We also then design NFT giveaways and enable NFT gated rewards for each tier. NFTs limit the cost of the giveaway to maximize funds raised while NFT gated experiences provide real value for participants increasing the number of donor participants and average donation amounts. If you're interested in working on adding NFT giveaways to your next fundraiser, we'd love to work with you. Learn more about fundraising with NFTs here or start your next NFT fundraiser here.