Have you ever stopped to think why people participate in philanthropic activities — willing to give from their own time and money, make efforts, and receive nothing in return?
Crowdfunding is an important exponential growing phenomenon, which raised $34.4 billion in 2017. Therefore, studying motivations and factors that influence monetary support decision within it is essential. My Lab and field experiments, on more than 800 funders, scrutinised four main rewards that are used as proxies for motivations —gifts, recognition, participation, and influence — and their impact on monetary support. Alongside these motivations, my model scrutinises the impact of campaign type, age, gender, personal income, charity affiliation, country of birth, and perceived meaning on donations in crowdfunding.
The crucial role of meaning
‘The more one forgets himself – by giving himself to a cause to serve or another person to love – the more human he is and the more he actualises himself’ (Frankl, 1946)
The main finding concerns the essential role of meaning, as defined by Viktor Frankl, as part of his will to meaning and logotherapy (the ‘Third Viennese School of Psychotherapy‘). I theorise that this will to meaning is what motivates people to participate in crowdfunding. The main tenet of the will to meaning is that people have a psychological need for purpose (Frankl, 1969). To live in true happiness and contentment, human beings must attach meaning to their actions. I claim and demonstrate that participating in philanthropic activities such as crowdfunding can satisfy — to some extent — this basic need.
Researchers have related to Sigmund Freud’s ‘will to pleasure’, and to Friedrich Nietzsche’s ‘will to power’ (Joshi et al, 2014). However, empirical research to confirm ‘meaning’ theories has been scarce (Park, 2010). Frankl’s logotherapy, a psychotherapeutic method to overcome suffering using the will to meaning, was reinforced, finalised, and, unfortunately, confirmed by Viktor Frankl during World War II. Frankl, a Jewish Holocaust survivor, outlived several death camps, to confirm that meaning is the ‘primary motivational force in man’ (Frankl, 1946). Frankl provides practical methods to discover meaning as part of logotherapy. Two of these methods are particularly relevant to philanthropy in general and crowdfunding specifically: ‘doing a deed’ and ‘experiencing something or encountering someone’. Crowdfunding allows participants first to contribute, and second to experience something through the different rewards they are offered.
My study shows how funders’ perceived meaning is the strongest predictor — with robust significant explanatory power— of monetary support decision by far compared to any other variable examined. The higher the perceived meaning that people find in crowdfunding, the higher the monetary support they will give. Namely, for each increase in the level of perceived meaning, there is an average increase of around 21 per cent in monetary support. The transition between having a negative feeling of meaning to a neutral feeling produces an increase of 49 per cent in average monetary support. Figure 1 demonstrates how meaning and support are strongly correlated.
Figure 1. Comparison of average perceived meaning with average monetary support within campaign type
The non-trivial model of crowdfunding
My study revealed a non-trivial model where variables that would seem to affect funders’ support, such as personal income and charity affiliation, did not show significant influence. On the other hand, less obvious variables to have impact on donation giving, such as country of birth and meaning, showed significant effect. Moreover, the significant effect of campaign and reward predictors indicates that it is not giving per se that is critical, as claimed by the warm glow theory (Harbaugh, 1998; Andreoni, 1990; Bénabou and Tirole, 2006), but how the giving is set (i.e. the rewards offered and chosen) and who (i.e. the particular campaign) is the receiver.
Which perks fund seekers should offer in reward-based crowdfunding?
My experiments revealed that gift is the most preferable choice of reward in crowdfunding (66 per cent of participants). Nevertheless, it also generates the lowest average monetary support. Recognition generated a higher average monetary support by seven per cent than gifts, participation by 11 per cent, and influence by 41 per cent. Fewer participants seek influence (only 4 per cent), but those who do seek it are prepared to pay the most for it. These findings also show the over-justification effect (Titmuss, 1970; Gneezy and Rustichini, 2000; Fehr and Falk, 2002; Bénabou and Tirole, 2006; Kamenica, 2012), where gift and recognition, namely, extrinsic incentives, crowd out intrinsic motivations and induce lower levels of average monetary support, while participation and influence, namely, intrinsic incentives, generate higher levels of average monetary support. Figure 2 visualise these discoveries.
Figure 2. Comparison of the sum of support with average support within rewards
Another interesting finding was the crucial role of the sociocultural factor presented by the funders’ country of birth. Participants born in the United States give significantly higher average support in 37 per cent than participants born in Canada and in 7.5 per cent compared to British born funders (Figure 3 illustrates these results).
Figure 3. Comparison of average monetary support given across funders’ country of birth
Finally, I found that the variables that influence support are the ones that are less external and more internal to the crowdfunding campaign. An exception was the sociocultural predictor. Figure 4 shows the general model I suggest. I assume that will to meaning is what brings people to participate in crowdfunding. The internal factors — rewards and campaign — influence support decision as well as country of birth (even though it’s an external factor). Meaning is the strongest motivation that significantly affects support. Other external factors — gender, age, income, and charity affiliation — do not affect pledges.
Figure 4. Reward-based CF model: meaning, and internal and external factors
Notes: Solid arrows indicate internal factors directly related to the CF. Dashed arrows indicate external factors not directly related to the CF
Increase your funders’ meaningfulness experience
Entrepreneurs and fundraisers should think of means to increase the perceived meaning of their funders. Perhaps emphasising the importance of the campaign goals and the benefits for the fundraiser and the public when the goals are realised. In summary, I assert that one of the most critical and practical conclusions from this study is that economic exchange mechanisms must not ignore or understate the importance of the motivations of players in the exchange game nor underrate the players’ search for higher meaning. Meaning is an integral motivation for giving and, therefore, must be acknowledged in behavioural (economics) research as well as by capital raisers.
- This blog post is based on the authors’ research presented in the annual congress of the European Economic Association in Manchester, August 2019.
- The post gives the views of its author(s), not the position of LSE Business Review or the London School of Economics.
- Featured image by Matese Fields on Unsplash
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Jonathan M. Bezalel is a senior economist and a senior deputy comptroller at the Ministry of Finance in Israel. His research interests are in the fields of behavioural economics, economic psychology, and philanthropy. He has been an economist at the Bank of Israel, sourcing analyst at Intel, and a senior economist at the Ministry of Health. He also held a position as a teacher and research assistant at The Hebrew University of Jerusalem. He obtained his BA and MBA, magna cum laude, from The Hebrew University of Jerusalem, and attains his PhD from the University of Leicester. Email: email@example.com