The Role of Seed Money and Threshold Size in Optimizing Fundraising Campaigns: Past Behavior Matters!

Fundraising 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 2x3x3 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.