London Business School
When talking about better marketing for a better world, I believe the challenges for marketers is to take micro-level phenomena and learn how to scale these phenomena into macro-level solutions. With this in mind, I would like to focus on what I believe are the two key barriers facing the charitable giving industry in making the world a better place, and present a potential pathway to get over some of these barriers.
The first barrier facing the charitable giving industry is the same barrier facing pretty much every industry: maximizing “share of wallet.” Many people would like to donate more to charity, but find that they are too pressed for cash to do so. Indeed, as people earn more, as economies improve, it’s easy to assume that giving would also increase. However, in my research, I find that, across most levels of income, people feel strapped for cash, and as a result put of donating until they feel that they have sufficient spare money to do so. Yet, the percent of income that people donate to charity does not change substantially as income rises. In other words, once they do earn more money, the fail to put their good intentions into practice. To illustrate this phenomenon, in one study, my co-authors and I found that people who earned less than $50,000 a year predicted that they would donate an average of $500 a year if they did earn that much. However, data shows that people who do earn $50,000 actually only donate an average of $125 to charity. Why is there such a gap? One reason is that marketers are too good at selling people products. People adapt to the $50,000 lifestyle, are tempted by more personal expenditures, and donations get crowded out.
The second major barrier is getting people to donate to more effective charities. When people do choose to sacrifice their hard earn money, it is important to make sure that the charities they choose to support are maximize the welfare for the most people, or, in other words, make the biggest impact. However, a growing body of research shows that people are more drawn by charities that they feel an emotional attachment to, rather than causes that help the most people in the most cost effective manner.
How do we get around these issues? One potential path is to harness reputational incentives to foster what the philosopher Peter Singer refers to as a “culture of giving.” In order to create a culture of giving, a few key factors must be in pact. Most notably, people’s good deeds need to become more visible. Indeed, making behavior observability is a simple and straightforward way to increase cooperation by creating a descriptive norm. The “I Voted” stickers are a great example of creating a descriptive norm of voting through observability. The more people you see wearing an “I Voted” sticker, the more it becomes clear that voting is a behavior that is quite normative. But there are barriers to making charitable giving observable; there are strong norms against people publicizing their good deeds. No one likes a braggart, and that is particularly true of people bragging about their giving.
Despite these barriers, there is hope. Among billionaires, a movement called “The Giving Pledge,” starting by Bill and Melinda Gates and Warren Buffet, challenges wealthy others to publicly pledge a portion of their income to charitable causes. This “challenge” has had wild success in getting many of the country’s wealthiest citizens to pledge large sums of money to charity.
This leaves us with our own challenge: how do we scale such a pledge to the rest of society so that we can cultivate a culture of giving at large?
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