This guestblog is written by Alejandra Pereda Kappner , who wrote her Master Thesis for the University of Tilburg, like Carolina.
I had the opportunity to base my master thesis on crowdfunding for charity purposes. When I was thinking about potential topics for my thesis, I realized that a vast amount of research had examined how the promotion of offline charities encourages or discourages donations. Nevertheless, as crowdfunding is still an emerging concept, no studies had been conducted on the effects of different types of promotions on online charities. So what are the main promotional factors that result in online fundraising success? To answer this question I analyzed the differences between 161 completed projects from the 1% Club. I looked at project and promotional characteristics to try to identify those that contribute to prompt project funding.
The study revealed that a number of factors influence project achievement speed, i.e. the time it takes to complete the funding of a project. Based on my results, I have developed some recommendations for project managers in order to speed up project funding and fight world poverty.
1. Long detailed descriptions about the project accelerate project achievement speed.
A projects description can communicate the project’s benefits and increase confidence and trust. As a result, project managers should make sure they include clear and complete descriptions of the project’s plan in the ‘short description of the organization’, ‘extended project description’, ‘project planning’, and ‘project budget’ sections.
2. Projects with large request sizes take longer to complete their funding.
For prompt project funding, demand only the required funds. If possible, managers can divide the large projects into two separate projects. Projects with long detailed description collected the required funds faster than those with brief descriptions. Consequently, once funds for the first part of the project have been met, the second part could include an explanation of the success and progress of the first part of the project. Additionally, asking members who helped fund the first part of the project is likely to result in higher compliance rates.
3. When the number of project donators is too small, additional project updates slow down project funding.
Project updates include the posted messages, weblogs, replies to members’ posts, and information about added links, photos or videos that are displayed in the project ‘wall’. 1% Club members can see how many people have donated to a project. Results revealed that adding too many project updates when the number of donators is low can slow down project funding. When potential donors observe too many updates without results, they believe that the project is incapable of completing its funding. They perceive projects that post many updates without results as desperate. As a result, when the number of project supporters is low, it is advisable for project managers to post only informational and relevant project updates.
4. Once the project has sufficient donators, additional project updates will accelerate project funding.
When posting project updates, timing is important. Think about it this way. You may keep pouring water into the soil, but without a seed, a tree can never be grown. However, once you have a seed, water will help the tree grow. Online project funding has a similar effect. Once the project has sufficient project donators, additional project updates will increase the funding speed. This happens because people can see others contributing to this cause, and the project is now seen as capable. Additional project updates are now seen as updates regarding project advancement.
5. Additional visual support can encourage or discourage donations depending on the number of project donators.
Visual support has a similar “seeding” effect as project updates. Visual support refers to the project’s uploaded photos and videos. A project with little or no project donators where many visuals are uploaded is seen as incapable and desperate. Potential members observe failed marketing efforts. Here, project managers should be selective about the visual support added to their project website. On the contrary, when there are many project supporters, additional visual support enhances perceived capability and encourages viewing behavior. In cases like these, managers should continuously add visual support.
6. Member recommendations decrease the negative effect of request size.
As previously mentioned, large request sizes slow down project funding. However, results showed that if website members recommend a project to others, the negative effect of a large request size significantly decreases. Word-of-mouth acts as a powerful persuasion tool. Therefore, project managers should stimulate peer recommendations within the website of a project. They can encourage their friends and current contributors to post comments, testimonials, and rate their projects. Managers may also encourage contributors to share the cause in their social networks and highlight the importance of donating. Information coming from friends or fellow community members is more likely to motivate contributions and increase member commitment.
I am Alejandra Pereda Kappner and I have just completed a Master in Marketing Management at Tilburg University. I based my master thesis on the promotional and social effects in crowdfunding. The 1% Club kindly offered an insightful view into their company, and with the guidance of my thesis supervisor Johanna Slot, I was able to uncover how the promotion of online charities influences donations.