The Economic Value of the Charitable Sector
8.1 INTRODUCTION Fundraising expenditures by charities are akin to advertising expenditures by private ﬁrms. Both represent an attempt to persuade individuals to part with their money, whether in return for consumer goods or more intangible philanthropic beneﬁts. Both are typically undertaken in a competitive environment, where shifting demand from one supplier to another may be as much of an issue as raising demand overall. Anecdotal evidence suggests that, like advertising executives, charity managers pay great attention to where they target their persuasive efforts. Some individuals have a higher predisposition than others towards purchasing certain types of goods, or contributing to certain types of causes. Where this predisposition is correlated with observable socioeconomic and demographic characteristics, an opportunity is created to increase the returns from fundraising (or advertising activities) by targeting campaigns on particular segments of the population. The literature on charitable fundraising to date has focused on the question of whether charity managers aim to maximize gross or net revenues (Weisbrod and Dominguez, 1986). However, little attention has been given to the role of targeting in fundraising activity, and consequently a number of interesting questions remain unanswered. What factors inﬂuence the choice of targeting strategy adopted by any particular institution? How far is it desirable to take the targeting process? To what extent does targeting succeed in dissipating the competition for funds between rival organizations? This chapter extends the existing literature on fundraising by incorporating targeting as a basic decision-making variable for the charity manager. Using a dataset...
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