Making giving harder for everyone

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I don’t understand this one. I get that the U.S. government is making cutbacks to its budget for aid. Fine. As I’ve written about previously, this will mean that U.S.-based NGOs will have to rely increasingly on donations from individuals to keep their programs afloat. So you’d think that to offset these cutbacks, our government would at least try to improve incentives for individuals to donate. But the opposite is happening. According to the Chronicle of Philanthropy yesterday,

The president’s latest budget proposal would, for example, raise money for the federal Treasury by imposing new taxes on the amount the wealthy give to charity. While no one is sure what “wealthy” might ultimately mean under this plan, the president has previously suggested that he means people who make $250,000 or more per year. That definition covers more people than you might think—including the average police captain married to a nursing supervisor in New York City.

Changing the tax treatment of charitable gifts in ways that make it more costly to give those gifts will undoubtedly cause many higher-income Americans to reconsider the amount of their gifts…

Today a donor in the highest tax bracket who makes a $100,000 gift to charity is excused from paying federal income tax of up to 35 percent on that sum… Under the proposed plan, however, a new tax of $7,000 would be due because people in the upper-income brackets could only deduct charitable gifts at the 28-percent tax rate.

Will this “new tax on giving” really have much effect on our national budget? Out of the few trillion dollars the government plans to spend next fiscal year, this would theoretically save only about $7 billion. In relative terms, not a huge dent.

Beyond the short-term effects (or lack thereof), this proposal creates some long-term problems, too. Essentially, it would increase the “transaction effort” required for individuals to make a donation, by reducing the incentives available to donate in the first place. There are three actions the government is taking that signal that charitable giving is not a valuable undertaking: (1) it’s cutting on its own charitable programs, (2) it’s reducing the amount of funding it provides to NGOs, and (3) it’s giving individuals less of a reason to give on their own. Long-term, if charitable giving continues to be de-prioritized by the government, then I can only see society following suit.

Can we please to something to counteract what’s happening here?

Thanks to the FrogLoop blog for bringing light to this issue; they’ve started a petition to sign, if that’s your thing.

Weekend Reading – May 29

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Since you might have an extra day off this weekend, here are a few posts worth exploring:

 

Should social businesses educate customers on causes?

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I’ve been thinking this week about the role businesses should (or should not) play in educating their customers about the causes they support. If a business is a “social” one, meaning that supporting causes is part of its core mission, does the answer change? When is it relevant for a brand to discuss causes, and when is it off topic? Let’s take a look at a few examples:

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Patagonia is one of my favorite clothes manufacturers. Their stuff lasts forever. But I really admire their involvement in the “1% for the Planet” initiative. This is a public commitment to donate one percent of all gross revenue towards environmental causes, a step that over 700 businesses have taken to date. It’s clear that Patagonia has taken environmentalism to heart. So what role does it take in educating customers about environmental problems and initiatives? Their homepage today provided a quick answer – it featured a call to action against dam construction in of all places, Patagonia, Chile. The page devoted to the cause goes on to provide videos, pictures, and written copy about why this is an important issue. You’ll also find stories about environmental issues in their print catalogs, too.  I’ve even seen separate ad campaigns with founder Yvon Chouinard making appeals for environmental causes. Patagonia isn’t shy about promoting environmentalism; they probably do a better job of presenting material than some non-profits even do.

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Now, let’s contrast Patagonia with Newman’s Own. In case you’re not familiar with Paul Newman’s enterprise, Newman’s Own is a line of salad dressings, sauces, and other grocery products. The business gives 100% of all profits to charity, and has donated over $300 million in the past three decades. Impressive. Their food is good, too. But Newman’s Own messaging about their philanthropic support couldn’t be different from Patagonia’s. Little is said about its charitable work on the Newman’s Own site; instead, most of this information is available on a separate site for the Newman’s Own Foundation. Similarly, the Foundation site says little about the food products. There’s very little connection between the brand and its charitable work; whereas Patagonia made the connection overt, Newman’s Own requires one to dig deeper to find the relationship. An interesting contrast, since Patagonia is more of a traditional for-profit company, and Newman’s Own is essentially a not-for-profit.

So why the difference in the two approaches? It all comes down to how relevant the cause is to the product, and thus to the customers.

The connection between Patagonia and environmental protection is pretty obvious; its clothing is intended to be used in the great outdoors, so its customers likely see environmental protection as personally important. By stressing their commitment to the environment, Patagonia presents itself to its customers as a savvy, educated, and active participant in environmental causes. Perhaps many of its customers would like for themselves to be perceived in the same way, and by wearing Patagonia clothing, they can help convey this message. I’m not criticizing Patagonia for this – it’s good marketing. And it doesn’t come across as phony, because Patagonia’s own leadership has been actively and publicly involved with these issues for some time. Furthermore, by helping protect the environment, Patagonia in some small way helps ensure a better outdoors experience for its customers. Since there is such a strong connection between the cause and the product, Patagonia is taking the right approach here.

Newman’s Own, in contrast, supports charities that address a variety of causes. Everything from clean water, public broadcasting, education, and disaster relief have received support from the Foundation. You can probably see where this is headed – those issues have little to do with selling pasta sauce. If Newman’s Own were to overtly discuss the causes it supports in trying to market its food products, it would likely create a very confusing message. There are too many causes its involved with to create a clear tie-in with their products, and focusing on one or two would be missing the bigger picture of what they do. So by simply telling customers that profits go towards “the common good”, that’s all that needs to be done.

Both companies have taken an approach that is appropriate for them, and each would be ill-advised to adopt the cause marketing strategy of the other. Patagonia would be missing out on a good marketing opportunity if it hid its own involvement with environmentalism. Newman’s Own would look ridiculous if it talked about supporting disaster relief and public broadcasting on is jars of spaghetti cause.

These are just two examples – can you think of other brands that do a particularly good or bad job of discussing causes they support? Do you think brands should take more of an active or passive role in promoting the causes they support? Does this change if the company is pure for-profit or a social business?

How does transaction effort impact giving?

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In the last post, I talked about how much should people give to charity. Let’s start to examine why people do or don’t give to charity in the first place. This is a question I’m personally interested in – I’ve always believed that it’s a “good thing” to donate one’s money to causes, but I have had various degrees of success in actually doing this in practice. Usually less success than I’d like!

You could write a whole book about barriers to giving, but let’s explore just one today: transaction effort.

Transaction effort is the amount of work required to take the intention to make a donation and turn it into a donation itself. An example of low transaction effort is when you drop a few dollars in the hat at church – you don’t have to go anywhere, fill out a form, or even think much about whether to give. An example of high transaction effort, on the other hand, occurs when you send a check in response to a solicitation campaign you received in the mail – you have to read the material, write the check, stamp the envelope, etc. Anytime that potential transaction effort can be reduced, it’s more likely that a transaction will be made in the first place. That’s one reason why online donations are usually more likely to occur than offline ones.

But even within the realm of online donations, there are ways of reducing transaction effort. Let’s take a look at three companies that attempt to do exactly that: SwipeGood, GoodSearch, and SocialVest.

SwipeGood ties giving to everyday usage of your credit card. After registering your credit card, SwipeGood will round up each transaction to the next dollar, using the difference to make a donation to a charity of your choice. I signed up about a month ago, and SwipeGood tells me that I’ve donated $27.84 to Room to Read, the charity I picked. Pretty easy. But honestly, I had kind of forgotten that I had signed up, and only remembered to check while writing this post. SwipeGood only allows me to give to one charity, at a time, so if I want to change things up, I have to log back into the site and change my settings. There’s not much I get to see after I donate, either. SwipeGood makes it easy to give, but I’m not sure if they make the experience much more meaningful. I could have just signed up for a recurring donation on Room to Read’s site, and accomplished very much the same thing.

GoodSearch follows a similar principle, but instead of giving through transactions, you give through searching. By using their site, or a search toolbar installed into your browser, the site makes donations to a charity of your choice. Search sites generally make money from sponsored search results; GoodSearch follows this model, but simply donates some of its revenue. I haven’t really used GoodSearch; I don’t want to have to go to a special site each time I want to search, and I’m not willing to switch browsers just to use the toolbar (it’s not supported for Google Chrome). It’s a good idea, but has much room for improvement in terms of its ease of use and interface. For now, I’ll pass. Google did a much better job of this with it’s Chrome for a Cause campaign last year.

Like SwipeGood, SocialVest is also tied to transactions. By clicking on links to online retailers on SocialVest’s site, you can earn donations to charity by making online purchases. SwipeGood gets referral revenue by providing links to these retailers, and you can usually earn between 1%-5% of your purchase amount towards charity. Although SocialVest attempts to make giving easier, I’d argue that it actually makes it harder, at least when measuring effort. You have to head to their site, then find the retailer you want to purchase through, and then make your purchase. Certainly more effort than going directly to say, bananarepublic.com and being done with it. SocialVest does allow you to make donations without paying anything out-of-pocket, but I question how many people will go out of their way to use the site, since this is all it offers.

Do you think these sites truly offer a better giving experience? Will they truly Or are they missing the mark?

A break, for a good reason…

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It’s been a while since I’ve been able to post here, but I have a good excuse! My wife and I gave birth to our daughter, Charlotte Elise, on May 13th. Needless to say, I have been pretty busy over the last couple weeks, without much time to blog. I generally don’t write about personal material much, but I can’t go without posting a picture of Charlotte here. You probably won’t see much more of her on this blog, unless she starts writing at an exceptionally young age! Another post to follow shortly…

Charlotte during one of her quieter moments

How much should we give to charity?

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How much should we be giving to charity? I’ve been thinking a lot about this question – while I don’t have a specific answer to offer, I thought I’d share some various perspectives. The most common answer I’ve heard (especially since I grew up Catholic) is that people should donate 10% of their income. You might have heard this referring to as tithing. But the meaning of the term various through history and across cultures (just take a look on the Wikipedia entry). So how should this be interpreted at present?

I found one group that’s formed a pretty specific answer, called Giving What We Can. Its members pledge to give at least ten percent of their income to organizations that fight poverty in developing countries. This is a slightly different take on what is taught in religious contexts, that individuals should give money to their church, synagogue, mosque, etc. Giving What We Can has devoted much of its site to arguing why using donations to fight poverty in developing countries is the “best buy” for charitable giving, and their perspective is worth reading.

Some of the answers I found on Quora frame the question slightly differently. One author believes that since so few people give anything to charity, it’s more important to focus on whether we give at all, instead of how much we give. I’m not sure what percentage of people give nothing (or very little) to charity, but assuming its a significant number, perhaps that’s the right place to start for some. No one is going to go form zero to giving away much of their income without taking some incremental steps along with way.

The more I think about this, I don’t think there’s a fixed, one-size-fits-all answer for everyone. Should a wage-earning single mother of four really donate the same percentage of her meager income as a married couple of professionals with no kids? How about a recent college grad whose paying of loads of student debt? Or a multi-millionaire?

Instead of answering those questions, I’ll note a couple of examples of people who’ve set the bar very high: Warren Buffet who pledged to give away 99% of his wealth and is encouraging other wealthy Americans to donate at least 50% of theirs; and the widow in Mark 12:41-44, who gives away “all she has” by offering up a couple of small, nearly worthless coins. Read the stories of each, if you haven’t already. Perhaps following the examples of people like this, and challenging ourselves to constantly get closer to those standards is the way to go.

How much do you think we should give to charity? Is there an answer that works for everyone?