Wednesday, 27 May 2020

COVID-19: The new economics of our daily lives

The impact of COVID-19 on the giving economy

Joanne Sneddon, Julie Lee & Paul Gerrans

Joanne Sneddon, Julie Lee and Paul Gerrans look into how the COVID-19 crisis has affected how and how much we donate to charitable causes and highlights what fundraisers and charities can learn from the observed changes in giving.

On 11 March, the day that the World Health Organization declared COVID-19 a global pandemic, HBF cancelled ‘Run for a Reason’, Western Australia’s largest community fundraising event. This resulted in a decline in donations of over 90% for the 170 charities registered as ‘Run for a Reason’ beneficiaries.

Similar stories have played out across the Australian charity sector as public health measures, such as social distancing, have disrupted community-based fundraising, and the growing health and economic crisis has impacted individual donors’ abilities and willingness to give. Predictions based on previous economic crises estimate that total giving in Australia will drop by around 7% in 2020 [PDF, 0.98MB], with the largest losses in donations from individuals and corporations. However, even this dire prediction appears to be somewhat optimistic compared with the expectations of fundraisers, many of whom are anticipating a drop of 20-30% in fundraising income, at a time when many charities are facing an increase in demand for services.

Given the potential severity of the impact of COVID-19 on the Australian charity sector we examined how individual donors are responding to this crisis. As part of a series of surveys examining the consequences of COVID-19, administered through The Values Project at UWA, we asked 895 donors whether they had given less, the same or more money to charity in the last month than they would usually. This referred to the period from mid-March to mid-April when social distancing and the heath and economic implications of the COVID-19 pandemic were already evident.

Over a quarter (27%) of donors reported giving less to charities than usual, 6% reported giving more and the remaining two-thirds (67%) reported giving about the same as usual.

So what factors might influence donors to give less than usual during the COVID-19 crisis, particularly at a time where other opportunities for charitable behaviour, such as volunteering, are limited? To answer this question we compared donors who gave less with donors who gave the same or more than usual in the last month.

While we found no differences between these groups of donors in terms of age, gender, household income, and socioeconomic status, we did find significant differences in their financial wellbeing, concerns about the COVID-19 pandemic, and personal value priorities.

Donors who gave less than usual in the last month reported: (1) experiencing more recent negative financial events, (2) feeling less comfortable living on their household income, and (3) having collectively fewer assets, and less success at work and security than they would like, as compared with those who donated at least the same as usual.

Perceptions of the severity of the crisis also had an impact on giving. Those who have given less than usual reported being more worried about contracting COVID-19, having a greater fear of themselves or their loved ones getting sick from COVID-19, and perceiving the severity of COVID-19 to be greater than those donors who gave at least the same as usual.

The values that reflect what is important in a donor’s life also influenced what they gave during this crisis period. We found that donors who gave less than usual emphasised self-enhancement values more and self-transcendence values less than donors who gave at least the same amount as usual. That is, donors who gave less placed a higher importance on the pursuit of personal interests and a lower importance on promoting the welfare of others than those donors who gave at least the same as usual.

Thus, donor values and personal experience of COVID-19 had a greater impact on donation behaviour than the more commonly assessed sociodemographic factors (e.g., age, gender and income). This points to how important it is for fundraisers to understand both donors’ values, as motivational life goals, and their lived experiences, especially during periods of crisis.

What about giving to COVID-19 related charities? There is growing evidence that the impact of the COVID-19 pandemic on fundraising will be uneven across the sector. In the UK, studies have shown that some donors are considering giving to new charities that focus on the effects of COVID-19, while others are considering reducing their donations to charities not directly related to helping with the pandemic. However, the effects of the COVID-19 pandemic in the UK are very different from those being experienced in Australia.

We asked our sample of 895 donors whether they had given money or goods in response to the COVID-19 crisis. Overall, 11% of donors gave in response to COVID-19; however, it is important to understand whether these donations replaced existing donations or were new contributions.

We can gain some insight into this issue by considering whether COVID-19-related donations were made by donors who recently gave more, the same, or less than usual. It is clear from the data that COVID-19 is cannibalising existing contributions. Over 75% of those who gave to COVID-19 related charities reported giving the same or less than usual. Thus, this suggests that fundraisers may benefit from communicating to donors how their organisation is helping to alleviate the health and/or economic impacts of the COVID-19 pandemic, if they do.

So what does this mean for fundraisers in the Australian charity sector? Our study presents a sobering picture of donor behaviour during the COVID-19 pandemic that largely echoes industry leaders’ concerns about the ability of the charity sector to weather this crisis.

Our results suggest that charities may need to shift their focus away from more transactional fundraising activities to connecting with and addressing the needs of donors. This approach will possibly require some charitable organisations to reinvent the way they communicate with, and relate to, donors if they are to retain existing and attract new donors as the crisis continues.

Now, more than ever, it is critical that charities understand donors’ values, which underpin their motivations to give, and how their giving experience can help them to fulfil their life goals. To do this, fundraisers need to communicate how their missions align with the value priorities of their donors. This will help to reassure donors that each charity understands what they care about and why they give.

It may also be important for charities to communicate how their mission relates to the lived experience of their donors. Taking a more individualised approach to fundraising by building stronger donor connections may help to weather the current crisis and build more resilient long-term donor relationships.

Joanne Sneddon is a Senior Lecturer of Marketing in the UWA Business School and Co-Director of the UWA Centre for Human and Cultural Values. Joanne’s research focuses on the measurement of human values in adults and children and the role that values play in predicting prosocial behaviour.

Julie Lee is a Professor of Marketing in the UWA Business School and Co-Director of the UWA Centre for Human and Cultural Values. Julie’s research focuses on the theory, measurement and implications of human and cultural values on consumer behaviour.

Paul Gerrans is a Professor of Finance at UWA. His research focuses on consumer financial decision making, particularly within a retirement savings context, and the role of financial literacy. Paul is currently a member of the OECD/INFE Research Committee, ASIC’s Financial Capability Research Steering Committee, and the OECD’s PISA Expert Group.


UWA Public Policy Institute