Optimal Targeting in Fundraising

Ineffective fundraising lowers the resources charities can use to provide goods. The paper presented in this ZEW Research Seminar combines a field experiment and a causal machine-learning approach to increase a charity’s fundraising effectiveness. The approach optimally targets a fundraising instrument to individuals whose expected donations exceed solicitation costs. Their results demonstrate that machine-learning-based optimal targeting allows the charity to substantially increase donations net of fundraising costs relative to uniform benchmarks in which either everybody or no one receives the gift. To that end, it (a) should direct its fundraising efforts to a subset of past donors and (b) never address individuals who were previously asked but never donated. Further, the authors show that the benefits of machine-learning-based optimal targeting even materialize when the charity only exploits publicly available geospatial information or applies the estimated optimal targeting rule to later fundraising campaigns conducted in similar samples. They conclude that charities not engaging in optimal targeting waste significant resources.