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John List

John List

What Can Opt-Out Boxes Teach Us About Giving to Charity?

We worked with Smile Train on a daring solicitation idea that paid off.

In 1985 Coca Cola felt like it had to reboot its image. Pepsi had all the momentum in the cola wars thanks to the Pepsi Challenge, so Coca Cola took, in the words of its corporate website, “arguably the biggest risk in consumer goods history,” by changing the formulation of Coke and selling it as New Coke.

The decision was a disaster. The response was overwhelmingly negative and just 77 days later Coca Cola admitted its mistake and announced that the original formulation would return. The whole ordeal was an embarrassment for Coca Cola. They came off as clueless and millions of dollars were lost, but had it really risked all that much? Worst case scenario it could always return to square one. This is a feature of just about every marketing campaign: There is rarely all that much at stake. Companies might not see much return for the millions spent on TV airtime, but they can always just start over again—after all, things have worked out pretty well for Coca Cola in the aftermath of New Coke.

Of course, not all products are as easy to sell as liquid candy. Brian Mullaney realized that when he moved from his job as a Madison Ave. adman to the offices of a lean and mean charity called Smile Train. Smile Train is a wonderful charity with the mission to surgically repair clef palettes of impoverished children all over the world, but to do this it has to raise money. And to raise money it needs to convince people to become donors, which is no easy feat. It’s not that people dislike donating their money to good causes, it’s that for most donors it can really be hard to figure out which charities are the good ones.

How does a charity stand out then? One idea was to send out hundreds of thousands of letters that tell households that if they donate just this once, they’ll have the option to never get another solicitation again from Smile Train. Who would do this, we thought? A charity that really believed in its cause.

The downside, of course, was substantial. Households could have responded by making a token donation just to never be bugged by Smile Train again. Smile Train could have lost access to hundreds of thousands of households—households they’d never be able to reach out to with new ad campaigns. It was like if when Coca Cola unveiled New Coke, it had destroyed the original formulation of Coke because it was that confident in its product.

It was exactly that projection of confidence that the solicitation ended up conveying, though. The field experiments were conducted with coauthors Amee Kamdar, Steve Levitt, Brian Mullaney, and Chad Syverson. Initially we started small (for Smile Train, at least) and sent out 150,000 letters. Households got either a “once and done” solicitation or the standard Smile Train letter. The response was overwhelming: “once and done” raised $22,728 vs. $13,234 for the standard Smile Train letter. Even more promising was that only 39% of the donors that got the “once and done” letter indicated that they didn’t want to be contacted again.

Feeling even more confident, we worked with Brian to launch the experiment to over 800,000 households (at this point it’s probably worth noting that there’s a good chance you were part of this experiment) where we tracked giving for years after the initial letter. All told, the “once and done” letters raised $260,783 compared to $178,609 for the control mailings—an increase of 46%. Introducing risk, we found, was exactly what Smile Train had to do to convince uncertain customers that their charity was high quality.

Clearly, there was more to explore, we thought, and our book The Why Axis: Hidden Motives and the Undiscovered Economics of Everyday Life, details our adventures in learning about what motivates humans. We go to the end of the earth to figure out the invaluable WHYs we face as a society.