Spring Blog Post: “A Predictive Model for the Non-profit Market: From a macro to a micro perspective”

Student–Faculty Research Project 2017–2018 

“A Predictive Model for the Non-profit Market:

From a macro to a micro perspective”

Spring Blog Post: March 19, 2018

 

Prof. Francisco J. Quevedo – Andrea Katherine Quevedo-Prince

  • Introduction

Since June 2017, this project has studied the dynamics of the non-profit sector, first, from a macro perspective, then cause-specific, and, finally, now, of individual giving, which takes us to the micro level. Our purpose is to determine what variables come into play to push non-profit revenues, and which factors act as moderators.

After a detailed review of the literature, we started by casting a wine net on likeable variables, taking into account metrics such as GDP, and disposable personal income, to look for relationships between these, public awareness, TV and printed press coverage, regarding specific social causes, and non-profit revenues.

Our most firm conclusion indicated that non-profit revenues respond for the most part to the DPI, and to the level of public awareness regarding cause-specific issues, as reflected on TV coverage, in particular.

We are now looking to define what variables make the individual donor give to one or another cause within this context, being individual donations the largest source of charitable giving, reaching $268.28 billion, or 71% of total giving. As a whole, the nonprofit sector contributes almost $1.0 trillion to the US economy, representing 5.4% of GDP, bigger than many national industries. There are approximately 1.53 million nonprofit organizations registered with the IRS.

Research has focused more on the micro than the macro view. Yi (2010) suggests that a better understanding of the factors that affect fundraising efficiency should be of great interest to charity managers, policy makers, and private donors. Wallace (2016) points to the fact that predictive modeling has focused big-donor analytics, largely aimed at the identification of potential donors. Sergeant (2010) said that the need for the development of a comprehensive model of giving behavior has never been greater, and Lesley and Ramey (2016) point to the higher education sector’s urgent need to improve fundraising.

We contribute to the field of study by bringing a macroeconomic model, and perspective, which creates a context for validation at the micro level.

  • Our Model

Factor Analysis allowed us to pinpoint the most influential variables in the Non-Profit Sector. Regression Analysis then showed most significant relationships between disposable personal income, TV coverage, and non-profit revenues for a specific cause, thus fitting the following model:

NPR Environment = -4351.29 + 519.039(DPI) +23.078(TVCoverage)

+ 3.823(PRINTMEDIACoverage) + Ɛ

We replicated the research of List (2011), who sought out relationships between macro-economic variables and total revenues of the non-profit sector. He discarded the correlation between GDP and Non-Profit Revenues as obvious, but did not explore Disposable Personal Income as a macro-economic variable. He seemed to stick to single variable searches, and found a correlation between the S&P index and NPR, working with lagged figures, and arrived at a correlation coefficient of 0.636.

Our model above, after extracting variables, arrived at a Pearson’s R of 0.935, with almost perfect significance levels.

  • Literature review: The micro view

Clark, Kotchen and Moore (2003) present a model that combines what they call the internal and external influences on donor behavior, pointing in the direction of our study. External variables, they say, consist of household income and standard socio-demographic characteristics. The internal variables determine their decision to donate.

Kumar and Henley (2007) concluded that potential donors need to be targeted with an appropriate message, if fundraisers wish to push their decision to give to a specific cause.

Misener and Paraschak (2006) point to the need to cultivate relationships between non-profit organizations and individual donors. They label relationship-building “a strategic approach to fundraising”, and would suggest that the female factor may drive donations to higher levels in the male-dominated sports segment. Owens-Erwin and Yarbrough-Landry (2015) reaffirm that fundraising is based on build­ing relationships with donor constituen­cies.

Wooden (2005) says that on an individual (micro) level, the vast majority of donors she interviewed were enthusiastic and positive about the organizations they give to and about charities in general. Leonhardt (2008) refers to the “warm glow” theory, which states that people give money to feel the “glow” associated with being the kind of person who helps a worthy cause.

  • Hypothesis:

On a micro level, we propose that (H3) individual donations will respond to individual commitment to the cause, where public awareness, the economy, and personal economic considerations would act as moderators. We would posit that former soldiers will give to veterans, alumni would donate to their schools, karatekas will support Olympic karate, and churchgoers would give to their church’s social causes. Our model, from micro to macro, is shown below.

  • Methodology

Using our database of individual donors, we will ask a sample of them a set of questions, considering prior research studies, to pinpoint specific motivations, hoping to confirm our hypothesis, derived from the macroeconomic model, crossing, however, with other views on the matter.

In particular, we will present them with simple agree – disagree statements on a Likert Scale like the following:

  1. Knowing about a specific social cause is important in deciding where to allocate my donations.
  2. My relationship with a specific cause is more important to me in deciding where to allocate my donations.
  3. Donating or not will depend on my view of the national economic situation.
  4. How much I donate will depend more on my particular situation and disposable funds for that moment.
  5. My charity donations are based mostly on tax incentives and considerations.
  • The Researchers’ Credentials

Professor Francisco J. Quevedo teaches Marketing at the graduate and undergraduate levels at Pace University. He graduated in Economics, from the University of Massachusetts in 1978, and holds an MBA, and an Advanced Degree from the Lubin School of Business, 1982 and 1983, where he is doing doctoral work now. He has raised funds for amateur sports since 2007, having exceeded US$ 4,000,000 in revenues, and directly supported winning 205 world medals between 2007 and 2015 in Tokyo and Cyprus. He has also advised several foundations and NGO’s in the US, Japan and Venezuela. He is a Trustee of the WSKF USA Foundation.

Andrea Katherine Quevedo-Prince, 19, is a Dean’s List PA-Track student at Pace University, who maintains a 3.82 GPA. A member of the Alpha Lambda Delta honor society and the Lambda Sigma sophomore honor society, she has won nine world medals in Karate-do since 2010, and a total of 90 medals between the US, Japan, Cyprus, and Venezuela, 56% of them Gold. She was a member of the WSKF Venezuelan Karate Team between 2007 and 2016, and was instrumental in its fundraising efforts. She is also a Trustee of the WSKF USA Foundation.

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