Tiptoe-ing Carefully Around Donor Tipping

Guest Author: T. Clay Buck, TCB Fundraising

T Clay Buck headshotWith extensive experience in nonprofit leadership and fundraising, T. Clay Buck is the Founder & Principal of TCB Fundraising, a consultancy focused on individual giving, strategy, systems, and storytelling. He also teaches fundraising and strategic planning at the University of Nevada, Las Vegas, and is the co-host of the #1 ranked fundraising podcast, Fundraising is Funny.

 

Let’s get straight to the point: is asking donors to provide a tip to help cover costs the right thing to do?

The Tipping Culture (aka Tip’flation)

I fear I’m going to age myself with this reference, but here goes: Third Rock from the Sun aired on NBC from 1996-2001. The show poked fun at contemporary culture through the viewpoint of a family of aliens posing as humans to study Earth.

In one episode, Dick, the head of the family played with hilarious sincerity by John Lithgow, learns about the custom of tipping. Not fully understanding the concept but grasping the idea that it’s a reward for good service, he places a pile of bills on the dinner table and tells the waitress, “Every time you please me, you’ll see the pile grow. However, if I am unsatisfied… you’ll notice the pile shrinking.”

The older I get, the more I think he was on to something. Tipping culture has certainly taken over – everywhere you go today, someone’s awkwardly sticking a tablet in your face for you to choose a tip amount.

It’s referred to as “tipflation.” A staggering 72% of Americans now say that tipping is expected in more places today than it was five years ago.

I want to be fully transparent here: I’ve partnered with many fundraising platforms that allow donors to “tip” as part of their contributions. Many have good features that drive strong fundraising results, and the “tips” help make the platforms affordable for nonprofits.

Tipping vs. Covering Costs: What’s the Difference?

I do want to delineate the difference between tipping a fundraising platform and covering credit card processing fees – some fundraising platforms ask donors to do both. For this article’s sake, tipping will refer to any additional money given that will go straight to the fundraising platform. Covering costs or fees will refer to any additional money given to cover credit card or third-party payment company processing fees.

Now, including administrative fees, or the option for a donor to increase their contribution by a small amount to cover credit card processing fees, isn’t new. We’ve been doing this for a while.

In fact, we’ve been doing it long enough that we’ve got good data on it as Claire Axelrad discusses in this great roundup.

Overall – net positive! Win-win!

Or is it?

How Tipping Makes Your Donors Feel

See, we haven’t been doing it long enough to know the long-term impact.

We also don’t know how donors actually feel about it, but being asked to add an additional tip on top of covering processing fees that go to the fundraising platform does seem like it may leave a bad taste in one’s mouth. I almost always add a tip when someone throws that tablet in my face… how do you say no when they’re right there in front of you? But it does make me think twice about places that ask for tips when they didn’t before.

Giving is an emotional, visceral response. The most effective online giving pages – those that raise the most money and convert more visitors to donors – create as little friction as possible. Give us your name, the amount you want to give, and how you’re going to pay for it as quickly and easily as possible.

As soon as we insert logic into the emotional giving experience, we’re giving donors reasons to say no.

For example, $25 to feed a hungry person in my community sounds like a straightforward, affordable deal. But now you’re asking me for an additional $3-$5 as a “tip” that goes to the software provider vs. the mission?

It starts to feel transactional.

We simply don’t have the data on how many donors who did pay processing fees or added a tip renewed their gift. Or how many recurring donors paid the processing fees and/or tips every month. Or, more importantly, how many people abandoned the page because they saw the extra fees.

To frame that as a “tip,” … well, it just feels kind of “icky.” Who is the donor tipping, exactly? If tipping is traditionally for good service, what service is being rewarded here?

And if the tip is to cover administrative costs, it’s no longer a tip or a gratuity that I’m giving because of my satisfaction and gratitude.

Here’s a quick digression for my fellow word nerds: “gratuity” and “gratitude” don’t share the same root. Gratitude stems from the Latin gratus, meaning “thankful” or “pleasing.” Gratuity, a synonym for tip, comes from gratuitas, meaning “free gift,” which itself comes from an earlier Latin form gratuitus, meaning “free” or “freely given.”

So, when tipping becomes expected, it’s no longer “free” or “freely given.”

While, yes, donors can opt not to pay additional fees, let’s be honest: it feels uncomfortable to decline, doesn’t it? There’s some guilt attached to declining to tip.

At the same time, we can’t ignore the impact that donors covering fees – or tipping – has on the bottom line. That can translate to some real dollars that can lower our costs as nonprofit fundraisers and improve ROI.

(The accounting of all this could get funky, too. Technically, for example, a $100 donor made a $107.50 gift, and that’s what they should be receipted for, but that $7.50 is, technically speaking, restricted to administrative costs/processing fees, so how are you tracking and recording that? And are you being fully transparent with donors on how the money is allocated?)

What is Your Data Telling You?

So, where does the “ick” factor outweigh the benefit, or vice versa?

The answer, as is so often the case, depends on your organization’s culture and whether you’re intentionally measuring the response. Sure, maybe 65% of your online donors choose to tip, but are you tracking their ongoing giving, renewal rates, and lifetime value?

If it’s working for you – great! Communicate openly and honestly with your donors and thank them, not just for their generosity but for their choosing to cover the costs because it helps.

If it’s not working for you – also great! That tells you something about who your donors are and what matters to them.

Consider examining your giving page metrics if you have a tip feature. Page abandonment and conversion rates can reveal a lot. Or, try a true A/B test – one page with the tipping option and one without, keeping everything else the same. See which one converts at a higher rate (and remember not to test multiple things at one time – it can mess up your data!).

Personally, I believe credit card fees and processing charges should be considered part of a nonprofit’s operational expenses. Just like any other organization, these costs are a standard part of doing business.

I also believe that adding extra fees or tips on donations perpetuates the nonprofit scarcity mindset and, in subtle and indirect ways, reinforces the idea that overhead (i.e. business costs) are bad.

And can we really say, “If you tip, more of your contribution goes directly to mission.” Does it, though? Are we really saying that donor contributions only go to mission-related activities and not to any overhead? Because unless you’re truly restricting that donation to a specific program, that’s not entirely a true statement.

Is “tipflation” one of the Big Challenges of fundraising and the nonprofit sector today? Maybe. Is it something we should keep an eye on and measure for ourselves to determine the potential long-term impact? Absolutely.

Ultimately, what matters most is how you invite your community to engage with your organization’s mission and vision. Your giving page sets the tone for stewardship, the start of an ongoing relationship with your donors. Every part of that experience, from the first click to long-term engagement, is worth carefully considering for its impact on the donor’s journey.

Making the Switch

Whether you’re looking to upgrade or are navigating fundraising software for the first time – we have the resources you need to make the most informed decision for your team. Check out a few resources to help you avoid donor tipping:

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