Many of us have experienced the classic pub meat raffle. The ticket sellers come around offering some friendly banter to ensure that you part ways with a lazy $5 for a good cause. Invariably, they will entice you with some bonus tickets if you spend a little more. The question is though, does discounting tickets actually result in people spending more money?
This longstanding assumption is tackled in a journal article written in 2017 titled ‘Using raffles to fund public goods: Lessons from a field experiment’. The article outlines research conducted in the USA to test which ticket pricing strategies result in higher spending by buyers. Fighting through the academic lingo and heavy mathematics was worth the effort as it presented some interesting results.
The researchers partnered with a charity and sold raffle tickets door-to-door using four different ticket pricing methods. They approached 834 people of which 51% donated $4,263.
They tested four pricing methods:
- Fixed Pricing – all tickets were priced the same regardless of how many you buy
- Discounted Pricing – price per ticket goes down the more you buy i.e. using bonus tickets as a way to promote higher spending
- Penalty Pricing – price per ticket goes up the more tickets you buy i.e. promote fairness by discouraging any one person from buying large amounts of tickets
- ‘Pay What You Want’ – Pay a fixed price for a single ticket but also ask the buyer to give an additional voluntary donation over and above the ticket price
So what did the authors find:
- Participation rates were fairly similar with around half the people approached donating regardless of the pricing method. ‘Pay What you Want’ had the highest participation rate at 62% and Penalty Pricing was lowest at 45%
- Penalty Pricing and Fixed Pricing were the lowest performers from a donation perspective
- Discounted Pricing performed the best overall but the ‘Pay What You Want’ format was a very close second
- Nearly a quarter of those who purchased tickets using ‘Pay What You Want’ pricing, chose to spend more than the minimum.
Three things to consider from this research:
- Using fixed pricing or penalty pricing is highly unlikely to maximise raffle ticket sales.
- Go ahead and keep offering discounted pricing, it is efficient in getting buyers to spend more.
- Try the ‘Pay What You Want’ pricing method. It is perceived to be fairer and allows for people to feel good about donating a little more.
One last piece of advice, based on research on the principle of ‘social proof’, regardless of which pricing strategy you use consider placing all cash collections in a clear box or bag. Visible evidence of other people buying tickets encourages higher rates of donation.
‘Using raffles to fund public goods: Lessons from a field experiment’, Carpenter & Mathews (2017), Journal of Public Economics, Vol. 150, pp.30-38.