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One thing that seems to be a given with most groups who are trying to raise money is that they will be offering some sort of prizes to their sellers as a way to incentivize the group’s members to sell more. But does this practice work? Is it worth doing? Are there better ways to incentivize sales and end up raising more money? This article, part of our ‘How to Do Fundraisers’ series, will help to answer these questions about fundraiser prize programs.
We have talked to a lot of groups about this issue and have found that, in the real world, fundraiser prize programs do not actually lead to higher sales or profits and that makes total sense when you think about it.
First, the money to pay for those prizes has to come from somewhere right? And whether you realize it or not, the money is coming out of your profits. Rather than giving the money to your group to fund whatever great program you are raising money for, the company you are working with will take a portion and pay for the prizes. For some groups this is okay as they really enjoy the prize programs and are okay with giving a percentage of their profits to fund them. But for most groups, the goal is to raise money, not buy prizes. So, in the end, a prize program means your profit percentage is decreased.
But what about actually incentivizing your sellers to sell more? In theory it sounds like a great plan. I mean, who wouldn’t want to sell more for the chance to win a prize? But the problem is, and we know this from loads of anecdotal evidence, that the opposite is actually true. In nearly every group we talked with for this piece, there would be one or two members who traditionally sold the most whether there was a prize program or not. But when the prize program was introduced, the other group members would actually sell less because they knew they wouldn’t win the prizes and so it actually disincentivized the sale.
What we found that did actually work was a good plan, clear communication with your group, and a great fundraising goal. You should never do a fundraiser because “it’s the time of year when we raise money”. Buy new uniforms, build a playground, purchase classroom computers, plant a community garden, do something exciting and meaningful with your money and watch as your sellers and your customers put more energy into helping you meet your goals than ever before.
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