The Discerning Consumer: Is Nonprofit Status a Factor?

Abstract

The authors update and extend the research on consumer awareness of an organization’s nonprofit status and test Hansmann’s seminal contract failure theory. They explore consumers’ abilities to identify nonprofits and their levels of trust in nonprofits as compared to for-profits and government organizations as well as their proclivity to patronize nonprofits as direct and indirect consumers. Data from a sample of 1,169 university students reveals that they are more likely to trust as well as volunteer and donate to nonprofits’ than other types of organizations. In purchasing health care and education, they are also more likely to patronize nonprofits. However, most cannot spontaneously identify the status of well known nonprofits, and in this regard they did not differ from the front line staff working for those organizations.