What Are Nonprofit Premiums? How to Use Donor Incentives to Boost Giving

An image of a donation form with an arrow pointing at a free gift with donation, while on the other side of the image is a branded tote bag from a non-profit.

Erin Booker

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November 5, 2025

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5 minutesf

Nonprofit Trends

How To Nonprofit

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You’ve worked hard to keep your nonprofit’s mission alive, even as fundraising feels tougher than ever. Donations that used to flow easily are trickling in, familiar supporters are giving less often, and the economic climate has made every dollar feel harder to earn.

In moments like this, it’s natural to look for something—anything—that reignites donor excitement without stretching your team or your budget. That's exactly why premiums are getting renewed attention. They’re not gimmicks; they’re small sparks of joy that remind supporters their generosity matters—and that it comes with a personal touch.

Funraise’s Premiums feature makes offering incentives simple and seamless. With just a few clicks, you can link a reward to a donation level, helping your campaigns stand out and perform better.

Since they're having a little bit of a moment, let's explore what nonprofit premiums are, why they work, and how to use them effectively to raise more while staying true to your mission.

What are nonprofit premiums?

Nonprofit premiums (also called donor incentives or thank-you gifts) are physical or virtual rewards offered to donors in exchange for their support. They serve as tangible or experiential thank-yous that make the act of giving even more rewarding.

What premiums are not: Direct mail incentives like name and address labels, socks, or holiday ornaments are frequently sent through USPS before a donation occurs. Many nonprofits use fundraising direct mail as a way to get a potential donor's attention, but the return on those fundraising efforts is usually less than the cost of the name and address labels. Premiums are a fundraising game plan that minimizes waste and maximizes fundraising revenue.

Common types of premiums

You’ve probably seen premiums before on PBS drives or charity walks, but they’re not just for big organizations with massive budgets. For small and midsize nonprofits, premiums can be the difference between a campaign that gets noticed and one that quietly fades away.

Physical premiums

Branded merchandise
Calendars
Mugs
T-shirts
Art prints

Virtual or experiential premiums

Exclusive livestreams
Online meet-and-greets
Virtual classes
Digital downloads

Premiums aren’t just for big organizations—they work for nonprofits of all sizes. With Funraise's Premiums feature, you can offer rewards directly through your donation forms.

Why premiums work

Offering a premium taps into a powerful psychological principle: reciprocity. When people receive something of value, they naturally feel more connected and motivated to give back.

Here’s what makes premiums such an effective fundraising tool:

They boost conversions. Donors are more likely to complete a gift when they see a tangible reward.
They increase average gift size. Clearly tiered rewards encourage donors to give at higher levels.
They reinforce donor loyalty. A memorable premium—like a mug, T-shirt, or virtual event—keeps your mission top of mind long after the donation.

And because Funraise’s Premiums feature automates setup and fulfillment tracking, nonprofits can focus on what matters most: inspiring generosity.

If you’re thinking, “This sounds great, but I don’t have time to launch a whole new campaign,” you’re not alone. Many fundraisers assume premiums are complicated, expensive, or only make sense for big events. The truth? They can be as simple—or as creative—as you want them to be.

Start with what’s working. If you have a donation form that already performs well, use that momentum. Add one thoughtful premium, track the results, and see what happens. Fundraising innovation doesn’t have to start from scratch—it starts from curiosity.

How to start using premiums on your donation forms

Adding premiums to your campaign doesn’t require a total overhaul. Start small and strategic:

Choose one donation form that already performs well. (Psst, if you haven't implemented best practices for donation form optimization, now's the time!!)
Select a reward that aligns with your mission and audience.
Set donation tiers with Funraise Premiums—linking higher gifts to exclusive incentives.
Promote the premium through email, social, and on your form with clear, enticing visuals.
Track performance to see what’s working.

Want to see how easy it is?

Reach out to your Funraise Growth Partner or follow this step-by-step setup guide:
👉 How to Set Up Premiums in Funraise

Calculating the cost of a premium

Every nonprofit leader knows that “great idea” feeling that quickly collides with the “but can we afford it?” question. The good news is that premiums don’t have to strain your budget to succeed. What matters most is that your incentive feels valuable, not expensive.

By running a simple calculation before you launch, you can make sure your premiums inspire generosity without cutting into your mission funds.

Net Donation Value = Donation Amount − Premium Cost − Fulfillment Costs

This quick calculation helps you estimate your campaign’s return while factoring in production, shipping, and staff time. For example:

If your average donation is $100, and your premium costs $15 (including shipping), your net donation is $85.
As long as you’re covering costs and maintaining strong engagement, your campaign is succeeding.
Don't underestimate the cost of the time it takes to fulfill requests, the cost of storing incentives, or sunk costs for items not claimed.

Pro Tip: Keep costs low by choosing lightweight, easy-to-ship, or digital items.

Understanding tax deductibility and compliance

When it comes to taxes and compliance, it’s easy to feel a flicker of panic (or a flame of fear). The words “fair market value” can sound like a paperwork nightmare; however, in reality, most nonprofits handle this with ease once they know the basics.

Offering premiums can affect the tax-deductible portion of a donation, but it’s usually straightforward to manage.

Here’s how it typically works:

The fair market value (FMV) of the premium must be subtracted from the total donation to determine the deductible amount.
Donors should be informed of this value in their receipt or acknowledgment letter.
Funraise can help you manage donor communications and transparency seamlessly.

However, since every state’s regulations differ, it’s best to check:

Your state government’s nonprofit compliance website and IRS regulations
A trusted compliance partner like Harbor Compliance
Or your nonprofit’s accountant or legal advisor

You don’t have to be a compliance expert—just proactive and informed.

Common premium pitfalls to avoid (and how to dodge them)

It can't just be us, right? Every fundraiser has tried a campaign idea that didn’t land quite the way they hoped—and that’s okay. (Right??) Using premiums is about testing and learning, not perfection. The only true misstep is never trying something new because of fear that it might not work.

Still, there are a few common pitfalls worth sidestepping so you can set your campaign up for success from the start.

Choosing a premium that doesn’t align with your mission or audience
Picking something too costly or complicated to produce
Forgetting to factor in fulfillment, shipping, or storage costs
Offering too many options and overwhelming donors
Not highlighting the premium prominently on your donation form
Failing to test messaging or design before launch
Ignoring performance data and missing opportunities to improve

Remember: Premiums are meant to be experimental! Even if your first attempt isn’t perfect, you’ll gain valuable insights about what inspires your donors.

Premium ideas by cause type

You say you want something that fits your mission? Say no more, mon amour! (Does anyone hear Rex Manning singing that as they read it? No one?)

Physical fundraising gifts

Animal organizations: Paw-print coffee mugs, pet bandanas, or wall calendars
Youth-focused organizations: Stickers, water bottles, or branded art kits
Community and social services: Locally made goods or collaborative merchandise
Human rights organizations: Ethically sourced apparel or mission-driven pins
Environmental organizations: Eco-friendly tote bags or grocery bags, seeds, or reusable kitchen towels
Health and medical research: Journals, awareness ribbons, or wellness kits
LGBTQIA+ organizations: Pride-themed tote bags, enamel pins, or T-shirts

Example: A community food bank offers locally designed aprons for $75+ donors—celebrating local artists while encouraging larger gifts.

Virtual and experiential premium ideas

Digital rewards can be powerful, scalable, and mission-driven. Don't count them out!

Animal organizations: Virtual “meet the rescues” tours or live Q&A with caretakers
Youth-focused organizations: Online art classes led by alumni
Community and social services: Private virtual panels or webinars with leaders
Human rights organizations: Virtual film screenings or awareness events
Health and medical research: Expert Q&As or mindfulness workshops
LGBTQIA+ organizations: Pride livestream concerts or storytelling nights

Example: An LGBTQIA+ advocacy group offers access to a virtual storytelling event for $50 donors—and sees engagement soar as supporters share the link widely.

How to measure the success of your fundraising premiums

Once your premiums are live, the fun part begins: seeing how donors respond. Data isn’t just numbers—it’s the story of what motivates your community to act. Watching those patterns unfold helps you make smarter, more inspired decisions for the next campaign.

Even small improvements, like a bump in average donation size or a higher completion rate, can add up to major wins.

Once your campaign is live, donation form analytics can help you understand how well your premiums are performing. Focus on key indicators like:

Conversion rate: Are more visitors completing donations after adding a premium?
Average donation amount: Are donors upgrading to higher tiers?
Repeat donor rate: Do premiums encourage second or recurring gifts?
Fulfillment efficiency: Are you delivering rewards smoothly and on time?

Tracking these metrics helps you refine your approach and identify your most successful incentives over time.

Checklist for confidently launching premiums

At this point, you’ve got all the tools to start. You understand how premiums work, how to price them, and how to avoid the most common challenges. The only thing left to do is try.

Remember—fundraising is part science, part heart. Every experiment, every campaign, every donor conversation is a chance to learn what makes generosity grow.

Before you launch, run through this quick checklist:

Choose a premium that aligns with your mission and audience
Confirm your costs fit within your fundraising goals
Check any state or IRS disclosure requirements
Promote your premium across all donor channels
Track metrics and make data-driven adjustments

Don’t overthink it—start small, stay authentic, and learn as you go.

Bringing it all together with Funraise

Your donors want to feel something real when they give. They want to see the impact of their contribution—and sometimes, a small token or experience helps make that connection tangible.

Premiums aren’t about the item itself. They’re about deepening relationships, sparking joy, and creating lasting memories tied to your mission. With Funraise Premiums, you can make that happen with confidence, creativity, and ease.

Because even in a tough economy, generosity is still out there—you just have to give it a reason to shine.

Ready to add a little extra joy to your next campaign?
👉 Learn how to set up Funraise Premiums

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Nonprofit Premiums FAQ

What are nonprofit fundraising premiums and how do they work?

Nonprofit fundraising premiums are thank-you gifts or donor incentives offered in exchange for contributions. They motivate giving by adding tangible or experiential value to a donation. Using tools like Funraise Premiums, nonprofits can easily connect rewards to donation tiers and automatically manage fulfillment to inspire more generosity.

Why do nonprofits offer premiums to donors during fundraising campaigns?

Nonprofits offer premiums to increase donor engagement and motivation. A meaningful gift—physical or virtual—creates a sense of connection and appreciation, making supporters more likely to give or upgrade their donations. Premiums help turn generosity into an experience, reinforcing donor loyalty and strengthening long-term fundraising success.

What types of premiums are most successful for nonprofit fundraising?

The best nonprofit premiums align with your mission and audience. Branded merchandise, digital experiences, or locally sourced gifts work especially well. Physical items like T-shirts or mugs and virtual rewards like webinars or livestreams can all boost giving—especially when featured on your Funraise donation forms.

How can nonprofit organizations use incentives to increase fundraising success?

Incentives increase fundraising success by motivating donors to act. When nonprofits link rewards to specific donation levels, donors see clear value in giving more. With Funraise Premiums, organizations can easily test different incentives, track performance, and discover which gifts inspire the highest conversions and repeat donations.

How can nonprofits use gifts to effectively thank and retain donors?

Donor gifts serve as personalized thank-yous that build emotional connection and loyalty. When supporters feel appreciated, they’re more likely to give again. By offering thoughtful, mission-aligned premiums through Funraise, nonprofits can show gratitude, celebrate donors’ impact, and strengthen relationships that lead to sustained giving over time.

Premiums help you go all in on donor retention strategies!Hear from Innocence Project and Justin Wheeler, Funraise CEO and Co-founder on how to retain and upgrade your donors:

“It is infinitely more cost-effective to retain a donor that we already have than go out and find a new one.”

How do nonprofit premiums help increase donations?

Premiums increase donations by adding immediate, emotional, and tangible value to the act of giving. Donors are more likely to complete a contribution—and give at higher levels—when rewarded for their generosity. Funraise Premiums make it easy to integrate these incentives directly into donation forms for better results.

Are nonprofit premiums tax-deductible?

Only part of a donation that includes a premium is typically tax-deductible. Donors can usually deduct the amount exceeding the fair market value of the gift. Nonprofits should disclose this value in donor receipts and consult compliance partners or state nonprofit agencies for accurate tax guidance.

What are examples of nonprofit premiums?

Examples of nonprofit premiums include branded T-shirts, mugs, tote bags, and digital experiences like virtual events or behind-the-scenes tours. Animal shelters might offer pet calendars, while health organizations could provide wellness guides. With Funraise Premiums, it’s easy to customize incentives that reflect your mission and excite donors.

How can I set up premiums with Funraise?

Setting up premiums in Funraise takes just a few minutes. You can link rewards to specific donation tiers, track fulfillment automatically, and highlight incentives on your forms. Follow this step-by-step guide to get started: How to Set Up Premiums in Funraise.