Everyone has gotten a free gift from a business at some point. It could be a discount coupon or gift card, product samples or maybe even some high-end merchandise.
Free stuff is great for customers and a wonderful marketing tool for businesses. But there are limits, and there is a right and wrong way to go about it. University of Alabama Assistant Professor of Marketing Carlos Bauer is a co-author of a study titled “Effects of Gifting on Relationship Performance: Strategies for Avoiding Suspicion and Unfairness Perceptions,” which was published in the Journal of the Academy of Marketing Science.
The authors explored how giving free gifts to customers affects business relationships, emphasizing the importance of matching the gift’s value to the stage of the customer relationship. A company should provide a gift that aligns with the current stage of the customer relationship. That strengthens the bond between the customer and the company. Conversely, a mismatch can lead to negative feelings.
It can be broken down into three ways. Offering a high-value gift too early in the relationship may cause customers to feel suspicious about the company’s intentions. Giving a low-value gift in a well-established relationship might make customers feel undervalued. However, providing a gift that appropriately matches the depth and duration of the relationship fosters feelings of gratitude and enhances the relationship.
Appropriate gifts can lead to feelings of appreciation and strengthen the relationship, while gifts that seem too generous early on can make customers question the company’s motives. Inconsistent or low-value gifts in a mature relationship can lead to perceptions of inequity.
“Think about it in terms of personal relationships and someone going on a very first date,” Bauer said. “There is no way that a guy is going to pop the question and present a ring on a very first date to the girl, right? She will be traumatized. She will be thinking, ‘What is happening here?’ The relationship has not developed. The opposite could also be true, where you have a couple on their 30th wedding anniversary, and the husband comes with a T-shirt. You don’t give a T-shirt on your 30th wedding anniversary.”
To maximize the benefits of gifting and avoid potential pitfalls, it’s best to have transparent communication and clearly explain the reasons for the gift to alleviate any doubts about hidden agendas. Gift customization tailor gifts to align with the customer’s preferences and the current stage of the relationship, ensuring they feel valued and understood.
This research underscores the significance of thoughtful gift-giving in business relationships. By considering the relationship stage, being transparent, and demonstrating thoughtfulness and effort, companies can enhance customer trust and loyalty.