Psychological Impact of Gifting on Customer Behavior
Loyalty is a concept associated with the highest level of connection that brands can create with their customers. Creating long term, enduring customer loyalty is a pinnacle goal for any organization. It’s a state-of-mind, fueled by emotion, that stimulates growth in wallet share, increases annual customer value, and can surmount any service level problem to prevent churn.
The trouble is most marketers associate the word “loyalty” with a company’s loyalty “program”. And, while every company needs a well-conceived, planned and executed customer strategy, not all need a loyalty program. The loyalty program is merely a means to an end, a vehicle to enable a value exchange or provide a framework for financial measurement.
What if you wanted to create customer loyalty outside the confines of a formally structured program? Are there other means to trigger customer engagement; create the next contact or sale; solve service problems; or repair customer satisfaction issues?
You may be surprised to learn that gifting is the answer. The psychological impact of gifting, when created and delivered with specific design, has a powerful impact on customer behavior. In contrast to a loyalty program, gifting is a cost effective way to achieve tangible and significant results.
Gifting as a marketing tactic seems soft, until you see the science
Repairing a broken customer relationship is not an easy task. Trust is difficult to build, but easy to break. Consumer research coming out of the pandemic era shows consumers are increasingly attuned to how they were treated by individual brands. As an example, Farmers Insurance led the way in abating auto insurance premiums when consumers needed them most while others including State Farm followed suit much later, casting a grudging persona to its customer base. If the research holds true, renewal decisions may favor the more friendly brand.
Sharyn Leaver, SVP Research at Forrester summarized the way forward; “To emerge successfully from this global crisis, brands must build experiences that help them engage with their customers at an emotional level”.
Customer care is becoming a more complex function to deliver, and as brands of all types turn to online (digital) channels there is a risk of becoming faceless, impersonal, and ultimately losing touch with customers. Strategic and personalized gifting strategies can help maintain a personal touch with customers to preserve relationships while leveraging technology and digital communications channels for everyday business execution.
We’re not just saying so, we’ve got some scientific evidence to help you understand the many benefits of a gifting strategy.
The Neuroscience of Gifting
A landmark report on the neuroscience of gifting, published by Psychology Today, revealed that giving is a powerful pathway for creating more personal joy and improving overall health. The neurochemical drivers of happiness are quite easy to identify — dopamine, serotonin, and oxytocin make up the brain’s Happiness Trifecta. Any activity that increases the production of these neurochemicals will cause a boost in mood. It is really that simple. All giving works wonders, not just cash given once or twice a year.
The Neuroscience of Gratitude
OK, so giving makes the sender feel good. How about the recipient?
In a scientific study conducted at the University of Southern California (USC), researchers used fMRI imaging technology to study a range of experiences that people experienced in the context of gift-giving. The results of this and other similar academic studies concluded that strong feelings of gratitude can be generated by gifts that largely fulfill two criteria: (1) they come as a result of perceived genuine effort from the giver and (2) they are valuable and fulfill important needs for the recipient (Tesser et al., 1968).
You’ve heard it said about the impact of gift-giving that “it is the thought that counts”. Now we can have confidence that science, specifically research in behavioral psychology, helps explain the positive responses people experience to gift-giving. The same emotional connections that are triggered by gift-giving are powerful drivers of customer loyalty.
A Harvard study concluded that money is an opportunity for happiness, but it is an opportunity that people routinely squander because the things they think will make them happy often don’t. Researchers suggested that experiences were more important than things, yet the gifting of experiences remains an underutilized tactic.
Research shows that receiving a gift from a romantic partner has a significant impact on college students’ feelings about the likelihood that the relationship will continue over the long-term and lead to potential marriage. If you can’t draw a correlation between this finding and loyalty marketing than your thinking maybe just a bit too narrow!
Forbes reported a staggering 74 percent of Americans prioritize experiences over products. People want to experience all that life has to offer, and since acquiring things no longer dictates your class or status in life, people are simply enjoying experiences over things, or access over ownership. This is especially true among millennials who value experiences over things because it makes them happy. And they aren’t wrong — many studies have found that spending money on experiences brings more lasting joy than spending money on things.
Airbnb is one firm that is leading the trend with its new Experiences offerings. Have a hobby you want to share? Know a hole-in-the-wall restaurant only locals visit? People around the globe can sign up to lead groups and individuals through experiences to immerse travelers into their world. Instead of just traveling and seeing tourist traps, Airbnb users can now see things from a local’s point of view on anything from a food tour through Montreal to a kimono sewing class in Tokyo. The goal is for guests to experience things they wouldn’t be able to otherwise and to build a community of travelers. This soft benefit strategy holds promise as the foundation for an entire loyalty program. And all experiential ideas can be incorporated into a comprehensive gifting platform.
The science of happiness has revealed two key elements:
- Happiness thrives best in novel environments
- Material goods are less influential than experiences
The Neuroscience of Employee Engagement
Gifting strategies can work as either a stand-alone loyalty program or as part of a larger customer experience effort. Neuroscience also suggests that gifting will work wonders in an employee engagement effort. Employees are human beings — they react in the same neurological manner as customers when it comes to receiving a gift because it triggers an immediate dopamine response in the brain. Described initially by Wolfram Schultz more than 30 years ago, reward systems in the brain heavily influence our behavior.
The Art of Gifting Reward Strategies
If all this psych talk has got you believing that gifting is being overlooked as part of your customer or employee engagement strategies, then you will undoubtedly seek a more refined plan and design. There is an art to all of this, but most organizations don’t have the experience to successfully plan, implement, and financially control the entire strategy.
Here are some tips to get you started:
- Objectives — What groups of customers are you hoping to reach and what impact do you hope to achieve?
- Journey — Think beyond the gift itself. Create a gifting journey that becomes a memorable experience.
- Access — How do you enjoy access to the recipients? How did you acquire permission to send the gift?
- Flexibility — What options will you provide with the gift? Will you give the recipient the choice to donate the gift to charity or return it in lieu of a donation to their favorite cause?
- Delivery — How is the gift packaged, what is the opening experience going to be?
- Results — How will you measure success? What KPIs will you measure to determine ROG (Return on Gifting?)
Jonathan Legge, Co-Founder and CEO of gifting company &Open, shared a story about how the six factors came together to make a memorable gift for one client, a travel business. The idea of sending scented candles was being discussed when the team at &Open questioned if the gift would be both too subjective and generic. If a candle was to be the gift, then it needed to be contextualized into the world of the recipient.
The team vetted the use of scented candles by three primary filters. Firstly, across many cultures a candle lighting in the window is the sign of an open home. Secondly, beeswax is the most responsible and sustainable source of wax. And thirdly, when you burn beeswax it purifies the air. Telling the story of the candle with these three ideas in mind contextualized a simple candle to the recipient’s world and laced it with the narrative told across each touchpoint between giver and receiver.
When people received these candles and learned the story they became attached to the idea that this was a thoughtful and useful gift, even before striking a match to the wick. In sum, the beeswax candles became an iconic gift and one of the favorites in Jonathan’s recent memory.
If you want to explore new means of creating emotional connections with your customers, remember that gifting can be the perfect solution. Behavioral science tells us why gifting works and when the proper art is applied, the results can flow. Remember that incremental sales or an improvement in customer or employee retention will drive incremental financial benefits back to the organization to cover the cost of the gifting program. That’s when the gift rewards both the recipient and the giver.
In the context of business, that giver is your organization, which means the gift rewards all parties!