In my consulting, I often seek insight from consumers into the emotions that the ideal product or service would engender. I hear things like wanting to feel confident, feel secure, and feel in control. And, especially in service contexts, consumers say that they want to feel appreciated.
So what exactly should a company do to make a customer feel appreciated? Is a simple “thank you” good enough? What about offering a “thank you” along with a financial acknowledgement such as a discount on future services? If you were presented with this choice as a consumer, which would you say would make you feel more appreciated?
If you are like most people, research indicates that you think that receiving a “thank you” along with a financial acknowledgement would make you feel more appreciated. In fact, this is probably why, in 2012, Microsoft sent loyal Xbox customers a birthday e-card with a gift of 20 Microsoft points (worth $.25) to express its appreciation.
But, like many areas of research, our intuition leads us astray in this domain of consumer psychology.
Customer Appreciation – Something Is Not Always Better Than Nothing
A trio of researchers from Duke University, University of Pittsburgh, and Vanderbilt University recently published a series of studies that demonstrate that “the inclusion of a financial benefit can actually subtract from, rather than add to, customer goodwill.”
Our intuition that any financial acknowledgement should be viewed favorably rests on the premise that thecomparison standard for evaluating a financial gift is nothing. We presume that something must be better than nothing. However, like many things in life, we compare what we get to norms of what we expect rather than nothing. This is why we would be unhappy to get a re-gifted present from a friend. Our expectation has been violated, even though we got something more than nothing.
In their paper, “Should Firms Use Small Financial Benefits to Express Appreciation to Consumers? Understanding and Avoiding Trivialization Effects,” published in the May 2015 issue of Journal of Marketing, Professors Peggy Liu, Cait Lamberton, and Kelly Haws “demonstrate that receiving an acknowledgment with a smaller-than-expected financial benefit can lead consumers to feel less appreciated than receiving no financial benefit.”
In one study, for example, the researchers set up a laptop survey outside the dining room of a hotel conference center and asked hotel guests to complete a customer review of the conference center. After completing the review, half of the study participants were randomly assigned to receive a letter of thanks from the hotel for their review and the other half of study participants received a letter of thanks along with a small financial acknowledgement ($.05). Analyses indicated that participants who received the “thank you” andfinancial acknowledgment felt significantly less appreciated than those who received only the “thank you” letter.
A separate study showed that the “trivialization” effect also holds when the form of financial acknowledgementis a % off discount on future purchases. That study looked at eight different levels of discount from 5% to 40%. However, it showed that a financial acknowledgement is only detrimental when it falls below expectations. Specifically, participants felt less appreciated when they received a 5% discount acknowledgment in comparison to nothing, equally appreciated when they received an acknowledgement of a 10 to 25% discount, and more appreciated when they received a 30 to 40% discount acknowledgement.
How to Show Customer Appreciation Properly
So what should managers do as a result of this research?
First, be cautious about showing appreciation to customers via a financial acknowledgement. Acknowledgements that fall below customer expectations can actually backfire. And even acknowledgements that don’t backfire may not make customers feel more appreciated than simply thanking them for their business and their efforts in support of your company.
Second, if the goal is to acknowledge customers financially, be sure to do your homework to understand customer expectations of what level of acknowledgement would be considered appropriate. The % off discount study showed that a financial show of appreciation can be beneficial, but only if it is large enough to exceed the expectations of most customers.
Third, seek to introduce other norms into how a financial acknowledgement will be evaluated. Another study by the researchers showed that a small financial acknowledgement can go from having a detrimental to neutral effect on felt appreciation if it is offered to a prosocial cause on the customer’s behalf. And if a trivial acknowledgement can go from detrimental to neutral, then modest levels of financial acknowledgement may go from neutral to positive. In this case, the company gets more impact per dollar when a prosocial rather than business transaction norm is introduced.