My favorite holiday, Thanksgiving, is just around the corner. This is a great time of the year for companies to send out words or gifts of appreciation to their loyal customers. The insurance company AMICA sends out artistic Thanksgiving cards to their customers every year; many real estate agents send out fresh calendars for the next year to their clients; and I once even received a BIG can of popcorns as a customer appreciation gift during this time of the year. Are such gestures beneficial for companies? How should such thank-you’s be conveyed? In this week’s post, I pull academic research on gratitude to shed some light on these questions.
Feelings of Gratitude
According to philosophy and social psychology research, gratitude is an important emotional foundation for sustained reciprocity in human relationships. When an individual feels gratitude, he or she is motivated to repay the favor by conducting an act of kindness in return. Many of us probably still remember the paying it forward story at a Starbucks in Florida a few years ago. It started with a woman offering to pay coffee for the customer behind her, who then passed on the kindness by paying for the next customer. This chain continued unbroken for a total of 378 customers. That is the power of gratitude. In a bilateral relationship between a customer and a company or brand, feelings of gratitude can provide the drive to sustain a trusted and committed relationship and increase customer loyalty.
Gratitude Needs to be Expressed
The feeling of gratitude has a unique social component that prompts it to be expressed. In an eloquent essay written by Dr. James W. Ceasar, he describes gratitude as having developed into an objective standard of behavior. In his words, “Gratitude has a social aspect and is incomplete if it does not include the act of acknowledgment”. Or in more plain words, not saying “thank you” when someone has done something nice for you is just rude. Although much of Dr. Ceasar’s arguments relate to political and social domains, they are just as relevant to customer relationships. It is not quite enough for a company to claim its commitment to its customers when it does not properly express its gratitude to customers.
Expressing Gratitude with Financial Incentives
So how do companies express gratitude to their loyal customers? Frequently, the answer is to include a small financial incentive such as a small gift card, a special offer, or in my previous experience, a can of popcorns. Unfortunately research shows that such simple tactics may actually backfire. A team of marketing researchers conducted a series of studies comparing the use of a verbal thank-you versus thank-you paired with a small financial bonus. They found that study participants who received the simple verbal thank-you felt more appreciated than those who received the thank-you and a financial bonus. These researchers argue that including the small financial incentive makes the gesture of appreciation appear more trivial and therefore less effective.
But before you put away your gift cards for good, the same researchers also suggest some situations where financial incentives can be effective in customer appreciation efforts. If a company has enough resources, the financial incentive needs to meet or exceed customers’ expectations of how much such a bonus should be. In their study, as an appreciation for favorable brand behavior such as positive word-of-mouth and referrals, offering a percentage discount became more effective than just saying thank you once the percentage discount reached the 30-40% range.
Obviously offering larger financial incentives can be costly. What if your company does not have deep pockets to reward customers handsomely? The study suggests that you can also try to lower customers’ expectations. One way to do that is by turning the direct financial incentive into a prosocial benefit such as a donation to a charity, which is known to have lower amount expectations. The other way is by offering additional anchors that are lower than the actual incentive offered. For example, by showing all five percentages of 1%, 2%, 3%, 4%, and 5% on the appreciation note but with 5% as the one circled and actually provided, it can signal to consumers that what they received is towards the higher spectrum of a potential range.
Expressing Gratitude with Preferential Treatments
An alternative to providing direct financial incentives is to offer preferential treatments to particularly loyal customers. Good examples of this abound in the travel industry, where premium tier loyalty program members receive priority check-in at the gate or at hotel registration desks. When do these practices work? A two-researcher team suggests a few conditions for preferential treatments to be effective:
- When the customer receiving the preferential treatment is interested in forging a relationship with the company. This means that a preferential treatment likely works better for the truly attitudinally loyal instead of habitual customers.
- When the preferential treatment is made selective (harder to get) than a generic thing that many people receive.
- When the preferential treatment is considered fair, which means clear standards need to be established to ensure the transparency and justice of such treatments.
When Saying Thank You Does Not Quite Cut It
Academic research also suggests two situations where saying thank-you may not be that helpful. The first is when the consumer had received low-quality service. This is not surprising. Imagine you just had a lousy experience dining at a restaurant. Hearing the restaurant owner thanking you for your visit on your way out the door is probably not going to make you feel really appreciated. In contrast, experiencing good-quality service may make the thank-you message more powerful. This means that while your company hands out thank-you messages during this holiday time, it is particularly important to monitor its service quality so that bad customer experience does not end up erasing the value of the thank-you notes.
The other situation where saying thank-you is not particularly effective is before customers commit a helpful action to the brand. Research suggests that although help receivers are most likely to feel gratitude before they get the help, help givers expect gestures of gratitude after they have delivered the help. So in a consumer-brand situation, this means a thank-you message after consumers have done something good (e.g., writing a review) will work better than a thank-you message delivered beforehand to encourage the action to go through.
Encouraging Feelings of Gratitude Among Customers
Before wrapping up, I would like to briefly point out that gratitude is not a one-way street. At the same time as you thank your best customers, it is also important to help your customers appreciate you. Relationship marketing research shows that customer gratitude can increase purchase intention, share of wallet, and sales growth. To generate such feelings of gratitude, two conditions must be met: (1) the customer successfully fulfills his/her goal with your product or service; and (2) the customer contributes the success to your company rather than to him or herself or someone else. You can achieve these by providing the right relationship marketing investments such as allowing frontline employees the autonomy to provide favors to customers, training service personnels to be helpful, and of course, providing good service overall.
I hope the information here offers you some ideas on how to communicate thank-you to your best customers. I would also like to take this opportunity to thank all of my readers for supporting my blog. Your generous sharing and feedback has helped me produce better-quality content and advance the practice of loyalty science. Thank you and Happy Thanksgiving!