Want to reward customer loyalty? Don't be cheap

Size does matter when it comes to the size of customer rewards, according to a new study. A gift that consumers find too small could backfire, say researchers in the latest Journal of Marketing. How small is too small? Microsoft once mailed their biggest Xbox customers an e-card that held 25 cents’ worth of Microsoft points. The result? Customers felt devalued—that Microsoft only considered their business worth a measly quarter. Researchers call the backfire phenomenon the “trivialization effect.” To test their theory, the researchers created seven studies where they provided participants with both real and imaginary services. Participants were then either thanked, or awarded a small amount of money for their participation. In one study, guests at a full-service hotel conference centre were asked to write a review of the place, and afterwards, were given a note that simply thanked them—or thanked them and awarded 5¢. The researchers found that customers appreciated a simple thank you, but did not value tiny monetary gifts added to the note. Customers will change their evaluation standards once money is added to the picture, the study says. A verbal acknowledgement is assessed relative only to other verbal norms of showing appreciations, while financial acknowledgement is evaluated relative to both verbal norms and customers’ monetary expectations, according to the researchers. Sometimes, nothing is better than something. This article first appeared on CanadianBusiness.com