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Perks from businesses put customers off, study finds

Research from the University of British Columbia’s Sauder School of Business carries a note of caution for businesses looking to butter up their customers with unexpected perks. Images

There is perhaps no marketing technique that is less controversial than the theory of reciprocity: Give customers something for free, and they will love you for it.

But research from the University of British Columbia's Sauder School of Business carries a note of caution for businesses looking to butter up their customers with unexpected perks. People appreciate a free upgrade to a fancier rental car, for example, or an unexpected discount on products at a store checkout just for them. But hand in hand with that goodwill, the research has found that this special treatment can also make customers uncomfortable – and may even make them spend less money with the very business that is working to woo them.

The study, Consumer Reaction to Unearned Preferential Treatment, to be published in the Journal of Consumer Research in October, outlines a series of experiments the researchers did to explore this psychological tension.

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First, participants were put in a scenario where free samples were handed out at a booth. After they saw that another person was given three samples, the subjects were handed five, with no explanation. In another phase of the experiment, this same perk occurred when the other person was not present and the subjects were alone.

In both cases, subjects reported feeling grateful for the bonus, but when others could see them, the discomfort was clear: those subjects spent four minutes in the store on average, while the group that received their bonus samples without being watched stayed for roughly five minutes.

"It's like they wanted to get out of there," said JoAndrea Hoegg, one of the study's authors, along with Darren Dahl and Lan Jiang, who conceived of the experiments as a graduate student at UBC and is now a professor at the University of Oregon. "… It's the fear of negative evaluation. If you're getting something you don't deserve, you're thrilled – as long as no one is watching you."

Another experiment showed this discomfort can actually affect sales. In a mock convenience store set up on campus, shoppers were given the chance to draw a card for a store discount. Subjects drew 25 per cent off, and the cashier told them they were the first ones to receive that high a discount.

All subjects were given $5 to spend in the store. Those that received this special treatment spent $3.55 on average when they did not think other people saw it happen; those that thought they were seen, spent $2.84 on average.

"We're not saying don't do promotions; it can absolutely be a good strategy for developing relationships," Prof. Hoegg said. "But because we see that satisfaction and spending do not increase when it's done in front of other people, managers need to step back and say, 'Are we spending money and doing promotions the right way?'"

Other parts of the study also explored people's reactions when being given perks in front of a person with higher status, such as a boss, versus a colleague. (They were more satisfied when it happened in front of a higher-status person – the researchers believe that may be because they felt their own status was elevated.) Yet other experiments showed that when other people present congratulated them on their good fortune, the negative impacts were lessened.

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Studies have shown that perks do increase sales, but those have often been in the context of loyalty programs, she said. Because members of those programs feel they have earned a perk, they don't feel the same psychological discomfort. Outside of loyalty-based promotions, Prof. Hoegg suggests brands can still reap the benefits of reciprocity – but they may want to consider making the offer in a quiet corner, by phone or e-mail, where the shopper is not aware of being watched. Another option is to find a reason to justify the special treatment, so they are protected from perceptions of unfair benefits in front of others. "We all want to feel special, but we also want to be liked," Prof. Hoegg said.

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