If a customer is given an unexpected bonus at the time of purchase, the surprise endows extra value. But when the customer then tells others what happened, they won’t be surprised if coming into the store to get the bonus. Further, if the customer perceives the bonus to be exclusive to them plus a limited number of others, widespread news of the bonus award program raises expectations by other shoppers.
Widespread news also alerts other retailers who could decide to meet the offer. The exclusivity is disrupted and the competitive advantage erased. In fact, paralleling what happens in a price war, the competition might raise the bonus offer or lower the base price, requiring you to meet a more profit-sapping threshold.
The researchers’ advice is to under-promise and over-deliver with a surprise item or service of modest value, but not encourage your customers to spread news of the surprise value they received. Instead, satisfied customers could be asked to tell friends and family about other aspects of the transaction.
All this bother is worthwhile because bonus gifts have been found to break ties among decisions difficult for the shopper as well as reduce returns of purchased items. The best bonus gift is one which helps the purchaser get more out of the main item they’re buying. But if you can’t easily do this, separate the purchase from the gift, such as presenting the gift after the purchase has been completed. Bundling an expensive with an inexpensive item actually detracts from the perception of value for the expensive item unless you’ve described synergy.
And explain the reason for the gift. Otherwise, the customer might get angry, thinking that your store policies are highly arbitrary or even discriminatory. According to studies at Baruch College, University of California-Berkeley, and San Francisco State University, consumers having a Western mindset prefer demographic explanations (“We’re giving a gift to senior citizens”) or marketing-determined (“A special gift for first-time purchasers”). For consumers having an Asian mindset, the researchers found it best if the customer concludes they earned the good fortune (“You are lucky enough to have selected an item for which we’re adding a free gift today”).
For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology
Click below for more:
Avoid Price Wars with Price Guarantees
Break Ties When There’s Limited Selection
Worm Your Way into WOM with Self-Discovery
Gift with Purchase to Cut Item Returns
Offer Exclusive Price Discounts Cautiously
Bundle Expensive & Cheap Synergistically
Dazzle Your Customers
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