Sometimes a small token of appreciation can be too small and end up having an unintended effect on customer relationships, new research finds.
You might have good intentions by rewarding your customers with a small monetary gift for their loyalty. But if it's not big enough to excite them, you'll end up doing more harm than good, according to anew study in the Journal of Marketing.
Financial rewards, if they are too insignificant, can definitely backfire, the study's authors said.
"We refer to this backfire phenomenon as the 'trivialization effect,' the notion that including a very small amount of money may devalue or trivialize a consumer's relationship with a company," the study's authors wrote. "In other words, something is not always better than nothing at all."
For the study, researchers conducted seven different experiments in which participants were asked to provide reviews for both real and imaginary services. [Do Rewards Programs Work? Most Businesses Don’t Know ]
In all of the experiments, the participants were either thanked for their participation, or thanked and given a small amount of money.
The study's authors discovered that participants reacted positively to a simple thank-you note, but negatively when an unusually small amount of money, for example 5 or 25 cents, was included.
The results conclusively showed that receiving a thank-you note with a smaller-than-expected financial reward makes consumers feel worse than if they were given no money at all, the authors said.
The research stated that when money is included as part of a thank you, customers judge businesses not just on how thoughtful the thank you note is, but also on how fitting the monetary amount is.
The research did uncover an exception to the results: Customers didn't react negatively to the small amount of money when they were told that it would be donated to charity on their behalf.
"Firms offering small financial rewards should consider directing the amount to a good cause," the study's authors wrote. "This has added benefits, shown in prior research to benefit firms that engage in charitable giving."
The research was authored by Peggy J. Liu, a Ph.D. candidate in marketing at Duke University; Cait Lamberton, an associate professor at the University of Pittsburgh; and Kelly Haws, an associate professor at Vanderbilt University.