Offer something for nothing. (Or the power of the gift.)
What is it about a free incentive that persuades people to respond, say ‘Yes’, and take action? When you look back as far as the semi-mythical war between the Greeks and Trojans, you’ll find that people have always bent over backwards to accept a gift. In the case of the besieged Trojans, the Wooden Horse was one offer they should have rejected! But the urge to accept it prevailed against more rational thought. The ‘free gift’ is a tried and trusted direct marketing technique. It used to be am/fm clock radios. More recently, 0% balance transfer offers to take up a new credit card. And now we have social offers such as GroupOn. But the idea is the same: respond to our proposition and we’ll throw a little something in - for free - to make it worth your while. Offers are often viewed as crass or old-fashioned. But they work. And they work because there is more to direct marketing’s trusted free incentive than meets the eye. The gift has power because it taps into a fundamental aspect of human behaviour.
No one is immune to the power of an offer.
I am embarrassed to admit that I surrendered to the power of an offer in the face of full blown, righteous anger.
My story begins with the birth of my twins. I have always been a timely payer of credit card bills. In fact, I am one of those people who clears his cards every month. I can’t stand the idea of paying a high interest rate.
However, dealing with newborn twins is overwhelming. No sleep. Lots of nappies. Lots of feeding. (repeat ad infinitum) There’s very little time for anything else. So, I missed a paying some bills on time.
One such bill was for my American Express card. The late notice soon followed. I paid the late payment fee and interest without question. It all seemed a bit onerous, given all the business travelling I was putting on this card. All the business I was giving them.
Still, it was my fault. No argument. What I was not aware of is that I had slipped into the “bad credit group” at American Express. They take a dim view of you when you are in this bin. Your letters change from “...membership has it priviledges...” to “...if we don’t hear from you in 7 days we will hand your debt over to a collection agency...” and worse.
Then came the critical event. My passport and American Express card were stolen from my secretary’s desk. A replacement card was sent over. The paperwork for the trip to Moscow made it through in time. Off I went. Upon my return, I found £5,000 worth of rogue charges on my American Express account.
These were for flights to Nigeria under a Nigerian name that looks and sound nothing like Barton. I reported the ‘unauthorised charges’ and thought that would be that.
What followed was a string of correspondence that assumed I would accept the charges, warned that if I was involved in fraud in any way then I would be prosecuted, threatened hundreds of pounds worth of additional fines and legal charges, gave me 10 days to respond to a letter that was post marked 7 days after the date on the letter, etc. (why do companies insist on sending out urgent correspondence via second-class post?).
I was being treated as the guilty party. And I was hot with anger. I drafted a five-page letter outlining all of the wrongs as well as point out all of Amex’s inappropriate tone and manner. It was awash with righteous indignation supported with 15 pages of relevant documents. I demanded answers for why I was being treated in this way. I made time to write all of this in between nappy changes.
Then, I had my ‘day in court’ with Customer Services Manager, Ms Lynne Long. She read through all of my correspondence and empathised with my frustration. Lynne explained how I was placed with the ‘bad risk’ group because of late payment. This is why I was being treated at a fraudster rather than a member. I remember hearing the right words but feeling that it was all a bit disingenuous.
We went back and forth a bit. I threatened cutting up my card. I made it clear that I should receive compensation for the disgraceful way in which I had been treated. I had a full head of steam. Gratifyingly, it seemed as though my anger and sense of injustice were cutting through. I could feel the conversation getting to the point where Lynne would put this right.
And then she said, “Mr Barton, as a way of acknowledging your frustrations, we would like to offer you next year’s membership for free.” A £35 membership fee in response to thousands of pounds worth of frustration. My response, “Ugh, Ok.”
I couldn’t believe it. A lot of pacing and muttering followed. I felt played. But there was no denying it. I caved at the first sight of an offer. No one made me do it. It was as if 15+ years of communicating offers in direct marketing taught me absolutely nothing. I was as susceptible to the irrepressible power of an offer as the next person.
I called the following day and cancelled my American Express cards and have not owned one since.
The point of this story is that the offer American Express dangled in front of me was enough to stop me in my tracks and alter my planned behavior. I was trained to know better. Yet, I went with the power of the gift.
Because we are driven by forces that operate outside of our conscious thought.
Human beings have not changed that much throughout history. Whatever their cultural background, we find many similarities in how individuals respond to gift-giving. Giving a gift is an act that creates and maintains social ties by making people feel mutually obliged to give in return. And this, in turn, contributes to the revitalization of society.
And you thought you were simply getting a better interest rate on your credit card!
French ethnologist and cultural anthropologist, Marcel Mauss (1872-1950) was the first to conduct a systematic study of the custom of giving gifts, commonplace in pre-industrial or non-Western societies from ancient Rome through to contemporary Melanesia. The work’s central premise is that exchanging gifts is a kind of transaction that lies at the heart of human society.
Mauss looked at gift giving not only in economic terms, but as a moral, social and religious phenomenon, too. His exhaustive comparative study ranged across the globe and reached back to the earliest recorded examples of the gift. He isolated three common denominators across all of the societies in his study:
“Implicitly, it is always the more socially powerful party who initiates the generous offer of a gift - this special status is achieved by the thought itself. The gift always comes with an unspoken (and at times largely unconscious) imperative to reciprocate in some even greater way – for the recipient to ‘up the ante’ as it were. The gift emotionally binds the taker to the giver, and normally kick-starts, or is embedded within, a chain of ongoing, intentionally life-promoting obligations between the two parties over time.”
In short, it makes you feel as though you should respond. Do ut des. I give so that you give in return.
And there is an important relationship dimension. The gift binds and lubricates social relations and trade over time, setting up people’s relationships to each other. This contradicts a common misperception that an offer is a ‘one off’ gimmick to stimulate a transaction.
Perhaps this is the real power behind relationship marketing programmes such as the Tesco Clubcard scheme. We receive a gift in the form of money off toward future purchases. This creates a sort of tension or inequity between ourselves and Tescos that we feel we should respond to. As we redeem points, we set up a relationship where we feel more inclined to reciprocate and where we begin to conceptualise products and services that could be useful. All through one brand relationship.
And it looks as though we are in for more offers in the future.
Offers are now owned and traded within social networks. Groupon is the shining example from the current era. Groupon offer group coupons via the internet. An offer or sales promotion is put forward on their site and news of this offer is distributed by consumers via social media sites such as Facebook. When enough people sign up for the offer, the offer goes live. If the predetermined number of participants is not met, then no offer. Now we have real time offers that guarantee an amount of business for the retailer with virtually no upfront cost, amplified communication of the offer by the potential recipients and an outcome where the group benefits by participating in ‘gift-giving’ - - together.
I think Mauss would be impressed with this accelerated social lubrication process.
Wall Street has certainly been impressed. Groupon launched on November 2008. By 2010[update], they had 35 million registered users, they operate across North America, Europe, Asia and South America and they were valued at $1.35 billion.
(NOTE: delayed IPO in July of 2011. May IPO in October of 2011)
Where does it go next?
A recent study by Taylor and Harper into gift-giving between teenage mobile phone users found that teenagers use their mobile phones to participate in social practices that closely resemble forms of ritualized gift–giving. They give, accept and reciprocate messages, call credits and mobile phones themselves. And this shapes the way teenagers understand and use their phones, even conceptualise future emerging technologies.
More offers, more engagement, more devices in more places driving how we use new technology.
Like anything with inherent power, offers need to be used with care, and with sensitivity its social context. Used appropriately and imaginatively, offers can be a fresh and relevant way of connecting and building a relationships with your audience.
[Panel for case history:] The power of ‘FREE’. When making a complimentary offer, the magic word to use is still ‘FREE’. Systematically testing eight different communications propositions for a healthcare product from the AA, John Watson discovered that headlining ‘FREE healthcare advice’ was among the two most-selected propositions (Watson 1993:39).
It should also be noted that the incentive itself, thematically, can self-qualify customers and greatly reinforce the overall mission. In this case, only those with a predisposition to healthcare concerns would read further. All other things being equal, the ‘lift’ provided by a well-chosen incentive can become an everyday addiction and secret weapon for marketers and salespeople alike.
[Fact box:] Controlled tests have proven that, all other things being equal, an incentive offered free for a paying order will increase response rates by over 300%.
(Source: Commonsense Direct Marketing)
Additional Reading: The Gift: Form and Reason for Exchange in Archaic Societies, Marcel Mauss (1925)
Social Solidarity and the Gift, Aafke E. Komter
Age-old practices in the ‘New World’: A study of gift-giving between teenage mobile phone users, Alex S. Taylor and Richard Harper
BOX-OUT: Marcel Mauss
Marcel Mauss (1872 – 1950) was a French sociologist. Mauss' academic work traversed the boundaries between sociology and anthropology. Today, he is perhaps better recognised for his influence on the latter discipline; particularly with respect to his analyses of topics such as magic, sacrifice and gift exchange in different cultures around the world. Mauss had a profound influence upon the founder of structural anthropology, Claude Lévi-Strauss. His most famous book is The Gift (1923).
In The Gift, Mauss argued that gifts are never "free". Rather, human history is full of examples that gifts give rise to reciprocal exchange. The famous question that drove his inquiry into the anthropology of the gift was: "What power resides in the object given that causes its recipient to pay it back?"
The answer is simple: the gift is a "total prestation", imbued with "spiritual mechanisms", engaging the honour of both giver and receiver (the term "total prestation" or "total social fact". Such transactions transcend the divisions between the spiritual and the material in a way that according to Mauss is almost "magical".
The giver does not merely give an object but also part of himself, for the object is indissolubly tied to the giver: "the objects are never completely separated from the men who exchange them”. Because of this bond between giver and gift, the act of giving creates a social bond with an obligation to reciprocate on part of the recipient.
To not reciprocate (i.e. accepting the gift and making some sort of gift or commitment in return) means to lose honour and status, but the spiritual implications can be even worse: in Polynesia, failure to reciprocate means to lose mana, one's spiritual source of authority and wealth.
Mauss distinguished between three obligations: giving - the necessary initial step for the creation and maintenance of social relationships; receiving, for to refuse to receive is to reject the social bond; and reciprocating in order to demonstrate one's own liberality, honour and wealth.
An important notion in Mauss' conceptualisation of gift exchange is what is known these days as "inalienability". In a commodity economy there is a strong distinction between objects and persons through the notion of private property. Objects are sold, meaning that the ownership rights are fully transferred to the new owner. The object has thereby become "alienated" from its original owner. In a gift economy, however, the objects that are given are inalienated from the givers; they are "loaned rather than sold and ceded". It is the fact that the identity of the giver is invariably bound up with the object given that causes the gift to have a power which compels the recipient to reciprocate.
Because gifts are inalienable they must be returned; the act of giving creates a gift-debt that has to be repaid. Because of this, the notion of an expected return of the gift creates a relationship over time between two individuals. In other words, through gift-giving a social bond evolves that is assumed to continue through space and time until the future moment of exchange. Gift exchange therefore leads to a mutual interdependence between giver and receiver. According to Mauss, the "free" gift that is not returned is a contradiction because it cannot create social ties. Mauss's argument is essentially that solidarity is achieved through the social bonds created by gift exchange.
The Gift is still in print, published by Routledge Classics