“Give, and you shall receive.”
Who hasn't received this advice growing up?
It's based on the simple psychological principle of reciprocity: we tend to feel obligated to return favors after people do favors for us.
In the rational world of business, the approach tends to be different:
“If you do that, then I will give you this in return.”
It's a transaction, an economic exchange of value.
However, I came to appreciate first hand how reciprocity can also work in business, when I was running Clubcard for Tesco.
Take this example:
- When we gave customers a general money-off coupon with no conditions on what they could spend it on, it unsurprisingly got high redemptions. Customers thanked us for it, and crucially their overall spend increased over time - they became more loyal.
- In contrast, when we gave them coupons for specific products or categories they hadn’t bought before, redemptions were very low, customers didn't appreciate them, and this time there was no change in their spend over time.
- However, if we gave customers coupons for specific products but this time for products that they often bought, redemptions jumped up, customers thanked us, and again their overall spend increased over time - they again became more loyal.
The reason for this turned out to be reciprocity. In the first and third case, customers felt we were doing them a favor as we were not asking for anything in return, and they reciprocated. But in the second case, they felt we were trying to change their behavior for our own benefit, and they ignored us.
But reciprocity doesn't just have to be about coupons. The principle can be applied in all sorts of ways. For example:
- Why not alert customers to the promotions they might be interested in, based on their purchase history?
- If there's an overstock of flowers going out of code, why not give them to customers in-store, and make their day?
- Or what about giving employees or store managers a small budget for random acts of kindness to customers, in whatever way they see fit?
In the rational world, this can seem fanciful, as it's not rewarding a specific behavior. However, customers will certainly feel appreciated ... and some at least will return the favor.
A version of this post was published in Supermarket News.