Gift vs. Reward: Understanding the Power of Reciprocity
The difference between a gift and a reward is often misunderstood… let’s fix that.
The findings on the psychological Principles of Persuasion by Dr. Robert Cialdini have had a massive impact on my life, not only as a marketer, growth hacker, and entrepreneur… but on my life in general.
One of these powerful principles of persuasion, as posited by Dr. Cialdini in his powerful book Influence: The Psychology of Persuasion, is Reciprocity, or that desire we humans have to “return the favor” when someone does something nice for us.
For marketers, understanding this can be quite powerful!
But… while reciprocity is powerful, it’s not activated just by giving something to someone; there’s more to it, and it comes down the difference between a gift or a reward.
What is a Reward?
A Reward is something you give someone for taking an action, often as an incentive.
New Relic, an application performance management service, famously says “sign-up for our Free Trial, install our code, and we’ll give you a T-Shirt.” That’s a reward.
When you give a reward for an action taken, there isn’t any reciprocity generated in your favor since you were actually the one who owed them an action (reciprocity WAS activated on the other side when they took the action; you owe them a t-shirt) in the relationship.
Once you fulfilled your obligation — giving the t-shirt in exchange for them installing your code — the transaction was complete.
If we’re honest, I think occasion-based (birthday, anniversary, etc.) gifts are more like rewards, not just because an action had to be taken to get it (like, you were born or got married) but because it’s basically expected.
In fact, an easy way to tell the difference between a gift and a reward is to not give it and see if the person you didn’t give it to is upset. Would the person you promised a t-shirt to for installing your code be upset if you didn’t give it to her? The answer is yes, and there’s a support thread to prove it.
If they’re upset, it’s a reward… not a gift. (take my word for it, though… probably don’t test this on your own!)
What is a Gift?
A Gift, on the other hand, is something you give someone without requiring them to take an action first. A gift triggers reciprocity in a big way precisely because it was unexpected. Human nature says that the person that received the gift now “owes you” something.
We almost always know this — the fact that reciprocity will be triggered — going into giving a gift, which is why it’s very difficult to ever do a completely selfless act as a modern human being. But it’s still good to try!
In business, however, we can use this reality around how reciprocity works to get people to take the actions we want them to take… just by being nice. Nothing wrong with that at all (assuming, again, that the action you want them to take is in their best interest, too… not just yours).
In fact, here’s an experiment I’d do to test the effectiveness of reciprocity using New Relic’s “t-shirt for install” reward example from above.
If you have 1000 t-shirts ready to give out to those who take action and install your code, carve out 100 of those and send them to people at companies that match your ideal customer profile.
Don’t include a coupon code. Don’t ask them to do anything. Just make sure it’s clear who it’s from — perhaps a note with your email address (so they see the domain) — to say “thought you might like this cool t-shirt”…
Then see how many of those folks 1) talk about or show pics of the gift on social media 2) sign-up to try your product 3) convert to customers and 4) stay past 90-days as customers.
Then compare those same metrics with the 900 you gave as rewards.
I’d be interested to see if those folks don’t just install your code, but whether they become customers and how long they stay vs. the reward cohort.
Introducing the Gift-Reward
There is a sort-of 3rd option here, and that’s the Gift-Reward. This is something you give someone for taking an action (Reward), but that they didn’t expect was going to happen (Gift). This means they didn’t take the action with the expectation of being rewarded, which means reciprocity kicks in.
Putting on my Customer Success hat for a minute (honestly, I rarely take it off), consider when your customer reaches a certain milestone in their on-boarding process; what if you were to cater lunch for them as a reward. That is a milestone-driven reward, but it was unexpected so it will be received as a gift and reciprocity will be triggered.
Just be sure, if you’re using this for business purposes, to have something in mind to utilize that reciprocity you triggered… an up-sell, an advocacy request (testimonial, etc.), a survey, an invitation to speak at an event, etc.
As long as you use the powers of persuasion for good and not evil, you might as well take advantage of how we crazy humans operate.
I go into a lot more detail on different strategies and tactics around SaaS Marketing, Pricing, Growth Hacking, etc. on my Sixteen Ventures site.
I originally published this story on LinkedIn, but I updated it for Medium.