We human beings are more than just rational logic machines. Economics, the study of decisions that affect the financial well-being of individuals and societies, describes how people make choices under conditions of scarcity. But observing the way our minds work has lead academics to modify traditional economics by adding principles that define exceptions to the otherwise logical rules that we supposedly use when making choices. The field of behavioral economics is becoming an increasingly popular way to reconcile economics to actual human decision making.

In that vein, I question the effectiveness of “client appreciation” as a form of marketing. This seems particularly notable in situations where a business person, who is an expert in their field, is also responsible for their own marketing. As an example, think of real estate agents. I pay a real estate agent to present my house for sale and find buyers. I expect most agents are not expert in marketing. When I first moved to Calgary, we bought a house with a real estate agent and we’ve been on his marketing list since then. Each year, he sends us market updates and a small gift, such as a first aid kit, a cooler bag and a backpack.

This struck me as a little incongruous, but I could never put my finger on the disconnect. Then I read an article that described two different modes of decision making. One is financial, the other is social. Like mental accounting, in behavioral economics, we maintain separate “accounts” in our mind for social functions and for financial functions. To use the example of the real estate agent, he worked for me not as a favour for a friend, but because I hired him to perform his professional function. Therefore, the market updates make sense, in relation to his professional work. The gifts, on the other hand, cross the divide between financial (work-related) thinking and social (favour-based) thinking.

Marketers talk about the “powerful force of reciprocation.” But it still must respect the boundaries of social and financial thinking. For example, if my dentist asks me to floss, I’ll take it under advisement. If he gives me a new roll of dental floss, I feel like I should reciprocate by using the floss. This works, because he’s not asking a favour, he’s giving his professional advice and the gift fits in with his professional duty. On the other hand, mutual fund sales reps will sometimes phone and send a small gift to say thank you for a significant order. I always chuckle and think to myself, “I didn’t place the order to be your friend. I placed it because I felt it was most suitable for my client’s needs.”

Last week, we held a barbeque at our office. We invited all our clients and everyone had a very enjoyable time. However, fewer than a quarter of our clients attended. It occurs to me that the people who came are mostly the ones who we also see socially. Further, we had investment managers in attendance. Investors who wanted to talk with them about their method got some financial value from the event. Those clients would probably not have attended otherwise.

The only time I have given client appreciation gifts is at Christmas. It’s common for us to receive gift baskets from companies that we support, not to mention that it’s always a pleasure to receive chocolate. However, I felt awkward giving gifts to my best clients. Now that I reflect on it, I realise that those gifts are unrelated to our professional relationship and cross into social territory. The best thing I can do for my clients is to professionally discharge my responsibilities, and that’s the true basis for our continuing relationship.

Everyone has both social and financial sides of their thinking. When I meet with clients, it’s important to be interested in them as people, and understand the social influences that affect their financial needs. However, I am not a close friend of the people I serve professionally, so I choose not to engage them with social gift-giving. Instead, I do everything I can to competently serve them in a professional manner. If they ever have to choose between working with me or another advisor, I expect they’ll make their decision based on who is more professionally competent, not who gives better gifts.

What is your experience with receiving gifts from people you hire? How does your company give gifts? Does this separation hold when offering money to a friend?

Client Appreciation

5 thoughts on “Client Appreciation

  • July 29, 2010 at 3:13 pm
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    My wife pointed out that the gift basked in the photo is way nicer than what I offered my clients. That’s true. As a note, the pictures associated with each post have no actual meaning. I just think they look nice.

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  • July 30, 2010 at 8:49 am
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    Incorporating appreciation as part of your marketing strategy is not necessarily about giving gifts. Sometimes it may fit, but it’s more about making sure your clients or customers or referral sources KNOW that you appreciate their business. You may assume they know, but studies have shown that a majority of people will take their business elsewhere because they didn’t feel acknowledged or appreciated by the first business.
    While competently doing the job you’ve been hired and paid to do has seemingly become a differentiating factor in business these days, it’s not enough to guarantee repeat and referral business.
    Client appreciation could be as simple as hand writing a genuine note of thanks once a year.
    Your belief in doing nothing may work fine in the short term, but it is not a good plan for building long term relationships. People are people and most want to be treated as such, not simply as a transaction.

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    • July 30, 2010 at 9:20 am
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      You are right that we can’t assume people know we appreciate their business. I must not have been clear, because I don’t believe in doing nothing. I believe that my expression of appreciation should respect the divide between professional services and social relationships (but haven’t figured out what it should be, yet). A handwritten note of thanks is ALWAYS appropriate. So are sincere words like “I enjoy working with you” and “I really appreciated our meeting today.” One example of an appropriate gift, from my real estate agent, since I picked on him, was a waste basket when we moved in. It’s related to our house (the reason for our relationship with him) and we still have it. Many stockbrokers offer a free newsletter containing market commentary, which is relevant and appropriate. That’s what I think is the key.

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  • August 3, 2010 at 6:01 pm
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    When people who bring business to us are let known that their business matters and they are appreciated they have a tendency to work with us more often.

    My husband owns a construction company and he is amazing in his job and work, but he just doesn’t have the skills to build relationships with clients, and this is when I step in. we got many referrals over the years because thank you cards with sincere words and a little something extra.

    I use them as a marketing strategy. I thank you note with a Starbucks card goes a long way. I would rather spend my marketing budget in building personal client relationship then newspaper advertisement. Works much better.

    If we would do a bad quality job then all the thank you cards and gifts wouldn’t make a difference. You have to do it right all the way to be effective.

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    • August 3, 2010 at 7:54 pm
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      Thank you for your insightful comment. You’ve said it all. In fact, now I’m thinking of using gift cards that I know people will use. That way, it’s personal, but it also saves them money, which is actually related to my work.

      Reply

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