People love to give gifts.
Gift giving is more than a simple act or gesture. It’s a big part of everyday life. In fact there is a lot of research showing that giving gifts give us more happiness than we expect. In addition, research in Behavioral Economics shows that giving a “good” gift strengthens social bonds by not only demonstrating that the recipient is loved, but also the gesture of getting something they truly want. The strengthening of a social bond is difficult to replicate, and results in strong, positive emotions for both the giver and the recipient, which can then extend to the gift’s merchant and brand.
But giving a good gift is often easier said than done. What if it’s the wrong size? Or color? Studies have found that this high risk can drive many to choose neutral gifts like flowers or wine, doing little to strengthen the bonds in a relationship. Some chose not to give at all.
Some others compromise with gift cards. Scientifically speaking, gift cards are too close in the spectrum to giving money, significantly reducing the excitement for both buyers and recipients and tarnishing the important social bond. And while gift cards make sense occasionally, studies show they do not strike the right balance of thoughtfulness. Most consider them too transactional: too little meaning, not enough attention and emotion.
Growth in e-commerce is driving online shoppers to demand that retailers also accommodate impulse and instant-purchase behavior -- a main driver for online shopping -- including enhancing and improving the experience of gifting. To this end, major retailers and brands like Macy’s, Saks Fifth Avenue, Bergdorf Goodman, Coach, and Neiman Marcus have adopted product e-gifting solutions. In fact, it's estimated that the product e-gifting category represents many billion in sales annually. Brick-and-mortar and e-commerce retailers alike are becoming aware of this significant, unrealized category as an incremental business driver, but some still have questions about its fundamentals.
As product e-gifting becomes reality, there’s a clear understanding that retailers need to accommodate a dedicated shopping service and check-out for buying products as gifts rather than a self-purchase.
After looking into product e-gifting, it was clear to me that we have to examine the benefits of e-gifting, not just as efficient exchange of gifts, but also as mechanisms to improve the relationship between the buyer and the recipient, as well as with retailers and brands offering the service.
This past February, I conducted several studies that compared and tested existing approaches to product e-gifting that evaluated how a dedicated, end-to-end gifting experience compares to an approach that relies on an existing check-out flow to understand and explore differences as to how consumers respond to the distinct experiences. These studies focused on core fundamental differences, intentionally omitting direct reference to the type of gifts, price levels, brand names, etc.
What I found was that while product e-gifting can be incredibly useful to both customers and retailers, if done incorrectly it can hurt the relationship between the buyer and the recipient and erode the customer-brand connection.
Below I offer several observations and data points that are important to take into account in order to deliver a successful e-gifting experience. These points strengthen the buyer-recipient social bond and minimize risk, while protecting the consumer-retailer relationship, and drive a successful gifting program.
Experience is key to success.
Buying and receiving gifts are very different than self-shopping. Presenting, or leveraging an existing check-out is too transactional, degrading the emotional gift receiving experience. To drive value described above, retailers should avoid requiring the gift recipient to “check-out” their own gift, which was rated ‘very dissimilar’ to traditional gifting, and resulted in experiences that were rated three times less delightful by consumers when compared to experiences that had a dedicated, end-to-end gifting experience.
Hide the price.
Not surprisingly, consumers were uncomfortable seeing the price when receiving an e-gift, with discomfort increasing for higher-priced gifts. Experiences that didn’t display the price were found nearly three times more delightful than gifts that displayed the price, directly correlating to more consumers’ being ‘highly likely to recommend to a friend.’
Accommodate price fluctuations.
Pricing of items being gifted can fluctuate between the time of purchase and redemption. That a buyer or recipient could be left holding the bag registered as a “high concern” with strong negative implications. Being asked to add money in order to accept the gift hurts the social bond between the buyer and recipient, as well as between the consumers and the merchant.
Forget about registering the gift recipient.
Many consumers in the study rated ‘concerned’ when a gift recipient needed an online account with the merchant to receive the gift, noting it would degrade the experience. Redeeming a gift without an account will foster good will, and make recipients more likely to return.
Streamline and keep it simple.
A streamlined and natural e-gifting experience was rated more than four times more preferable than a cumbersome experience. Implement fewer screens to ensure buyers don’t “give up” before completion of an e-gifting transaction.
As adoption of technology fuels product e-gifting, retailers must understand and recognize that the basic fundamentals of why and how we give still need to apply. Very different than gift cards, there are higher standards, higher social recognition, and higher expectations when consumers are buying and receiving thoughtful products as a gift.
Positive e-gifting experiences can act as a catalyst for more repeat purchases than even traditional shopping. Offering a true experience for consumers will enable retailers to benefit from additional revenue through an entirely new channel, and strengthen bonds with their customers. The best product e-gifting experiences needs to support the fundamentals of true gifting to strengthen social bonds between the giver and recipient and achieve the value and benefits that it holds. And these platforms have to take these elements into account.
Dan Ariely is a professor of psychology and behavioral economics at Duke University, TED speaker and the New York Times bestselling author of "Predictably Irrational."