Give Big, Get Bigger
Reciprocity, also called reciprocation, is a common enough theme here at Neuromarketing. The concept of reciprocity suggests that giving someone something, or doing a favor for someone, establishes a subtle return obligation. An interesting study by German researcher Armin Falk showed that a bigger “gift” amplifies the reciprocity effect. Falk’s study involved mailing 10,000 requests for charitable donations, divided into three groups. One group got just the letter requesting the donation, one group received the letter plus a free postcard and envelope (the “small gift”), and the last got a package containing four postcards and envelopes (the “large gift”).
The idea that sending a gift along with a charitable donation request boosts response is well-established, and the experiment bore this out: the small gift boosted donation totals by 17%. The recipients of the large gift, though, were even more generous: they donated 75% more than the no-gift group.
This experiment is significant in a couple of ways. First, it tested reciprocity in the real world, not in an academic setting with undergrad psych majors as subjects. Second, it demonstrated that the reciprocity effect is relative to the perceived size of the gift or favor, even when the variations are relatively minor.
Non-profit reciprocity strategy
Non-profits are well aware of the reciprocity effect, and use it to great advantage. Some use an approach nearly identical to the test, mailing unsolicited small gifts to boost donation rates. This research suggests that testing different gift values and types is important. Clearly, four cards had passed some kind of tipping point that spiked donations compared to a single card. But would two cards have done nearly as well? Would six cards have caused enough of an increase to justify the even higher cost? And what if the cards were of exceptional quality (and apparently higher value), or if the gift was something other than cards?
The great thing about direct mail is that it lends itself to testing. It’s easy to segment donor lists for different mailings and to track the response rate for each package. With a little investment in testing and gift options, a non-profit can determine if a bigger gift will boost the donation rate by more than enough to cover the added cost.
While businesses don’t send gifts to potential customers asking for donations, a reciprocity strategy can still work. (Conference “swag” is one example – give someone a t-shirt, and many will feel an obligation to listen to your pitch.) One business use of direct mail that is somewhat similar to Falk’s experiment is the “appointment request” letter often used in sales prospecting. The typical letter introduces the salesperson, mentions the business purpose (e.g., showing the customer how to save money on their insurance), perhaps mentions a reference, and suggests meeting in person. A business that uses this approach should try increasing their appointment-setting success with the inclusion of a small gift for the recipient. Not only will reciprocity kick in, but the mailing piece will stand out from the flood of other mail on the recipient’s desk.
The old saw says, “it’s better to give than receive.” The reciprocity effect might change this to, “it’s best to give, and then receive!”
Great post Roger. Definitely, the reciprocity factor is in the mind of Tweeters, online marketers and entrepreneurs. I’ve found it useful to only follow (in the example of Twitter) people who’s work I really align with. That cuts out the hope of reciprocity all together and creates a relationship that is based purely on the sharing of great content.
I was never really for engaging in any interaction for the purposes of reciprocity. Sure, we all have it in mind, but people will share your stuff, or buy your stuff if they like it.
Overall, very interesting data. I think you make a great point that the study was done outside of an academic environment filled with psych students. Big difference.
Re. the charitable direct mail, it has the opposite effect for me. The larger the gift, the less I feel willing to donate to that charity because I feel that they will use the money I send on advertising instead of directly on the cause.
I have no idea what the numbers are, so I may be way off-base in this assumption. But, I really feel bad trashing the tacky thank you labels and xmas cards they send that I’d never use anyway. I’d prefer to see the resources used better.
I guess the research says this works, but personally I hate that non-profits send gifts. I always feel like they should be using that money for their mission rather than sending me a gift. Most of the time, they are items that are low quality or random. Things I don’t want anyway.
On another note, I’ve recently seen how this principle works with fundraising for an event that I’m participating in. We made the most money (from people who weren’t close friends and family) when we had a party that included a raffle for prizes like restaurant gift cards.
Naomi and Stacey, I tend to react the same way. When I see expensive direct mail pieces and get stuff I don’t want or need, I always wonder if the charity is spending most of its budget on promotion to generate miniscule net revenue.
The key, as always, is to test. If it works on your lists, then it’s a plus.
Reciprocity is a great influencer. However, I do not think sending a little gift with a business letter will do the trick, if your business is about complex products and services. If you send a letter to offer an improvement in business, you talk about something very valuable to them. I rather show reciprocity by letting them now I took the effort to find out who they exactly are. For instance, you can talk about their mission, their goals, or their recent activities and relate that to your message. A small gift in this situation is like giving an iPod with a Ferrari.
The test you’ve described went the way anyone with experience in direct mail fundraising would have predicted: Gifts (we call the “freemiums” in the business) almost always increase response, and “better” gifts tend to increase it more. Two problems: First, the quantity mailed in the study is much too small. 10,000 pieces split three ways, means test panels of 3,333 each. At the response rates one can expect from direct mail (somewhere around 1%), there is absolutely no way it gave statistically significant results. The difference between the lower and higher performing groups was just a few responses. This is often what happens when academics try to do what fundraisers do every day: They draw conclusions you can’t draw from the numbers, or they state the obvious. In this case, it’s both.
The second problem is that the impact on average gift of the responders isn’t reported. Freemiums tend to suppress donation size. Sometimes average gift is so much lower that the increase in response isn’t worth it. You have to look at both numbers and project out long-term giving from the donors before you know if you have a winner.
Great points, Jeff. As an ex-catalog direct marketer, I get what you are saying. Even with larger sample sizes, though, the same advice would apply: test your own offer and donor base. Just because something works (or seems to work) for someone else does not mean it will work for you.
There’s also another kind of reciprocity that you get when you give big: your own happiness and satisfaction grows, and you develop a more generous heart. That might not be tangible, but it does make a difference 🙂
Ben, it’s entirely possible that some kind of reward system in the brain is activated by doing good, and that you are encouraged to behave in a similar way in the future. Haven’t seen any research on that topic, it would be interesting to study.
I wonder what kind of gifts I could give for an insurance appointment. The trickier part is some states have a limit on gifting value…
I know if I spent the money to send gifts via mail, I would definitely call up the ones that didn’t bite to follow up on. Atleast they would be warmed up…
I don’t think it has to be an expensive gift, Justin. Relatively low cost swag would likely work, though the more relevant and useful the item is, the better.
Is this experiment reproducible across the globe? Esp. India?
Cultural differences can play a big role in behavior and response to various conditions. On the other hand, principles like reciprocity are likely based on evolutionary pressures and will be, to some extent, universal. As with any other recommendation, testing in the specific environment is essential.