Finding Profitability in Random Acts of Kindness

 In Company Culture/People At Work

Finding Profitability in Random Acts of KindnessA couple of weeks ago I happened upon a fascinating article in the New York Times Magazine by Rob Walker called Favor Enhancement.

It seems the Hyatt hotel chain is engaged in a marketing experiment in which employees of the mammoth hotel chain are being empowered to unexpectedly pick up the tab for a guest’s bar bill or spa treatments. Hyatt executives call the program “random acts of generosity” and it’s based upon psychological principals long employed in business “ particularly in the consumer packaged goods industry.

“The idea,” writes Walker, “is that the unexpected nature of the ‘gifts’ will leave the customer not just pleased but also grateful, and gratitude is a powerful and potentially quite profitable emotion to inspire.”

New research published this month in the Journal of American Marketing seems to bear this out. The research team from the University of Washington concludes, “A customer who is made to feel grateful most likely becomes enduringly loyal as a result.” Gratitude, as the paper puts it “can increase purchase intention, sales growth and share of wallet.” But things are not quite that simple.

Thinking about Hyatt’s program, my mind immediately went to the tactics used in relationship and loyalty marketing; that set of marketing programs based on the idea that it is much more efficient to maintain solid long-term relationships with loyal customers than it is to constantly acquire new customers. Frequent flier and membership rewards programs are the most famous examples of this. However, there’s more going on here. After all, as a customer joining a rewards program, you have an expectation of reciprocity; you know the rules of the game in advance. You buy something; you get a reward…basic Pavlovian stuff. This is different.

In “generosity marketing” you are giving unexpectedly to your customers “ with, of course, the expectation that they will not only remain loyal to you, but also will tell others about their positive experience and return new customers to you by word of mouth. And WOM is the dish every marketer craves in the era of social media.

According to the University of Washington research team leader Robert Palmatier, previous studies have found that people feel pleasure when they reciprocate out of gratitude and feel guilty when they do not. And the element of surprise is important. “If a favor seems to be a function of the free will (as opposed to company rules), (the customer) has more of a desire to reciprocate,” says Palmatier. Powerful stuff, human emotions. Think about it…a marketing program that can actually make customers feel guilty if they fail to reciprocate your generosity!

Palmatier points out that this is the principal employed at online shoe retailer Zappos when they find a product a customer wants elsewhere if Zappos doesn’t carry it. A pre-internet example is the Nordstrom service philosophy originated by my dear friend Betsy Sanders, former vice president and general manager of that famed retailer. Betsy understood generosity marketing more than 30 years ago and sewed the seeds of customer centricity “ and reaped the benefits “ building Nordstrom into the retail leader it is today.

The Nordstrom service philosophy is taught in business schools all over the world, yet Betsy’s philosophy, like generosity marketing, requires a significant paradigm shift for many of us. In her (still) wonderful book, Fabled Service she writes:

“Treasure the goodwill of your customers as if it were a valuable account. Your goal is to always make deposits into that account, adding more than you ever take out and paying unexpected dividends.”

The key of course is to drive the power to deliver random acts of generosity through the entire organization, from senior management all the way down through the rank and file, AND to maintain the informal, random nature of the experience. As one senior Hyatt official put it, the importance of the element of surprise cannot be overemphasized; there should be no discernable pattern as to which customers receive these “random acts.”

Generosity marketing then, is fundamentally different from loyalty programs or typical relationship marketing practices. While most marketing programs work by focusing on customer’s decision-making processes, generosity marketing is supported by a more holistic psychological structure “ by the way we are “naturally wired.”

According to Palmatier, “In addition to its mediating role, gratitude increases customers’ trust in the seller, both strengthening the quality of the relationship and positively affecting seller outcomes through trust’s influence on performance-enhancing commitment. (Gratitude) is a relationship-sustaining emotion that increases relational trust. Thus, feelings of gratitude and a history of gratitude-based behavior appear to change customers’ perceptions and evaluations of trust.”

This is the very essence of the expression “game-changing.” The effect of gratitude on seller performance is actually greater than the effect of commitment alone (about 23% greater!) And this suggests that gratitude’s role in marketing effectiveness is comparable to, if not more important, than typically measured sales and marketing programs.

OK, you say. This is all very interesting, but I am in human resources with no direct contact with my company’s customers. Oh really?

I have two words for you: Employment Brand.

The human resources department of any organization markets the employment brand! Very often, you are the first personal point-of-contact an individual has with your company. That candidate or prospect is your customer and a customer of your company’s products where they are sold.

Ask yourself the following questions:

  1. Do my interactions with candidates and those in my professional social network reflect the way I expect to be treated?
  2. What is the candidate experience with my employment website like? Do I acknowledge and thank potential employees for choosing to apply with my company or for becoming part of my company’s network? Have I ever followed up with previous applicants who did not get the job?
  3. When was the last time I forwarded a candidate to a colleague outside my own company because I though they were perfect for my colleague’s company?
  4. Do the recruiting partners I choose to do business with share my philosophy about the way people should be treated? How does the way my partners do business reflect on my employment brand? Do I have measurement tools in place to measure any metrics beyond “number of hires”?

I believe these are extremely important questions we as human resource professionals need to be asking ourselves as the economy further tightens. When push comes to shove in the decision making process, top talent will make the “stay or go” decision based upon the relationships they have with your organization and the business partners they engage with throughout your recruitment process. How much gratitude do you think they will feel towards you?

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