When More Isn’t Better: Rethinking Gifting in Customer Relationships
When More Isn’t Better: Rethinking Gifting in Customer Relationships
A customer opens a package and finds a surprise gift inside. Maybe it’s small. Maybe it’s generous. Either way, most marketers would assume the same thing: this is a good moment for the brand.
That assumption is so common it rarely gets questioned. If anything, the instinct is to increase the value of the gift—make it bigger, more noticeable, more memorable—on the belief that more generosity will lead to better outcomes.
But according to the article “Effects of gifting on relationship performance: Strategies for avoiding suspicion and unfairness perceptions,” published in the Journal of the Academy of Marketing Science, that instinct can quietly work against you.
Across a field experiment with more than 6,000 real customers and a series of controlled studies, the authors — Carlos Bauer, Fine Leung and Robert W. Palmatier — found that free gifts don’t operate on a simple “more is better” logic. The same gift can strengthen a relationship, do nothing at all, or actively damage it, depending on when it’s given. What matters isn’t just the value of the gift. It’s the relationship surrounding it.
That becomes clear when you look at how customers interpret these moments. A gift is never just a benefit. It’s a signal. And customers read that signal through the lens of their relationship with the brand — what they expect, what they’ve experienced, and what feels appropriate at that point in time.
About the Research
Effects of gifting on relationship performance: Strategies for avoiding suspicion and unfairness perceptions
Journal of the Academy of Marketing Science (JAMS), 2023
Authors:
Carlos Bauer
Fine Leung
Robert W. Palmatier
Download the paper >
Full Citation:
Bauer, C., Leung, F. & Palmatier, R.W. Effects of gifting on relationship performance: Strategies for avoiding suspicion and unfairness perceptions. J. of the Acad. Mark. Sci. 52, 1713–1740 (2024). https://doi.org/10.1007/s11747-024-01026-9
Early in a relationship, expectations are still forming. There isn’t much trust yet, and the norms of the relationship are unclear. In that context, a high-value gift doesn’t necessarily feel generous. It can feel suspicious. Customers start asking quiet questions: Why are they giving me this? What do they want in return? Is there a catch?
In the field experiment, that reaction showed up in behavior. New customers who received a higher-value gift were actually less likely to repurchase than those who received a smaller one. What looks like generosity from the firm’s perspective can feel like overreach from the customer’s.
As the relationship develops, the dynamic flips. Customers who have been with a brand for a while bring a different set of expectations. They’ve invested time, attention, and money. They’ve built a sense of what the relationship is worth. When those customers receive a low-value or generic gift, the reaction isn’t suspicion—it’s evaluation. And often, it feels like a mismatch.
Instead of appreciation, there’s a subtle sense of imbalance. This is all I get back? That feeling of unfairness—of the exchange not quite adding up—undermines the relationship in a different way. The research shows that long-term customers respond more positively when the value of the gift reflects the depth of the relationship, not when it falls short of it.
Between those two extremes is a narrow but powerful space where gifting actually works the way marketers expect. When the value of the gift feels appropriate to the relationship—neither too much nor too little—it generates something different: gratitude. And gratitude, unlike suspicion or unfairness, leads to reciprocity. Customers come back. They engage more. The relationship deepens.
What makes this especially important is that the gap between these outcomes isn’t small. The study finds that the exact same gift can be significantly less effective—by more than 20%—when it’s mismatched to the relationship stage. The difference isn’t the gift itself. It’s the context.
That has practical implications that go beyond just “right-sizing” a promotion. It suggests that gifting strategies shouldn’t be designed as one-size-fits-all campaigns. They should be treated as relationship signals that need to be timed and framed correctly.
One of the simplest ways to reduce the risk, especially early on, is to remove ambiguity. When customers understand why they’re receiving a gift—even a brief, transparent explanation—it reduces the likelihood that they’ll question the firm’s motives. In early-stage relationships, clarity can matter more than generosity.
Later in the relationship, the challenge shifts. Matching value with value isn’t always feasible, especially as customer lifetime value grows. But the research points to an alternative lever: effort. A gift that feels thoughtful or tailored to the customer can offset lower monetary value. In some cases, a customized, lower-cost gift performs just as well as a more expensive, generic one because it signals attention rather than transaction.
Stepping back, the broader takeaway is less about gifting itself and more about how customers interpret value. Value isn’t fixed. It’s contextual. A $100 gift can feel excessive, appropriate, or disappointing depending on when it appears and what the relationship looks like at that moment.
That’s where many well-intentioned marketing strategies fall short. They focus on what is being given, rather than how it will be read. But customers are always interpreting. They’re asking whether something makes sense, whether it fits, whether it aligns with what they expect from the relationship.
Free gifts don’t create meaning on their own. They reveal it.
And when marketers align those moments with the relationship instead of overriding it, the impact isn’t just more efficient. It’s fundamentally different.
From the Authors
What marketing challenge(s) does your article address?
The article addresses the strategic challenge of when and how to effectively use free gifts as a marketing promotion/relational strategy. Specifically, it addresses the paradox that while 77% of U.S. firms use free gifts as an active marketing strategy, their intended effectiveness can backfire if relationship dynamics are not taken into account. The core challenge is that a mismatch between perceived gift value and the customer relationship stage can damage, rather than strengthen, customer relationships, creating either suspicion or perceptions of unfairness.
What companies/organizations/industries will benefit from your findings?
The article lists several companies that have used gifts to build a relationship with their customers, including TD Bank, Microsoft, and Monsanto. We see the applicability of our findings across industries such as hospitality and travel, retail, financial services, and personal care/cosmetic companies. Essentially, any business area interested in providing customers with gifts as signs of relational investments that are not limited by law on a gift’s value (e.g., gifts to government employees cannot exceed $50).
How and to what extent may this research benefit these companies or industries?
As the article describes, we conducted a field experiment with a personal care retailer. For this firm, a $15 difference between the low-value gift (worth around $5) and the high-value gift (worth around $20) was sufficient to elicit the proposed effects. Therefore, this skincare retailer should be mindful of how easily a consumer’s perceptions of a gift’s value can be influenced. Second, the firm ought to specify windows of opportunity. For this retailer, a low-value gift was effective very early in the business relationship. However, a high-value gift became effective only after about three months’ worth of customer-firm interactions. Again, these windows of opportunity may be context dependent. However, they occur across industries, and representative firms need to understand when and how they occur.
How can the recommendations from your findings be implemented?
Step 1: Segment customer base by relationship stage: Use relationship duration as the primary metric. Supplement with purchase frequency and total spending. Depending on the firm/context, identify 3 possible relational zones: over-investment, targeted, and under-investment.
Step 2: Develop gift tiers guided by relational dynamics
Step 3: Build appropriate communication strategies. For instance, draft transparent explanations for high-value gifts to new customers (e.g., "Celebrating our 10th anniversary"), or train staff on when/how to explain gift motives.
Step 4: Create customization capabilities. Audit customer data for personalization insights (preferences, interests, demographics). Develop a catalog of customizable gift options and set guidelines for "appropriate" customization levels by relationship stage.
Step 5: Scale with guardrails. Implement automated rules for gift selection based on relationship data, but maintain human oversight for high-value relationships. Create feedback loops for continuous refinement
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