Exploring the idea of surplus (added value) and status
Over the last week I’ve started to peel back the onion on a concept called the gift economy and how it relates to marketing. I have to thank fellow #usguys Kevin von Duuglass-ittu @mediasres, Lisa Thorell @lisat2 and Christopher Porter @67tallchris for spearheading the discussion. Kevin gets extra nods for driving the bus and diving deep with a few strong posts to explore the concept.
So – what is a gift economy?
According to Wikipedia:
In the social sciences, a gift economy (or gift culture) is a society where valuable goods and services are regularly given without any explicit agreement for immediate or future rewards. Ideally, simultaneous or recurring giving serves to circulate and redistribute valuables within the community.
A gift economy is opposite of a market economy. In a market economy there is an exact exchange of values (quid pro quo). It is my theory that there is a hybrid called the lagniappe economy that can sit between the two:
Can lagniappe live in the middle? Here is a great analysis from a post by Kevin on gift economies:
“This does not mean that the Gift Economy … and the Market Economy of business are incompatible, not in the least. In fact many if not most of our business exchanges are grounded in Gift-based relationships whose “gift” nature we simply are unconscious of and just assume. If you develop a keen eye for the gift-giving environment, and think about all the things that gift-giving in those environments signal, 1. a surplus others want to attach themselves to, 2. a magnanimous respect for the relationship beyond all else, 3. a debt structure that is “positive”
Let’s examine each of the three through the lens of a lagniappe economy:
1. Surplus – the idea of surplus is grounded in giving extra or creating an inequality. Lagniappe comes from the spanish ‘la napa’ or the Quechan ‘yapay’ both meaning ’something that is added’. Lagniappe is the practice by the business of throwing in little extras at the time of purchase.
2. Respect – The gift or little extra is about the respect for the relationship. It becomes a beacon, a sign that shows you care. It’s a physical sign of goodwill and customer appreciation.
3. Positive – A debt structure that is positive. This speaks to exceeding expectations by giving extra. The idea of an equal exchange (market exchange) is a myth in marketing. You either exceed or fall short of customer expectations. Providing that extra value provides an inequality that is positive. The positive effect leads to a sort of indebtedness or reciprocity on behalf of the customer.
The Benefit of Surplus is Status
As a business why would you want to incorporate gift economy principles into your market exchanges? I believe there are 3 distinct reasons and corresponding benefits of the status gained through marketing lagniappe:
1. Positioning – stand out from your competition. If everyone is providing x, the fact that you provide x + y (gift) differentiates your offering. Less than 30% of consumers buy on price. You want to tap into the 70+% who are looking for value and a strong customer experience. Benefit: Differentiation
2. Loyalty – giving the little extra (gift) enhances the customer experience. It creates a bond between the business and the customer. The benefit of that bond include increased loyalty and ultimately patronage as a form of repayment. Benefit: Retention
3. Reciprocity – Part of giving extra is to create goodwill (inequality). That inequality is repaid by positive word of mouth or word of mouse. The best form of marketing is via positive word of mouth. By giving a signature extra (gift) you provide something for your customers to talk, tweet, blog, Yelp or Facebook about. Benefit: Referrals
What do you think? Is it possible leverage the power of gift economies in marketing transactions via marketing lagniappe?
Today’s Lagniappe (a little something extra for good measure) – Here is Chris Anderson, editor of Wired Magazine and author of the ‘Long Tail’ & ‘Free’ talking about the gift economy and the power of free:
Lagniappe defined: A marketing lagniappe, i.e. purple goldfish, is any time a business goes above and beyond to provide a ‘little something extra’. It’s that unexpected surprise that’s thrown in for good measure.
How do you stand out in the sea of sameness? How do you win repeat customers and influence word of mouth? Are you Giving Little Unexpected Extras?
What’s Your GLUE?
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Stan, I love your focus on lagniappe.
If we peel the onion, in some of the characteristics of gift and market economies we’ll find more cross-over. For instance, in gift economies, there can be very strong notions of expected reciprocity- an exchange deferred, if you will. And in market economies, there can be many instances of gifting. Cause marketing is an example of corporations giving back to communities.
Really wonderful post Stan - and thank you for the generous quotes. I love how you have drawn these categories out, and then provided them with more narrow focus in the Lagniappe example. What I kept thinking about as well, as you spoke of indicated surplus is the bucking antelope who at top speed will pause for a second and kick its hind legs, indicating it’s health, indeed its surplus to the chasing lion. Of course in gifts, in commodity purchases, it is not a predator to whom we signal but a potential partner in brand loyalty. This image of signaled surplus though is rife through the animal kingdom. Social semiotics are constantly cued towards the signaling of surplus. I think that really roots of this go down very deep in social organization, well below the human.
Sorry to digress…
I liked the Chris Anderson Wired video, but every time I hear him he seems oddly vague in his descriptions. He has great examples and enthusiasm but really what is important isn’t that we might be an in Age of Gift Economy - I have yet to read his book. But rather how Gift Economies really work. They are complex, or at least can be. They can be filled with competition, struggles in status. There are things that make them work, and things that make them fail, and everything being free or not isn’t the determining factor. I guess that is what makes your Lagniappe idea interesting, as it is deeply embedded in Market Economy practices, but then draws on the strengths of the under-bed of Gift Economy dynamics.
Thanks for the fantastic post. Look forward to more collaborative parallel thinking.
Kevin
@mediasres
Ric,
As you say, “And in market economies, there can be many instances of gifting. Cause marketing is an example of corporations giving back to communities.”
A great example. Insofar as such contributions are successful, they are in my view Gift Economy operating within, or in weave-with Market Economy. Here I am using “economy” to mean not a whole culture in the anthropological sense, but in the sense of prescribed expectations of exchange, status change and obligation that operate in a rule-like fashion sometimes only locally. What distinguishes the two general Economies though - switching levels to speak of a logic in each - is the very “exactness” of Market Exchanges and the unequal exchange that marks Gift Eco.
I think a big problem comes when Gift Economy dynamics become reduced purely to Market Economy motivations. A certain feel for them is lost. The reason why I work to maintain a distinction between the two separate views of exchange value is so that the analytical eye can trace out exactly what is happening in a particular offering, how it works. By seeing the two economies as inter-laid one can pick out when one is happening and not the other.
I love your example of Corporate giving. If BP donates big money to the Sierra Club indeed it is likely for Market Economy reasons, but if one wants to understand any of the positive debt that incurs from such an action and try to make use of it, one has to leave Market Economy thinking behind (at least for a while). It can reengage on the other side.
This may go someone against the grain of Stan’s idea that the Lagniappe being a hybrid economy. I think that the Lagniappe act or object itself is hybrid, meaning that it can be viewed from both a Market Economy (ROI) and Gift Economy perspective (positive debt). But to trace out the benefits of each, we need to step into one realm or the other, and perhaps move back and forth between them.
K
@mediasres
Thanks Ric. Reciprocity is a key factor. Giving a little extra creates a surplus which invokes reciprocity. Reciprocity is why the simple tactic of sampling is so effective. Imagine the power when you include sampling (gifting) as part of the transaction.
As a consumer I like the idea of receiving “Free” gift for my loyalty however, the gift has to be unexpected and with no strings attached. I really believe that Marketing Lagniappe being powered by the Gift Economy is a positive form of marketing as it allows the consumer to feel valued. That same consumer will become loyal to the company and therefore the money spent will be produced in the ROI. For the long run a company will gain more by valuing its consumers as they will return in addition to bragging about the services to other potential consumers.
Another form of giving to the consumer is when money are raised by the companies for a charity. However, I find it quite insulting when those companies take all the credit and the consumer is not recognized. Working in the non-profit sector for over five years and seeing how many companies take the credit for the money raised from their consumers is does raise questions when I am asked to donate money for a cause on behalf of those companies. I know that this is also a form of marketing as the company raising money becomes involved with the community and therefore they market themselves as giving back to that community. As a consumer I like to be acknowledged for supporting the company even when it comes to raising money for non-profits. I could donate the money directly to the non-profit and get the credit first hand, right? So why, as a consumer, have to give to a company when no recognition is given to me?
However, I see Lagniappe Marketing as a form of success more than failing. This form of marketing, if done right, it can bring revenue to the business in form of return clients and the word of mouth marketing. And since less money will be spent on marketing as the word of mouth or mouse will be in place, why not reward the consumer that does that for the company as a form of “Thank You!” ?
Thanks Doina. You make a strong point that “the gift has to be unexpected and with no strings attached”. I couldn’t agree more. I love the concept of g.l.u.e (giving little unexpected extras). It needs to be authentic with no strings attached. its an expression of caring about the customer.
Thanks Kevin.
Great points about Chris Anderson and the concept of FREE. I think his main idea revolves around the concept that every business can leverage the power of FREE given the low cost of digital. To your point I think where lagniappe differs is in the idea of giving the little extra (FREE) after the market transaction.
The best example is the case study of Izzy’s Ice Cream (an iconic ice cream store in St. Paul, Minnesota). The owner Jeff Sommers was told to do two things when he opened his shop: 1. SMILE and 2. Give away samples. He disliked the idea of just giving away free samples, so he created his own wrinkle. What he does is allow customers to add an IZZY scoop to each order. It’s a small scoop of any flavor. Great for customers who can take a ‘worry free’ chance to try a new flavor. It’s a little extra that goes a long way. Izzy’s was voted the best ice cream shop in America by Reader’s Digest.
Best,
Stan
@9inchmarketing
‘The longest and hardest nine inches in marketing is the distance between the brain and the heart of your customer’
Stan,
The example of the Izzy scoop is a great one. As a former bartender - in a past life - I understand to a powerful degree the importance of the “bought drink”. In fact in nyc this is an essential - often customary, tho often left to the wisdom and art of the bartender - aspect of building clientele. It is not just a clever marketing scheme, it is buried in the very micro-culture of drinking and sharing drinks.
the best,
Kevin
@mediasres
Kevin,
The buy-back is vintage lagniappe. You hit it with the craft aspect, there is definite wisdom and art at play. Driven by #gifteco and the idea of not keeping score per se. One part customer appreciation (recognition) and two parts retention (building clientele).
What happens though if every bar does a buy-back because it becomes customary? It ceases to become special and then becomes expected (kind of like the baker’s dozen).
I’m a big proponent of creating something that is signature. Here are a few examples from the restaurant / bar business:
Besito’s (worry dolls), AJ Bombers (p-nut bomber) and Lolita (cotton candy)
Stan
@9inchmarketing
Stan,
I absolutely believe that there’s a middle ground just like that. I also believe it may be the most remarkable AND profitable one for business.
Hi Stan,
Great post! I think that the Gift Economy and Market Economies are in fact very compatible. Reminds me of past business trips to Asia (Japan in particular) and giving gifts to start a relationship. The understanding of the giver is that the reward will come later. But, without a gift, the reward may never come. This measure of gift-giving is part of a deep cultural tradition and plays well with the lagniappe economy: #2 Respect. This gift is “about the respect for the relationship…a sign that shows you care.”
The lagniappe economy seems to serve as a bridge between the Gif Economy and Market Economies. Providing more value (particularly when unexpected) yields points for the purchaser and may help move them through the purchase > loyalty > advocacy stages. This may also be the beginning of customer lifetime value (CLV) so the upfront little extra is re-paid perhaps countless times.
Mark
@mnburgess
Hi Stan!
Very interesting and engaging post! You have received a number of excellent responses so here is my take.
I am thinking about gift giving in a different light and of smaller value (perhaps small value to the giver, yet over time of greater value to the receiver). You give a ‘Like’ to a brand on Facebook. This represents a positive sign of support for the brand (let’s not focus on whether the true value of a ‘Like’ which is another conversation).
Or, you retweet someone on Twitter or fan or follow someone. Surely there is giving in this act and your simple interaction may lead to other opportunities down the road.
Again, excellent topic and really enjoyed the post.
Cheryl
@ckburgess
Thanks Joe. A good business invokes the principle and has one signature extra (purple goldfish). A great business builds in numerous extras (a whole school). AJ Bombers differentiates itself and bakes in added value by design. Thanks for sharing your opinion on its importance towards being both remark-able and profit-able.
Mark - strong point about how gift practices are viewed in other cultures. You have to give to get. An imbalance or surplus that gets repaid down the road.
Love your observation about lifetime value and loyalty:
First timers -> Repeats -> Occasionals -> Regulars -> Heavy Users
Customer -> Fan -> Advocate -> Evangelist
I’ve read that customers that purchase via ‘word of mouth’ are worth 2x’s the LTV and will also bring in 2x’s the amount of referrals than customers gained without ‘word of mouth’.
Cheryl - you are onto something with regard to social media. It is highly influenced by the concept of a gift economy. You give without the expectation of an immediate benefit. But by giving you gain status and create an opportunity for future repayment.
Kevin @mediasres has begun to start analyzing how the principles gift economies intersect in social. The hashtag is #gifteco if you are interested in diving deeper.
perhaps you caught me on a cynical morning, but here goes. The idea of Free economy in the sense of ‘here’s a sample of what I produce or do” if you like it and want to buy more, quite frankly is not new. Chris Anderson didn’t create the idea of Free economy, he packaged it in a digital world so that he could make money from it.
Gift economy operates because the person giving the gifting paid their rent from some other means. Doing good work, making products worth talking about and treating customers in a way that compels them to return is smart business.
Now on to the gift idea. This is about intent. I participate on Twitter a lot. Sometimes it’s work related, I’m getting cash for my advice or providing some clever turn of phrase or link that a client can use on Twitter. (sorry i have 5 kids that must eat. I apologize for nothing that keeps them nourished)
In the digital world, we have developed a socialist economy of information. Stan, this idea of gift to me is about giving something to the community, providing a social good for what is a subsociety of social media users of that information.
How about RT - that’s a gift. I don’t need to promote you. I do it constantly, I promote people who are competitors. Do I get something from it? Certainly not directly, and perhaps never. I think we are in a phase where you will find out who is truly social in the giving sense and who reaped benefits from the gift economy without giving much back. This is not a criticism, it’s an observation, if someone reading this takes offense none is intended. We all operate in a marketplace economy.
Look on your Facebook wall and see if those same people who were community givers, who you contributed their gain are giving back to you. But to your point Stan, in the gift economy there is no expectation of immediate or future rewards. Back in the early days of the social web there should have been no expectation that what you give you will get back over time.
I love that idea of a gift economy, I just don’t know how that translates into a marketplace economy where we are finding ourselves competing.
How much time are you spending in the gift economy vs the marketplace economy. Is Izzy’s a gift economy? I’d say no, it’s a free sample economy model, because there is an expectation that you will be introduced to another flavor and you’ll return to purchase it. The provider of high quality cream spends his time in a marketplace economy so he expects to be paid.
The day when Chris Anderson doesn’t get a pay check is the day he lives in a Free economy. Even that statement is bogus because I’m guessing he can symbolically give up a paycheck here or there and not be worse for wear.
I provide gifts all the time. I agree there is a gift economy, but it is A) subsidized and B) exploited. Now, I’ve gifted the last 30 minutes to this blog, I have no expectation of return, no belief that someone will read this comment and think they must hire Albert Maruggi for his insights. Therefore, I must get back to the market economy, dinner is just hours away
All the best to you and your readers
Fabulous post, Stan! I particularly like your Marketing Language diagram of the different economies. It makes me wonder about those little birectional arrows you have between the boxes. It strikes me that there is a strong relationship between the Market Economy and Lagniappe: Lagniappe not existing without the assumption of a Market Economy transaction. But the Gift Economy seems to reside on its own- as Kevin points out- with no assumptions of repayment or obligation. The order of the gift appears important. If you gift before the market economy transaction, say, via “tryvertising” or a sample product that is firmly wedded to the market economy transaction with an expectation (it’s calculated!) that you the receiver will purchase later. This is known to have a profound effect in switching over customers to a product. However, where the gift occurs after the market economy transaction – why that’s lagniappe, a “Plus One” or the Izzy scoop.
I think there needs to be a dotted line separating Gift Economy from the other spaces. It exists alone and separate with absolutely no expectation of any market transaction or obligation. When the Gift Economy intermixes with Market Economy, as Doina points out in her example, the Gift Economy is spoiled and there is disappointment. Klout Perks are a great example here of a clash of the Gift and Market Economies, which has invited some backlash in some social media circles http://consumerist.com/2010/06/virgin-america-out-to-bribe-twitter-whores-with-free-flights.html . Why the clash? When the Klout Perk TOS states “absolutely no expectation of obligation”, too many see this as an obvious side-stepping of the FTC rules on disclosure of gift by bloggers and yet it’s obvious from the 3000+ advertising partners involved with Klout Perks that they lined up for the advertising value. Ay, there’s the rub – a clever one by Klout but not without some annoyance from purists (Gift Economy believers) that social interaction of tweeting, micro-blogging should be its own reward. It soils the microblogging environment in a way as one cannot help but suspect in some cases that some interact for @ mentions is driven to up their Klout scores for both social media authority as well as “ gift” reward. We now exist in that dynamic tension of this gray space – wondering if we are operating in a Gift Economy or Market Economy with Klout-motivated tweeting. And that pisses some people off. Interestingly, a good lagniappe doesnt suffer from this: Ocurring after the explicit Market Economy transaction, its seen as separate and “no foolin’”, a gesture of pure good will.
Stan, I agree with the above comment that customers are likely to be more committed to a product or brand that was recommended by someone they know and trust. It’s likely they’ll also be willing to pay more for it. (Think about it: When a friend recommends a great sushi restaurant, do you ask to see a menu to check out the prices before you commit to be seated? Of course not.)
In order for customers to recommend a product or service, they must first have a positive experience with it. Most interactions customers have with companies are transactional, soon forgotten, and don’t inspire recommendations.
When companies make a positive lasting impression on customers by providing a pleasant surprise (e.g., “gifts” of “lagniappes”), good things happen - including valuable referrals and recommendations.
Using the restaurant example, some chefs will send out a complimentary small plate with sample bites of appetizers or desserts. In some cases, this “lagniappe” will make enough of an impression to inspire a social media update, a positive Yelp review, or a casual recommendation at the office.
Either way, there’s nothing bland, uneventful, or transactional about this gesture.
Albert,
Thanks for taking the time to comment. I’m a huge fan of the Marketing Edge Podcast.
I think you are looking at market economy and gift economy as polar opposites. You see vinegar and water . . . they can not be mixed.
I would argue that you can exist using a market economy approach, but layer in elements and benefits of the gift economy on top.
I disagree about Izzy’s. I think this is one of the best examples of the hybrid approach. To illustrate:
Gift economy approach - give samples of ice cream away to everyone. There is no expectation that people will buy. Let’s say 20% end up buying. The other 80% is wasted or lost.
Market economy approach - a small ice cream = $2. You get exactly what you pay for. It is an equal exchange, nothing less and nothing more.
Hybrid lagniappe economy approach - reward only paying customers by giving a little unexpected extra (the IZZY scoop). A small ice cream + an IZZY for $2. Customer gets their ice cream and also gets to experiment with a mini scoop of a new flavor. You’ve differentiated yourself from other ice cream shops, you’ve given them a reason to come back and you’ve given them something interesting to talk about. Sure you are giving away a sample each time, but it is 100% targeted with no waste.
Thanks again Albert for taking the time to comment (gift).
Best,
Stan
Lisa,
Thanks for adding your perspective on the gift economy. Interesting take that it should be totally separate.
I believe there is a time for both. Times where you can operate in a gift economy and times where you operate in a market economy. I’d argue that most companies are too focused in a market economy mindset. They are blinded by the need to maximize shareholder value by minimizing cost and driving profit. The real focus should be on getting and keeping a customer.
Done correctly (and expression is absolutely key) and you can utilize gift economy principles in a market transaction. That little unexpected extra (lagniappe) creates the surplus. You can do it without creating any expectations. It becomes a sign of appreciation and goodwill that establishes a bond.
Look forward to continuing the dialogue.
Best,
Stan
Thanks Steve.
The little things (extras) truly do make a difference. The best form of marketing is a first person referral. Provide your customers with great experience, surprise them with a little more than they bargained for and give them something to talk, tweet, blog, YouTube, Yelp or Facebook about.
Stan,
I’ve read this post now several times and I still don’t seem to understand the purpose of it. Let me explain: the idea of lagniappe isn’t a novel one at all; in fact, it goes back centuries and is still practiced today by those with a surplus to those companies just getting started and trying to grow their business. So I’m not sure if you feel this post is introducing the concept?
As for a gift economy, it is the opposite of a market economy for good reason - people like getting paid for their goods & services; always have and always will (don’t you?). When you give away something, it loses its value. It’s not the same as lagniappe which is “adding a little extra” to the order. It makes for great blog fodder but isn’t a business model that will ever see wide acceptance.
A market economy works because people want to get what they pay for. It has worked for centuries and will continue to work because it makes sense AND it’s fair. Companies that have vision, creativity, and produce great products/services (Apple, anyone?) will continue to thrive in a market economy. Why? Because nothing gets more referrals; nothing gets more people tweeting, blogging, or talking than a great product or service (you wanna talk “positioning” & “loyalty”?). If your product or service is inferior to the competition’s, all the lagniappe and gifts in the world won’t save your business.
I’ve seen a trend lately, especially by social media marketers, enthusiasts, consultants, etc that lean towards the formation of new economies based on reciprocity, love and compassion. They create elaborate charts that illustrate new business paradigms. They talk of loyalty, differentiation, respect, & word of mouth as if it’s something that has been missing from business for the past century. I don’t know your background but I’ve found that there are mainly two types of people who support this type of thinking: those who have never worked a day in their lives in a corporate environment and those who have worked in a corporate environment and couldn’t cut it.
As for me, I come from a sales background (NYC & FL); from working in a cubicle to Sales Manager to Director of Sales & Marketing. I started my video production business in 2006 and have seen it grow each of the last three years by close to 30% (despite the economy). How? By providing my customers with what they paid for. And for successful companies thriving in a market economy, that usually ends up being more than what the client’s expectations were.
Nuff said.
Great post Stan and nice discussion here. I agree wholeheartedly with Albert Maruggi’s comments. To be clear (and not risk paraphrasing his thoughts, too):
I think that fundamentally the word “economy” is being, well, misused by a lot of people seeking to understand the next way of both doing business and creating value. Ultimately, as marketers and people responsible for growing a business, when we engage in gifting I believe we are really still operating in a Market Economy. It’s all about our intent. These aren’t really “gifts” without expectation – what we’re discussing is really about marketing strategy. And, by the way, I think it’s often a great marketing strategy – as long as there is real perceived value.
I like the notions of surplus, respect, and positive debt structure. All of those elements are great components for relationship building. It’s just good business (“always over deliver”). All of this, I believe, ultimately leads to a (if not the) holy grail of business: gaining trust. I think gifts are important in pre-sale as well as post — particularly in service organizations. There’s a concept called “Moving the Free Line” that is advocated by informational product marketers. The concept: give away your very best value and people will be so enthralled, so interested that they will want to learn more. So, gift? Yes. But market-driven? You betcha.
From a brand storytelling perspective, it can be a great differentiator to be known as generous, over-delivering and customer-focused. Creating a gift culture for your brand can have a lasting effect on whether or not people care about you and choose to do business with you. I don’t know about you – but those are the kinds of brands I want to support. And some of these gifting stories can take on epic myth-like proportion. Stew Leonards’ brand story in the 80s is probably a great example (so much so that classmates drove from Babson in Boston just to see the store in action).
So, technically – I can’t call this an economy. But a strategy, yes. And a good one at that. I do think, that businesses run the risk of many value-adds becoming the norm and actually driving down both value and price (and I’m certain there’s plenty of research on this topic). Regardless, serving customers by providing the best possible value is, in my mind, always a great thing (strategy, economy or otherwise!).
Dan,
Thanks for your well thought out response. I appreciate you taking the time to share. You make some very valid points. Let me address them:
- “Lagniappe is not a novel concept”. Agreed. The word ‘lagniappe’ dates back to the 1840’s (Mark Twain said it was a word worth traveling to New Orleans to get), but the principle of ‘yapay’ goes back way further. Even though it has been around for centuries, I don’t believe most businesses are familiar with the concept or (even if they do) see it as a form of marketing or as a potential strategic differentiator. Even when I explain the concept to people, it’s hard for them to think of examples of businesses that practice the concept. I’d bet you would struggle to name 5 examples from your last 100 business transactions. The concept of lagniappe is definitely a throwback. The days when the butcher knew you had a dog and put a bone in with your order or when your local bartender bought you a round towards the end of the night seem to be from a bygone era.
- “A market economy works because people want to get what they pay for”. A market economy is based on the idea of equal exchange. It’s my belief that almost everything is becoming a commodity (there are not many Apples out there). You can compete and differentiate your product or service on three levels: price, service or value. You can’t be all 3, you have to pick one or at the most two. Lagniappe is about value. The idea of creating added value, but doing it in a way that comes from the same principles as gift giving. Its about setting out to exceed the expectations of your customer. I firmly believe that setting out to just meet expectations via equal exchange is a recipe for failure. It’s like playing prevent defense in football. It only prevents you from doing one thing . . . winning.
- I’m not advocating for operating your business in a gift economy, because it’s an impossibility. I’m only stressing that there are elements of the gift economy that can be layered on top of market economy transactions. The idea of consciously giving a little unexpected extra is about appreciating your customer and thanking them for your business. My point is that if its done correctly it has some great benefits (differentiation, retention and referrals).
- “If your product or service is inferior to the competition’s, all the lagniappe and gifts in the world won’t save your business”. You are correct that lagniappe will not help you if your core product or service isn’t quality. You can’t make chicken salad, out of chicken sh*t. I certainly do not advocate that marketing lagniappe is a substitute. Concentrate on making your product great first. Tremendous point.
I personally resent your ‘market of one’ assertion about the background needed for supporting this type of thinking. I’ve worked in sales and marketing over the last two decades. My experience ranges from a Fortune 500 brand (adidas), with leading sports organizations (Yankees & PGA of America) and both small and large agencies (IMG and Synergy). I’m careful about not just spouting off theory. I’m in the process of crowdsourcing 1,001 examples. There are plenty of examples in my Project of business leaders who have adopted this strategy. Leading brands such as Southwest, Zappos, TD Bank, Virgin, Amazon, Starbucks, Kimpton, DoubleTree, Lexus, Whole Foods and Five Guys. There are also fantastic examples from pioneering small or regional businesses such as Zane’s Cycles, AJ Bombers, Izzy’s, Stew Leonard’s, Umpqua Bank, Peter Millar, Les Schwab and Johnny Cupcakes.
Congrats on the growth of Dan’s Video Creations. It sounds like we’re not that far apart at the end of the day. In your words, ‘Give your customers what they paid for and exceed their expectations’. I’m only advocating that brands should be strategic about setting out to exceed expectations. Call me crazy, but I believe this only happens by design and if you do it right in a signature way it can become a beacon for your brand.
Best,
Stan
@9inchmarketing
‘The longest and hardest nine inches in marketing . . . is the distance between the brain and the heart of your customer’
Stan,
Based on your response, it appears we’re not so far apart in our thinking. I don’t disagree that lagniappe isn’t a part of everyday transaction (does it even need to be?). I think it’s more common for repeat customers as a “thank you” for coming back.
I also agree that there are instances where “the gift economy can be layered on top of market economy transactions” to produce additional benefit to the customer. Again, that has been going on for years, yes?
I think the problem I had with your post is that it isn’t really clear how much of these additional economies should be utilized for a business. Any company who operates mainly under any of these additional options will surely fail. Nor will the implementation of gift or lagniappe ideology spare a company either. Ultimately, you can only discuss these alternate economys to a small extent as the wise companies are investing their time making their product or service the more desirable to the consumer. I mean, it has to start there, yes? I’m certain that none of the companies you listed in your reply came to be successful via gift or lagniappe practices; nor do many of them practice either one with any regularity. It’s a stellar product or service which leads to a pleasurable customer experience - not the freebies. You can exceed expectations with your product or service alone, no?
I meant no personal insult by my “market of one” remark as I had read your bio (which was indeed rather impressive) before writing my original comment. It is my opinion, however, and I’ve found it to be true in many instances. When we don’t understand something (or we fail at something) there is a tendency to wish for friendlier alternatives. Certainly not the case with you - which kind of puzzles me even more
Regards…
Just read these posts… seriously, I get things just about EVERY day that are free “gifts” that have tremendous value to me (note: the ebook download on this site, for example). I think most of us are here looking for ideas to grow or sustain our business. I, for one, think that revisiting age old concepts can be a really worthwhile exercise for us — be it lagniappe, storytelling or otherwise. Many businesses fail today because they fall short of differentiating with meaning. As we’re faced with increasing competitiveness on a global basis, I think the wise business people will be open minded to consider ways to separate themselves from the pack and create meaning in the lives of their customers. And friendly certainly works for me! Southwest Airlines has all my business because of all these reasons…. gifting, serving customers, innovation, and friendliness. Sounds like a good formula! If you would’ve predicted that from this Delta Platinum flyer a decade ago, I never would’ve believed you. They earned my loyalty.
A great analysis of how “going the extra mile” sits between “gifting” and “market” … I also love how you equate positioning with “something extra”. It’s the “something extra” that sets us apart and gets consumers to think about us. It’s what positions our brand in their minds. Love the thinking. Jim
Great points Sharlene. Just because lagniappe is an old concept doesn’t discount its value or effectiveness. Differentiation is absolutely key. How do you stand out in the ’sea of sameness’. The idea of giving little unexpected extras (glue) can become part of the fabric of the product or service (story).
Let’s look at Southwest. The ‘Bags Fly Free’ is a perfect example of providing an added value that differentiates you from your competition. Freedom is central point of their brand story. Your bags fly free, no change fees, free to pick where you sit in the airplane, etc.
Thanks Jim. We’re like minds. Your book “The Experience Effect” echoes the importance of creating a unique and consistent brand experience. It’s vital to not only get consumers to think about us, but what are we doing to get them to talk about us. The little something extra if done correctly becomes kindling that feeds the word of mouth fire.
Great post Stan, real food for thought. I love how you have separated and categorised the lagniappe economy.
One of the things I couldn’t help but think about whilst reading your post is whether the same offer moves across these perspectives over time, particularly in the eyes of the consumer. I’m wondering whether something that starts out as a gift, or lagniappe approach actually becomes synonomous with a market approach over time, as the tactics become more tried and tested.
For example, once upon a time a bright spark working for a cereal brand realised that being generous and offering customers lagniappe in the form of 50% extra free increases customer loyalty. But over time this generous offer is adopted by other cereal brands and is now been seen as the market norm - so much so that a lot of customers will now only buy cereals that offer 50% extra free. What started out as a gift, or a generous gesture, has become expected in an industry and is now part of the ‘quid pro quo’ for that product.
To use another example, does a Internet retailer run the risk, by randomly upgrading shipping, of shifting customers expectations (particularly given the transparency of business now) to come to expect such gestures? And as such does this resulting change in expectations shift the approach from a gift economy approach to a lagniappe approach and then ultimately become part of a market economy approach?
I’d love to hear your thoughts on this.
Cheers,
Jed
I’ve just realised that my use of the words “bright spark” could be interpreted as being cynical or sarcastic - this isn’t my intention - you know I’m in favour of a more generous approach to business
Thanks Jed. You make two strong points about how things evolve:
1. What happens when your added value becomes expected?
2. What happens when your competitors copy it so it becomes a de facto part of the product?
I personally believe the bigger problem lies with #2. If everyone is doing something, it is no longer special or value add. It’s the reason why the 13th bagel / croissant or beignet in the Baker’s Dozen isn’t really lagniappe. You expect that from every bakery you walk into. In fact, if you weren’t offered the extra you would feel slighted because of the expectation of the 13th. A good example is wifi at hotels. It used to be a differentiator if a hotel offered free wifi in lieu of charging $10 a day. Now almost every hotel offers free wifi so it no longer becomes special. Back to the baker, if he or she decided to give a 14th with the dozen . . . that would be an unexpected extra.
I believe there is art in creating your signature added value. Create something that can not be copied or provide it in a way that stands out from the crowd.
Personally I’m not a fan of random acts or ‘WOW’ moments. I believe the added value should apply to all customers. Not that I’m advocating that you treat everyone the same, just that you treat everyone fairly without favoritism.
Dan,
Thank for your follow up. I really appreciate you taking the time to clarify your thinking.
You are 100% correct that the concept of lagniappe is not new. I would again assert that its not a common business practice. In fact, I would argue that in the last few years that businesses have went in the opposite direction. Instead of adding value, they’ve tried to cut as many aspects to improve the bottom line. Let’s also consider what has also happened in the last few years with web 2.0. Consumers now have a much stronger voice. Forget about the watercooler on Monday morning, I can now take out my phone and immediately provide feedback to my network. The most effective form of marketing (word of mouth) has become that much more powerful.
I’m not taking a Chris Anderson ‘freemium’ approach. I’m only advocating that there are elements and benefits of the gift economy that can be applied to the market economy approach. Where we disagree is in the importance of doing so and the potential effectiveness. I think it can be a strategic differentiator and you do not.
I appreciate your clarification regarding your snarky comment about the two types of people who support this type of thinking. I guess I assumed that when you wrote, “I don’t know your personal background”, it meant that you didn’t know my background. As for why I’m doing this. Good question. I spent over a year writing about marketing over at 9 INCH marketing. I looked at all aspects of the craft and created 50 axioms. The one concept that continued to bubble up was the importance of customer experience and the myth of meeting expectations. In my personal opinion, for far too long marketing has been about the prospect and not the customer. My goal (as I tweeted to you on Saturday) is to try to change the paradigm. You think that’s wishful thinking and I believe its a noble cause.