Why people are embarrassed about freebies

If you've ever felt a little weird about receiving free stuff, it's probably because it was given to you in front of other people.

In findings that could be a wake-up call for company marketers, new research from the University of British Columbia's business school reveals giving an unearned, free bump in service or any other gift can actually backfire for retailers who believe giveaways cement customer loyalty.

In other words, retailers aren't doing themselves any favors by singling out customers in public because the resulting feelings of social discomfort can actually cause those consumers to close their wallets and run for the exits.

Envision that er-um-thanks feeling of getting, say, a spontaneous, free upgrade for a hotel stay when the person beside you doesn't.

That's in contrast to a so-called earned perk such as loyalty points whereby consumers are rewarded for a reason, leading to consumers being "less price sensitive, to engage in positive word-of-mouth about the firm and to be more loyal over time," the research states, highlighting examples such as a frequent flier points.

Authors conducted interviews with 24 retail managers including restaurants, cafes, stores and movie theaters in B.C.

In one scenario, researchers treated participants at a product booth in two different ways. One group received free personal care products -- perfumes, moisturizers, soaps, face cleansers, body wash -- in return for “customer loyalty” and another received free products with no explanation. Some bonus transactions were witnessed, and some were private.
When consumers received free samples with no explanation in front of observers, participants were less satisfied with them, the study shows. The research also showed that the decline in satisfaction was driven by feelings of social discomfort, and that those who received extra samples without reason browsed for a shorter time at the booth.

The message to retailers is that consumers are very empathetic, and if you're going to give freebies it should probably be done more subtly so it doesn't make people on the receiving end feel icky. "We have a natural concern for how we're perceived by others," says JoAndrea Hoegg, an assistant professor of marketing at UBC's Sauder School of Business and a co-author of the study.

Hoegg adds consumers are happy to receive the perks; they're grateful, feel lucky, they want it. They just don't want to feel bad about getting it.

Neither Hoegg or the paper's findings went as far as to suggest retailers should stop offering these so-called unearned, random and unexplained perks. Indeed, retailers will likely keep offering these giveaways as a way to boost brand recognition. Just don't be too obvious or splashy about it.