When Is A Gift Really A Gift?

When Is A Gift Really A Gift?

Most financial institutions have found that offering gifts work wonders for their sales. Gifts have been used as carrots to attract people to visit them and to buy certain products, or to buy more.

Where gifts are genuine and add to the value of your purchase, they should be received with thanks.

But if gifts are mere gimmicks to grab your attention and lower your defences, and to lead you to think they are getting a good deal when in reality they are not, the ethics can be questioned.

For example, if a financial institution like a bank charges upfront fees of 5 percent for a unit trust, and offers a gift of upfront cash of 2 percent of the investment sum to the client, the client is obviously delighted and thinks he has got a good deal. But in fact, the same product could be distributed by other FAs for a fee of 3 percent or even lower, but without a gift.

You can argue that the institution offering the gift knows buyer psychology and is better at marketing. It is clever and creative and likely to be successful, but it has taken advantage of the ignorance of clients of the market and product. In any event, clients must beware that gifts are not needed when something is good. Sweeteners are often applied to hide the bitter taste.

Usually, the product with a gift is more expensive than others. I remember a friend excitedly sharing with me how he conceived a marketing scheme to sell a product that was quite highly-priced but with a free handphone thrown in, and the product sold like hotcakes. We know of “bargain discounts” which are not really discounts because the prices have been jacked up before the discounts are applied. “Removal Sale” signs are put up permanently in some shops.

One way salespeople put pressure on buyers is to offer a very special discount or feature, but which only applies if the purchase is done on the spot.

Just recently, I was intrigued by an offer made of a free trip for two to any destination, if my wife and I were willing to visit the company and hear a presentation. Being curious about what the marketing strategy is, I went along with my wife and discovered that it was a firm offering a holiday club membership. If we accept the offer on the spot, we would enjoy a hefty discount. Since we did not think we’d benefit from being members of the holiday club at even the discounted price, we declined. For the record, we declined the free trip too. What I reckoned was that even if one out of ten who went for the presentation joined the club, the free tickets would have been covered.

It was a clever marketing strategy and a dangerous one at that, but my point is that the cost of the free tickets would have been paid by those who do sign up. One thing I did not do and should have done was to check whether the free travel included the fuel charge and airport tax.

The hotel stay was likely true because the organization also had a timeshare company and there would be excess capacity and anyway, it is always “subject to availability”.

When is a gift really a gift?

When you don’t have to “pay” for it and when others don’t have to pay for it except the giver.

This reminds me of the definition of a true dinner treat – when the people you invite don’t have the means to invite you in return.