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It’s November. Marketing departments are working on their customer appreciation messages and gifts, while HR departments are crafting their employee tenure rewards programs. It makes sense. Leaders know that it is important to acknowledge devoted employees and customers alike. And those leaders – if they are genuine and smart – know that it is not enough to inwardly appreciate dedicated staff and faithful customers for their ongoing support. They must also take the time to recognize that longevity and loyalty in a meaningful way. But not all recognition programs are created equal. Some work and others don’t. When and how should an organization express gratitude to their devoted employees and faithful customers? Here’s what the research says.
But first it might make sense to clarify the meaning of words like appreciation, gratitude and recognition. They are often used interchangeably but they are not synonymous. What’s more, not everyone agrees on what these terms mean. The Wharton School of Business defines recognition as the act of expressing appreciation or gratitude. It is a behavior. Whereas appreciation is about seeing or perceiving what someone did that was worthy. Appreciation therefore is a thought or perception. And gratitude is about feeling thankful as a direct beneficiary or on behalf of someone’s actions. Gratitude is an emotion. So it would be correct to say that an employer might appreciate an employee’s worth to a company (an observation), feel grateful for that person’s contributions (an emotion), and recognize those efforts by personally thanking that employee or giving that employee an award or bonus (an action).
Thanking Employees
When employees feel valued, they’re more engaged, motivated, and likely to go the extra mile for their company. A study by Deloitte on employee recognition programs found that organizations with a modern, recognition-rich culture had 31% lower turn-over. Those companies are also 12x more likely to have strong business outcomes. And when employees believe they will be recognized, they are almost 3x more likely to be highly engaged. Indeed, recognition can be a highly effective way to motivate staff. A study conducted by the University of Pennsylvania found that telemarketers who had a brief visit from the Head of Giving — thanking them for the efforts – performed 50% better (raised more money) than those who did not have a visit from the Head of Giving.
However, sometimes an employer might appreciate an employee and feel gratitude, but recognize that thankfulness in a way that does not resonate with employees. The same study found that tenure-based recognition programs did not work. While 87% of companies have tenure-based recognition programs and spend over $40 Billion on them — 1-2% of payroll — they have virtually no impact on organizational performance, and traditional financial rewards can even backfire. So it is important for recognition to be given in ways that are meaningful to the recipient.
- Recognize Performance Excellence – This can be Supervisor to Direct Report or Peer to Peer. It might sounds like this:
“Thank you for your consistent willingness to go above and beyond in your work. You are invaluable to our department!”
“Your ability to consistently drive business goals and generate outcomes is inspirational. We want you to know that we appreciate everything you contribute to this company!”
“I want to take a moment to acknowledge you for all of your hard work. You’re growing and continuing to set a higher standard every day.”
- Recognize a Positive / Can Do Attitude – This works best when it is Supervisor to Direct Report. Otherwise, it can sound condescending. Comments might sound like this:
“Your good attitude contributes a lot toward making our work environment better. It’s a pleasure to work on projects with you.
“You’re an invaluable asset to our team. It’s noticed and appreciated”
“You live out our company values every day and set a great example! Thanks for all that you do.”
- Recognize Accomplishments – This works well whether it is Supervisor to Direct Report or vice verse, Peer to Peer, Customer to Employee, Social Media to Employee, or some other source.
“Your perseverance is inspiring! You overcome roadblocks to deliver amazing outcomes. Well done!”
“Job well done exceeding your goals this quarter! What you do is key to our business.”
“It is impressive to see your skills and flexibility at work. You’re willing to take on any challenge and run with it. So glad you’re on our team!
But, for those who are instrumental to the organization, companies may want to offer other perks to show appreciation and increase engagement. A survey conducted by SHRM indicate what employees valued most in 2022:
| • Health-related benefits (FSA & HSA plans; nutritionist; mail order prescription, etc.) | 88% |
| • Retirement savings and planning benefits (401k contribution, coaching) | 82% |
| • Leave benefits | 82% |
| • Family care benefits | 70% |
| • Flexible work benefits (Hybrid WFH; four-day work week; etc.) | 70% |
| • Professional and career development benefits | 65% |
| • Financial (non-retirement) benefits | 52% |
| • Wellness benefits (peloton; gym membership; etc.) | 46% |
| • Education benefits (paid certification courses; seminars; conferences, etc.) | 42% |
| • Technology benefits (home wifi; updated laptop; paid cell phone) | 37% |
| • Transportation benefits (paid parking; rail or subway pass, etc.) | 12% |
| • Housing and relocation benefits | 9% |
Thanking Customers
What about thanking customers for their loyalty? Companies in the U.S. spend about $50 Billion a year on customer loyalty programs. Those are intended to recognize and reward loyal customers. But do they work? The short answer is that it depends.
There are two basic types of customer loyalty programs, tiered and non-tiered. Airlines, credit cards and hotels often use tiered customer loyalty programs that increase rewards as program members reach higher thresholds of spending over time. On the other hand, retailers and service industry businesses typically offer non-tiered customer loyalty programs, in which members are rewarded with frequency (rather than incremental) rewards, such as “buy 10 get one free.” Does either one work?
For tiered customer loyalty programs, the simple answer is yes, they are effective. That is why every airline, hotel chain and credit card has some kind of recognition program for loyal customers. And those programs are growing. Loyalty Programs globally are expected to grow by 12.6% this year to $142.8 Billion. Loyalty and reward programs are gaining market share in the Asia Pacific region due to population growth, tech growth and consumer demand for rewards programs. In particular, India, China, Indonesia, and Singapore have had a substantial demand for loyalty and rewards programs. Moreover, rising fin-tech start-ups are also expanding their market share through innovative product launches. This is pushing companies into strategic partnerships in order to be able to create tiered customer loyalty program solutions.
But non-tiered customer loyalty programs are not as effective. According to an article by INFORMS — the leading international association for professionals in operations research, analytics, management science, economics, behavioral science, statistics, artificial intelligence, data science, applied mathematics, and other relevant fields – a new study found that customer loyalty programs do not work in the way a business might think or want. Published in Marketing Science, the article titled Can Non-tiered Customer Loyalty Programs Be Profitable? — by Arun Gopalakrishnan of Rice University, Zhenling Jiang of the Wharton School of Business at the University of Pennsylvania, and Yulia Nevskaya and Raphael Thomadsen of the Olin Business School at Washington University in St. Louis – reported on a study that looked at the data of more than 5,500 new customers who started purchasing from the company in the same three-month period. They wanted to make sure the customers were comparable in terms of the amount of time they had to become acquainted with the firm. For the next 30 months, they collected all subsequent transaction data from those consumers. During that period, a non-tiered customer loyalty program was introduced. What they found is that while non-tiered customer loyalty programs did create a more sustainable customer base, they were less likely to generate increases in spending per transaction or accelerate transactions. In other words, non-tiered customer loyalty programs increased customer value by 30% over a two-and-a-half year period by helping with retention. Program effectiveness did not increase spending per transaction or frequency of purchasing but did reduce attrition from customer fall-off and turnover.
So if a tiered customer loyalty program’s goal is to keep loyal customers loyal, then that can work. But it won’t boost sales. For companies in highly-competitive fields or selling high-ticket items, a customer loyalty program is effective in holding on to customers, and thus worth implementing. For customers, it is not enough to express gratitude. Finding ways to recognize loyalty is key.
Businesses that appreciate employee and customer support and devotion — and want to express that gratitude – must carefully evaluate what will resonate with staff and clients. Not all recognition is created or received equally. It may take more than just an attitude of gratitude to properly express appreciation. For companies that want to go above and beyond a simple “thank you,” it is important to formulate programs that will resonate and motivate employees and incentivize customers to remain loyal.
Quote of the Week
We must find time to stop and thank the people who make a difference in our lives.
John F. Kennedy
© 2022, Keren Peters-Atkinson. All rights reserved.
The post Appreciation, Gratitude and Recognition in Business first appeared on Monday Mornings with Madison.