Gift Business: How Do People Buy Gifts? (Part 1)

Gift giving is a universal phenomenon.  From the Holiday Season to Mother’s Day, from Valentine’s Day to Graduation Day, from birthdays to weddings (not to forget anniversaries) literally hundreds of millions of gifts exchange hands every year, making both givers and receivers happy.  While many people give gifts the “traditional” way, others utilize new technologies and services.

We are going to cover the Gift Business topic in two parts.  In this post, Part 1 of the series, the individual steps that occur during a gift giving experience will be discussed.  In Part 2, we will take a look at how new technologies and services can improve, replace or eliminate these steps.

We are all familiar with the “traditional” gift giving process, even if we do not always consciously think of it as a process or recognize the individual steps.  There exist many academic studies with conceptual frameworks attempting to describe the gift giving process, such as this example from the clothing industry:

“The framework consists of four stages: prepurchase, purchase, presentation, and postpresentation. Components of the prepurchase stage are object; interactions among occasion, recipient, and gift object; giver and recipient; cost of gifts; and information search. The purchase stage includes choice of retail outlets for gifts, distance traveled to locate gifts, and methods of payment. The presentation stage focuses on perceptions of the giver and the recipient when the gift is revealed. The postpresentation stage includes ways in which gifts affect interpersonal relationships; consumption of gifts is another component of this final stage.”

In this post and the next one, however, we are going to follow our own framework.  The gift giving process starts with a NOTIFICATION.  The NOTIFICATION can be external, such as receiving a wedding invitation or a birthday reminder email, although it can be internal as well, where you remember your child’s birthday, or just feel like rewarding your team at work.  This is the stage where “whether to get a gift or not” decision is made.

If a NOTIFICATION results in a go-ahead, it is generally followed by the SELECTION step, with its three substeps: GENERAL IDEA, LOCATION and SPECIFIC GIFT, although not necessarily in that order.

The GENERAL IDEA is just what it sounds like: you do not know exactly, but you have a “general idea about the nature of the gift” for the recipient.  This idea can be dictated by tradition (flowers on Valentine’s Day) or can be a result of your own free will (“I will get my friend a book, because I know she likes to read.”)  The GENERAL IDEA helps narrow down the options for LOCATION or “where to get the gift.”

Sometimes, however, it works the other way around.  The gift giver may decide on the LOCATION first, and then move on to the GENERAL IDEA (if the LOCATION offers many different options, such as a department store) or skip the GENERAL IDEA step altogether and let LOCATION dictate the nature of the gift.  Reasons for deciding on LOCATION first can range from convenience (“I can buy the gift on my lunch break at the department store across the street.”) to timing (“I thought her birthday was tomorrow!”) to financial considerations (“I already have a coupon/store credit for this store.”)

Usually, people tend to decide on GENERAL IDEA before LOCATION, if they have a strong motivation to get a “good” gift for the recipient to enjoy, and vice versa if they care less about how much the recipient will enjoy the gift, than the fact that they are giving a gift, as is the case with obligatory gifts (such as Secret Santa at the office.)

Next comes the SPECIFIC GIFT step, where the gift giver decides on the purchase.  Depending on the nature of the gift giver’s relationship with the recipient, and how well they know each other, it is possible to skip the two previous steps and get the SPECIFIC GIFT directly.  (“I know that my fiancee really wants these earrings.”)  The availability of gift options also dictate whether the gift giver is ready to move on to the next step, or go back and change the LOCATION (“They do not have that sweater in her size here, I will look elsewhere.”) or even the GENERAL IDEA. (“I originally wanted to get my nephew a katana, but they are so expensive, so I decided to get a book on Japanese swords instead.”)

The steps we covered so far involve many research, analysis and decision activities on the gift giver’s part, which we will not discuss in detail.  There are tools, many of them online, that help gift givers research various dimensions of gift options, analyze their viability and price/value ratios, as well as make relative and absolute comparisons to decide which gift will ultimately yield the optimal outcome for both the giver and the recipient.  While it would be interesting to take the process map one level deeper, and look at these processes and tools in the flow, for the purposes of this discussion, we are going to stick to the high level steps.

The next step is PAYMENT.  After the gift giver decides on the method (cash, debit card, credit card, installations, coupon, existing store credit) they must also make a very cruical decision which affects the rest of the process: whether to get a gift receipt or not.  While the more traditional minded gift givers frown upon the idea of their gift getting returned and exchanged for something else, the more pragmatic minded gift givers always give the recipient the option to exchange the gift, which has become a standard service at retailers.

WRAPPING, what makes a gift really look and feel like a gift, comes next.  While gift wrapping is a standard service at many retailers, some traditional minded gift givers insist on wrapping their gifts themselves, with decorative wrapping paper and accessories appropriate for the occasion, which indeed does add a personal touch to the gift giving process.  Many people argue that an important part of the joy of giving and receiving gifts is the surprise element, achieved by the WRAPPING, and the excitement that comes from unwrapping.  Although getting a gift wrapped at the store is more convenient, it can take away some of the surprise if the wrapping paper has the retailer’s logo all over it and hints at the GENERAL IDEA. (“I wonder what that rectangular gift wrapped in paper with Barnes & Noble logo all over is?”)

Traditionally, DELIVERY is the last step of the gift giving process.  A gift giver generally prefers to give the gift to the recipient in person when possible, usually in order to witness the happiness of the recipient firsthand.  When a personal DELIVERY is not practical, usually due to factors such as distance, availability or size, a commercial delivery by either the store or a commercial delivery service is arranged.

Although it does not affect the steps of the process by itself, the gift receipt innovation, mentioned at the PAYMENT step, has altered the flow of the process.  Rather than ending the process at DELIVERY, a gift receipt has the potential to set the process back to the SPECIFIC GIFT step, by giving the gift recipient the choice between keeping the original gift and exchanging it for something else.

As mentioned earlier, traditional minded gift givers dislike the gift receipt, because it not only makes the entire original SELECTION step irrelevant, thus overriding the original intent of the gift giver, but also reveals the actual monetary value of the gift, which is considered to be impolite.  In contrast, progressive minded gift givers defend the gift receipt, claiming that it gives the recipient an opportunity to exchange an unwanted gift for a better one, increasing the recipient’s utility, and after all, is not the gift giver’s ultimate goal just that?

So far, we have examined the individual steps of the gift giving process.  In Part 2, we will take a look at various innovations that redefine the process, its flow, as well as one or more of the steps.