A new study has suggested that combining an expensive gift with a smaller one lowers the perceived value of the overall package for recipients.
According to Kimberlee Weaver, assistant professor of marketing in the Pamplin College of Business, suppose you are trying to impress a loved one with a generous gift this holiday season, one option is to buy them a luxury cashmere sweater. A second option is to add in a 10 dollars gift card.
Weaver said that if their budget allows, most gift givers would choose the second option, as it comprises two gifts - one big, one small. Ironically, however, the gift recipient is likely to perceive the cashmere sweater alone as more generous than the combination of the same sweater and gift card.
"The gift giver or presenter does not anticipate this difference in perspectives and has just cheapened the gift package by spending an extra 10 dollars on it," Weaver said.
The paradox arises because gift givers and gift recipients have different perspectives as gift givers follow a 'more-is-better' logic; recipients evaluate the overall package.
"People who evaluate a bundle, such as a gift package, follow an averaging strategy, which leads to less favorable judgments when mildly favorable pieces (the gift card) are added to highly favorable pieces (the sweater)."
"The luxury sweater represents a generous 'big' gift. Adding on a 'little' gift makes the total package seems less big."
Weaver said that the same contradictory effect can be found in other situations as well.
"People who present a bundle of information assume that every favorable piece adds to their overall case and include it in the bundle they present," she said.
However, Garcia, associate professor of psychology and organizational studies at the University of Michigan said that this strategy backfires, because the addition of mildly favourable information dilutes the impact of highly favourable information in the eyes of evaluators.
"Hence, presenters of information would be better off if they limited their presentation to their most favorable information - just as gift givers would be better off to limit their present to their most favorite gift," Garcia said.
Weaver and her co-authors found that the paradox was strongly evident in seven studies across many product domains, from bundles of music to hotel advertisements, scholarships, and even 'negative' items such as penalty structures.
The study has been published in the Journal of Consumer Research.