Stanford researchers prove you can spend 20% less on gifts for the same result

Image by: monstershaq

Bad news: When your sister, mother or lover said “You really shouldn’t have” when you gave them that expensive gift, they meant it. You should have shopped smarter and saved your money instead.

Academics at the Stanford Graduate School of Business recently discovered that:

Most gift givers assume an expensive present is better appreciated
Gift receivers don’t appreciate expensive presents much more

I’ve just negotiated another gift-giving holidays with my family. Years ago, when I was the first of my brothers and sisters to get a well-paid job, I spent far too much on presents. That might sound like I’m just being mean, but the problem wasn’t only that the presents weren’t – frankly – appreciated relative to how much I’d spent on them.

The big problem was I bought bad presents just because they had a bit of ‘bling’ – hiding my 20-something insecurities behind a price tag. More importantly, I can’t deny I involuntarily judged my siblings’ reactions. Didn’t they appreciate my gift cost four to five times what they’d spent on me? (Yes, I was an idiot!) Worst of all, my sister pointedly told me she felt my gifts made all her presents seem cheap.

What we all really cared about was whether it seemed like we’d been thought of and appreciated when the gift was chosen. While we all went in turn through the ‘expensive presents with a new job’ phase, we’ve now settled down to all giving small, very personal presents. (Not before time, as nephews and nieces have entered the gift-buying equation.)

It turns out my family’s experience mirrors what Stanford’s studies discovered:

1: Expensive engagement rings aren’t worth it

In their first study, the Stanford researchers looked at engagement rings – a one-off big ticket item where you might expect extra expenditure to pay dividends. But in practice the researchers found:

Men consistently thought their rings were more appreciated by their fiancées the more expensive they were
Fiancées did not rate themselves as any more appreciative if the rings were more costly

Of course! While there’s a lot of marketing pressure on young romantics to prove their love at the jewelry store, the fact you’re asking someone to marry you is about as big a statement you can make.

2: More expensive birthday gifts aren’t more appreciated

In the second study, the Stanford researchers asked participants to think about a recent birthday gift:

Participants described a variety of gifts, including T-shirts, CDs, jewelry, wine, books, and home décor items.

Again, those who were givers expected that more expensive gifts would make the recipients feel significantly higher levels of appreciation. In contrast, the recipients said they did not feel greater appreciation levels for gifts that had cost more.

Fact: It’s just not worth spending that extra chunk of cash. Researchers found givers would spend $100 on gifts that receivers would only pay $80 for. The excess $20 is a ‘deadweight loss’ in economic terms. Now you know why those Christmas chocolates are so absurdly overpriced.

If you see something the recipient would truly love that costs a little bit more and you can easily afford it, I’d say buy it. Otherwise, this study is a green-light to cut 20% off your gift budget.

3. An iPod isn’t any more appreciated than a CD

This one did surprise me:

In the third study, participants were asked to think about giving or receiving either a CD or an iPod as a graduation present. Once again, those who were randomly assigned to be ‘givers’ thought by giving the more expensive iPod their present would be appreciated more in contrast to the CD. The ‘receivers’ rated no difference in appreciation levels, regardless of which item they were told to think about getting.

Perhaps the problem here is people are being asked to imagine what it would feel like to recieve a CD; I just can’t imagine someone would really be as happy to get this CD as this iPod (never mind this CD). I’m a geek though who sold all his dying-format CDs for cash.

Conclusion: It really is the thought that counts

The message of the Stanford research is clear – money doesn’t count for much when giving gifts. Some suggestions:

Don’t feel guilty about setting a gift budget. You have to live within your means.
Put more time into choosing a gift that the recipient will really love.
If you believe you haven’t got enough time to shop for something special, think about how long it’d take you to earn the money you’ll spend on a costly quick-fix gift. You may ‘buy’ several hours, and a better present.

Research findings from: Money Can’t Buy Love: Asymmetric Beliefs about Gift Price and Feelings of Appreciation – Francis J. Flynn and Gabrielle S. Adams, Journal of Experimental Social Psychology.

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