Free Drink or Free Mug? Managing Service Experience with Experiential vs. Material Complimentary Gifts

In the marketplace, complimentary gifts can take the form of experiential elements (e.g., a meal) or material items (e.g., tangible objects such as a mug). We identify these free gifts as a meaningful service design choice that helps service providers innovate service. Specifically, we examine the circumstances under which experiential or material gifts are preferred and generate greater consumer satisfaction, enhancing the overall service experience. Across three experiments, we demonstrate that consumers are generally happier with experiential offerings, and they prefer (and are more satisfied with) experiential offerings on ordinary consumption occasions; experiential elements are believed to further enrich otherwise mundane experiences. However, this experiential advantage disappears for consumers on meaningful and special occasions because of a strong desire to obtain a memory cue that will help them recall the experience. Indeed, the preference for a material item holds only when the gift has the quality to serve as a salient memory marker, but not when it lacks this quality. This research provides insight for managers to take into account consumption occasions or type of consumers (e.g., special occasions, repeat customers) to effectively design service bundles with complimentary gifts and thus better manage overall service experience.