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No More Gifts, Please

Mises Daily: Wednesday, December 09, 2009 by

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No Gifts, Please

The fantastic thing about a recession is that it tightens up the business belt. Deadwood goes, much to the relief of the competent employees, who are only demoralized by the well-paid bum in the next cubicle. Good riddance.

In a recession, software upgrades become essential to life itself. Employees feel the need to actually do stuff besides update their Facebook accounts.

In other words, recessions make the world less wasteful and, in this sense, forge a framework for increased prosperity down the road. Finally, there is something aesthetically pleasing about clean houses, and recessions accomplish this by necessity.

But some bad business practices have survived this downturn, and number one on my list is the practice of sending gifts to customers during the holiday season. I simply cannot believe that this still goes on.

Far from pleasing the customer, these gifts have the opposite effect. They make the customer wonder what the heck the business is doing spending money on nonsense rather than increasing efficiency and giving lower prices. Is anyone really fooled by these gifts? I seriously doubt it. For me, I must admit, these gifts generate waves of fury.

Let's say that a printer decides to send out boxes of fancy candy and fruit to all its clients, an idea generated by some B-school grad in upper management. There are 30,000 customers. Each gift costs $8 plus $3 in mailing for a total of more than a third of a million dollars. With that, the company could hire a good programmer or software manager for five full years.

"Recessions make the world less wasteful and, in this sense, forge a framework for increased prosperity down the road."

These days, one good employee can increase the efficiency of a company by 50 percent, simply by automating processes that are now manual. Or maybe the money could go for some solid enterprise software or a web service. But no: the company instead squanders the money on cheap bribes that have nothing to do with enterprise.

Getting a fruit basket in the mail serves only to remind customers of the business's failure to get with the program. The truth is that vast numbers of American businesses are living in times past, using dated software and computers, and employing an army of fools who think that business life consists in dressing nicely and talking a good game. Meanwhile, the people who actually make the business run — the geeks — are underpaid and underappreciated. Their value to the future is nearly always underestimated.

And even if the company is using the latest technology (which is highly unlikely), why not put the money being spent on gifts into a price break for the customer? That is what people really appreciate. It conveys true devotion, true service, true attachment to the idea of excellence. Nothing says Happy Holidays like a discount. Even better would be good service and good prices all year long.

I don't see Wal-Mart sending presents to all its customers. In fact, most people would be rather puzzled to get a gift in the mail from Wal-Mart. The first thoughts to occur to the recipient would be "That chair I bought is falling apart, the CD player stopped working, and those crackers I bought were stale!" It would call to mind every failing of the company. Wal-Mart is surely wise enough to understand this.

But it is different in business-to-business contracting. Somehow the ethos caught hold in the B2B world that every third-party contractor must shell out thousands, millions, to send holiday treats. Why do they do this? Are printers, warehouses, and technology companies under the impression that these gifts increase the likelihood that the contracting company is going to use the provider more in the new year? They must believe this. Why else would they send them?

After all, these providers are not Santas. They are businesses. And in business the watchword should always be Get rid of waste. A gift to a client says, "We love waste and we think you love it too."

Yes, it is true that the holidays are a time for love and sharing and gift giving. But people should do this on their own dime, not at the expense of others. An office party is one thing, but why advertise inefficiency to your clients?

A business in the private sector is utterly and completely dependent on customers for its revenue, so the revenue they spend on gift giving necessarily comes from the customers too! Do you see? They are throwing away money on fripperies rather than serving others through what they are supposed to be doing.

As the gifts from these businesses pour in, think of it as a sign that this recession has not been nearly deep enough or gone on nearly long enough.