Recently, a small business owner asked me whether she should give away thank-you gifts for referrals. My response was outright no. I do believe in thank-you cards, but gifts should be spontaneous, such as, “I saw this item and thought of you!”

The reason is because of the habit loop. If the reward is extrinsic (quantifiable), would referrals stop coming if, but not limited to:

  • you stop giving gifts
  • a competitor gives better gifts

habit loop referral gift

When it comes to competitive strategy, your goal is to create entrenched value. Entrenched value is having a competitive advantage (e.g., inimitability / lower cost) that cannot be easily duplicated for a good that you produce that is desired by all customers.

During the past month, I was applying for a Google job Google Local Guides: Global Brand Manager. I was about to share a similar habit loop that I saw for my last interview, but, alas, the position was filled before I got to do so.

Anyway, similarly, Google Local Guides (GLG) use a service, review it, and get invited to Google parties as a reward (quantifiable). As a parallel, would reviews would stop coming if, but not limited to:

  • Google stops giving parties
  • Yelp or competitor gives better parties

If rewards are quantifiable, then there is little entrenched value. The value proposition for the two should be the network itself, not the gifts nor parties, respectively. Don’t create an arms race for who has the better gifts or parties. Now, the magical question is how to create that strong network.

habit loop google local guides

Riddle me this: Google Local Guides, unlike Yelp, is different by …
Riddle me this: You, unlike your competitors, are different by …

On the topic of parties, what do you like most about shindigs? Comment below!

Still trying to be a Googler,

Lawrence Chan

P.S. Speaking of parties, I had the privilege of attending Grace Ormonde‘s media PR event on Thursday at Mandarin Oriental, New York. It was sponsored by Dom Perignon, which was very cool. Unlimited bubbly!

dom perignon party