How much should you spend on customer appreciation gifts?

Spending the same amount on everyone is simple, but it wastes money on some and under-thanks others. A tiered budget fixes both.

Step 1: group customers by value

Sort customers into three groups: your top customers, a middle group, and everyone else. Use what they spend with you in a year, how long they have stayed, or how many people they refer.

Step 2: set a budget for each group

A common pattern is a small, personal gift for the top group, a modest gift for the middle and a card or small token for the rest. The right amounts depend on your margins. Use the budget planner to see the total.

Step 3: tie it to value

Compare the total with what these customers bring in. If your gift budget is a tiny fraction of the revenue and the customers are loyal, it is probably reasonable. If it eats into margin on small accounts, trim the lower tiers.

Do not forget the extras

• Shipping and handling
• Cards or notes
• Your time to write personal messages

The US tax limit on business gifts

In the United States, the deduction for business gifts to any one person is generally limited to 25 dollars per year. Rules and exceptions change, so check with your accountant before you rely on it.