Freebies From Friends Can Cost Economy Billions

NEW YORK ( MainStreet) -- Companies are on the lookout for employees who give products or services away for free, a practice known as "sweethearting."

If you're giving your friends or families a discount or a freebie without your employer knowing about it, your job could be at risk -- and that could be the least of your problems.
That free beer from your bartender friend is costing companies big time, and they want to stop the practice.

In a white paper titled Service Sweethearting: Its Antecedents and Customer Consequences, the Journal of Markets gives a more detailed definition of what constitutes the practice and how it affects commerce.

"Employee theft and fraud cost U.S. firms up to $600 billion annually. Within the retailing sector, approximately two-thirds of these losses and 35% of annual profit losses are attributed to an act of employee deviance in which frontline employees give unauthorized free or discounted goods or services to a friend or acquaintance," the paper reads. "This behavior, which we term service sweethearting, is common in hospitality industries where staff members may provide food and beverages that never appear on the bill. However, potential exists for this behavior in virtually any industry where employees interact with customers at the point of sale."

The report, penned by three Florida State University academics, tries to pin down the costs of sweethearting to employers and employees -- and reveals some alarming results.

Some immediate takeaways from the study:
  • Service sweethearting is a "clandestine practice that costs employers billions of dollars in lost revenue."
  • Certain traits of employees engaging in the practice are now available to employers, allowing them to "weed" potential employees out of the "candidate pool."
  • Customer loyalty, ironically, is tied to service sweethearting. Businesses that fire employee "sweethearts" risk losing otherwise good customers.

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