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Art of Giving

By Apr 01, 2004

The momentum in the 2003 U.S. economy spurred more generous gift-giving in corporate America, as companies pumped up spending to recognize employees for their service (and hold onto them as the job market slowly revived), to reward consumers for their purchases and to thank clients for their business.

The market for employee incentives and consumer premiums increased 3.6% to more than $29 billion, with spending on incentives up about 4% and spending on premiums up roughly 2%, according to PROMO estimates. Separately, spending on promotional products in the business-to-business arena grew about 5% to an estimated $16.9 billion.

The number of companies running length-of-service rewards programs is increasing as smaller companies begin to offer incentives, says Brian Galonek, president of All Star Incentive Marketing, Sturbridge, MA. Companies are expanding top-down recognition programs to incorporate peer-to-peer components, which allow colleagues to recognize one another for exemplary actions or performance. In All Star’s peer-to-peer program, which typically operates in an online environment, each employee has an account through which he or she can award co-workers points, and a second account for receiving points. Employees can then redeem these for TVs, VCRs, mountain bikes and other “toys” popular with adults.

Dittman Incentive Marketing Corp. developed a like-minded peer-to-peer recognition program for a major bank that allowed employees to reward colleagues at one of two levels (gold or silver), depending on the magnitude of the effort, says Jim Dittman, president of the New Brunswick, NJ-based company. The program also allowed supervisors to give on-the-spot rewards, such as a rub-off game card which revealed points that could be redeemed for brand name merchandise or travel, or a large award such as a weekend vacation or flat-screen TV.

As with every other marketing tactic these days, companies are looking to measure the return on their investment in incentive programs, a trend that will prompt brand executives to “stop looking at incentive programs as an expense and start looking at them as a capital expenditure,” Dittman says.

According to a joint survey conducted by WorldAtWork and the National Association for Employee Recognition, 87% of companies use recognition programs as part of their human resources strategy; four out of ten say they are doing more with recognition than they did a year ago. Of those with such programs, 65% have a written strategy and 97% of those based it on their overall goals as an organization. Eighty percent of companies use these programs to create a positive work environment; 75% use them to motivate high performance; while a relatively low 51% use them to increase retention and decrease turnover. Most of these objectives can be quantifiably tracked, most typically by a corporate personnel department.

Most commonly, incentive-based employee recognition programs reward behavior, such as length of service (87%, according to the WAW study), high performance (85%), outstanding sales (43%), useful employee suggestions (36%), employee of a defined period (29%), safety program adherance (28%) or attendance (20%).

In addition to measuring ROI, companies are also improving the efficiency of their incentive programs. “We’re seeing the delivery system move online,” says Karen Renk, executive director of the Incentive Marketing Association. She adds that online delivery will not replace print, but it provides participants with a fast and convenient alternative.

On the consumer side, marketers are upgrading the quality of the premiums they offer. For example, they are replacing gift certificates with more durable and appealing store value cards, says Darryl Hutson, CEO of American Express Incentive Services, Fenton, MO. A major Japanese automaker recently gave away $50 store value cards from American Express to consumers who took a test drive. “Gift certificates are not as powerful as the intrinsic value of a piece of plastic,” Hutson says.

CorpLogoWare, Miami, FL, is furnishing its clients with name-brand, high-quality apparel to appeal to consumers, says Dan Jellinek, VP-marketing.

Marketers trying to reach children, such as cereal and fast food companies, are offering toys that are larger, more dynamic and more advanced than toys offered in the past, says Jonathan Banks, VP and general manager of Los Angeles-based Equity Marketing, Inc.

In the promotional products arena, companies are also relying on higher-quality items to impress their clients. Electronic gadgets for cell phones and laptops were popular at the Promotional Products Association International’s (PPAI) trade show in January, says Bill Prickett, manager of public relations.

Anything that connects to a laptop is a big seller, agrees Danny Rosin, VP of Brand Fuel Promotions. “It’s prime real estate for our customers.”

Manufacturers of high-end retail products are expanding their presence in the promotional products business, including Tommy Hilfiger apparel and Coach accessories, which exhibited at the most recent PPAI trade show. And mainstays, such as mugs, pens and hats have become more sophisticated and durable thanks to technological advances in materials, Prickett says.

Distributors are also using technology to make ordering more convenient and reduce turn-around time, which has led to the emergence of customized online stores. Brand Fuel Promotions builds online stores for its large customers and keeps a supply of items in stock for fast delivery, says Robert Fiveash, president of the Morrisville, NC, company.

Distributors are looking to consolidate their business with fewer suppliers, which has strengthened relationships. “I’m beginning to see a development of stronger cooperative arrangements between suppliers and distributors working together to lower costs,” says Thomas Roller, president and CEO of Norwood Promotional Products, Indianapolis, IN, a leading supplier.

To enhance the status of its members among brand marketers, the IMA recently announced a certification program. Renk says that the program, which will require practical experience of at least five years within the incentives maret, as well as presentation of research, will ensure buyers that certified suppliers are “abreast of trends.” IMA’s goal, Renk says, is to “continually raise professionalism in the marketplace.”

SNAPSHOT 2003

  • Spending on employee incentives and consumer premiums increased 3.6% to $29 billion in 2003
  • Spending on promotional products grew 5% to $16.9 billion during the year
  • Companies expanded employee incentive programs to capitalize on the improving economy, and thanked customers with higher-quality gifts