Free Love
AFTER DECADES IN THE STEPCHILD ROLE, PROMOTIONAL PRODUCTS GET THEIR DUE.
Long considered a weak sister tactic in the marketing arsenal, promotional products certainly seem to be gaining respect from the rest of the family.
According to the latest survey from the Promotional Products Association International (PPAI), distributor sales of promotional products reached $14.9 billion in 1999, up 13 percent over the previous record of nearly $13.2 billion in 1998. (In comparison, overall promotion spending grew 9.4 percent and ad spending increased 6.8 percent.) Over the last 10 years, the promotional products industry has grown by almost 200 percent.
Meanwhile, spending on premium incentives increased 5.2 percent to $26.3 billion last year. That adds up to a total of $41.2 billion, or more than 40 percent of all promotion marketing spending and about 13 percent of promotion and ad spending combined.
“Companies want a more tangible reflection of their ad spending,” says Brad Keywell, president of product distributor Ha-Lo Industries, Chicago. “They want to know if their dollars reach consumers with impact, and what better way to do that than with a product featuring your logo?”
“More people are recognizing the value of promotional products,” says Greg Iott, vp-marketing at 4Imprint, Oshkosh, WI. “We’re selling a type of advertising vehicle that provides great value for the money. Just look at the branding issues companies are facing. They want to put something into the consumer’s hands rather than just sink dollars into mass media.”
Despite this rising interest, the costs of promotional products have remained relatively flat. “Prices have been surprisingly stable for the industry due to growing efficiencies,” says PPAI vp-marketing Bill O’Neil. “If you go to Bic Pen or any other supplier, you’ll see an automated manufacturing process that can churn out more product at a faster pace.”
ADDING BULK Once the domain of Mom and Pop shops, the industry has evolved into a market dominated by larger companies that display some of the slickness of the folks on Madison Avenue or Danbury Road. “Distributors are growing in their sophistication,” says O’Neil. “They’re getting in front of buyers, and as a result, clients are getting better presentations.”
Product quality has improved dramatically, as customers demand better merchandise rather than the disposable dashboard trinkets that characterized the industry for many years. “There used to be very little thought to the process,” says Steve Paradiso, president of Cyrk Inc.’s Gloucester, MA, promotional products division. “If someone said they wanted something, you just ran out and got a cheap pen. Today, that doesn’t cut it.”
Consolidation has had a major effect on the industry, as larger companies gobble up their smaller competitors. Industry leader Norwood Promotional Products, Austin, TX, added more than $200 million in annual revenues by acquiring Bemrose USA and R.L. Polk & Co.’s Advertising Unlimited in ’99. Last April, Omnicom Group, New York City, bought award-winning children’s premium maker Adpac Corp., Elk Grove, IL, to beef up its Case Dunlap Enterprises division.
The Internet has also produced a flurry of activity, with the most publicized being Ha-Lo’s acquisition of online start-up Starbelly.com. Cyrk, meanwhile, focused on Internet ventures that didn’t directly fall into its traditional business model, acquiring such disparate enterprises as a search technology developer, an entertainment portal, digital-image distributor, and a Web community for minorities.
BABY, IT’S A WIRED WORLD As with most industries, the Internet explosion is dramatically changing the dynamics of how promotional products and premiums are distributed, introducing a more expedient, more accurate, and sometimes less costly way for customers to order. The Internet gives distributors direct access to potential customers – and customers direct access to consumers.
“The advent of the Internet provides vendors with the ability to buy from a variety of distributors,” says PPAI’s O’Neil. “At first that sounds like it will shut out the middle men, but it could spur business for suppliers and distributors. Once buyers begin to understand the complexity of the process, they’ll want help. They’ll say, `We’re so busy today we don’t have to look on the Web – we want someone to come to us with a turn-key solution.'”
Rather than entirely revamping ways to reach customers, the Internet refines proven strategies. “We’re seeing the convergence of traditional models with the Internet, which doesn’t replace but extends them,” says Ha-Lo’s Keywell. “We’re currently working with a major consumer goods company to put their rebate and redemption programs online. That provides a more interactive experience with the consumer and exposes them to more branding. Basically, we’re adding new twists to what [marketers have] done forever.”
The new economy has prompted the sales force to evolve from cigar-chomping, suitcase-carrying warhorses to traveling computer experts. “Today, the enlightened salesman combines commerce with value-added technology,” says Keywell.
THE LEADERS According to a study from Louisiana State University and Glenrich Business Studies, financial institutions such as banks, credit unions, and stock brokers are the top buyers of promotional products, followed by healthcare services (hospitals, nursing homes, clinics) and nonprofit organizations. The study also found that customer retention and appreciation is the No. 1 use of promotional products, followed by trade show promotion and goodwill (i.e., enhancing the corporate image).
Meanwhile, product types are starting to take a back seat to product themes. “Clients want promotions to look more like their advertising images,” says Cyrk creative director Tomora Burk. “[And] they want to identify consumers before throwing a premium at them. It takes much more to catch people’s eyes today – especially with so many on the Internet looking for the next best thing.”
That desire for uniqueness has rocketed collectable premiums toward the top of most-used promotional products. “We’re seeing a collectibles frenzy, especially with the rise of [auction sites like] eBay,” says Burk. “Many advertisers are co-branding with hot properties or tweaking their own products so they become collectibles.” Last year, Cyrk gave away holograph baseball cards of Hall of Fame slugger Ted Williams to the first 20,000 arrivals at the All-Star Game in Boston’s Fenway Park for client MasterCard. The next week, some of the cards appeared on eBay – priced at $60 apiece.
Professional and authentic merchandise – an official team jacket worn by a NASCAR driver, say – are another hot ticket, as are retro or vintage products, adds Burk. In keeping with the new age, technologically enhanced product – translucent pens or talking ties – are increasingly popular.
LOOK GOOD, FEEL GOOD Wearable items continued to dominate in 1999, accounting for 29.5 percent of all promotional product sales, according to PPAI’s study. “You see so much logoed merchandise in stores that, when people get it as an incentive, they appreciate the value,” says O’Neil. “Plus, the apparel is gorgeous – the suppliers are producing really high-quality items these days.”
The apparel segment has been amplified by the migration of high-profile consumer companies such as Nike Golf into the corporate sales arena (see story, s27.) Nike also teamed with General Motors’ Buick brand to lure customers into dealerships to test-drive new cars by offering a free hat sporting the signature of golf icon Tiger Woods.
Catalog marketer Lands’ End, Dodgeville, WI, recently allied with 4imprint to jointly market promotional products. The two will target Fortune 500 companies via Lands’ End Corporate Sales, which now reps 4imprint’s hard goods such as mugs and pens along with its own apparel and accessories. Land’s End says it sells to 90 percent of the Fortune 500, and had $140 million in corporate sales last year.
AFTER THEY’RE DRESSED… Writing instruments – the staple giveaway for conference attendees – accounted for 9.4 percent of promotional product sales last year, according to PPAI, followed by desk and business accessories at 6.6 percent – the latter fueled by an ever-growing variety of products. (Haven’t received a monitor mirror in the mail yet? Then you must not be on the target lists of Compaq Computer or online incentive marketer SoftCoin.) Farther down the list are calendars (at 6.4%), bags (6.1%) and sporting goods/leisure products/travel accessories (4.7 percent).
Business gifts led program types, accounting for 17.6 percent of sales in 1999, according to PPAI. In today’s communications age, it’s getting harder to distinguish between personal space and the workplace. “The workforce is often overworked and over-traveled,” says Cyrk’s Burk. “People want accessories that bring the home into the office.” Dealer/distributor programs were the next most-used type, representing 14.9 percent of sales. Employee relations and events rounded out the top three with 10 percent of sales in 1999.
NOTES FROM THE FIELD Premium programs for consumers are getting bigger and better all the time. Here’s a look at a few that have made some noise recently:
– Procter & Gamble, Cincinnati, this fall will give away three million CDs of lullabies, kid’s songs, and Christmas songs along with Pampers diapers.
– Gas station chain Chevron has turned a simple premium program based on cartoon cars from its TV spots into a mini-phenomenon. Since 1995, Anaheim, CA-based Chevron has distributed more than 11 million Pete Pickups, Freddy 4-Wheelers, Tony Turbos, and Brandon Bumpers. “The public has grown to expect the cars – if they see it in a commercial, they expect to see it in our stations,” says brand manager Steve Woodhead. “We feel good about that connection, and the fact that we can put these little ambassadors into homes.” The toys have a dedicated section on Chevron’s Web site (www.chevron.com) that boasts 110,000 registered users.
– Brown & Williamson’s Kool cigarette brand upped its premium ante in 2000 with new efforts including a summer gift-with-purchase program in which consumers got a free mini-walkman. Four million premiums were shipped to retail. Other efforts will follow later this year and into 2001.
“Gifts with purchase are an underutilized tool for many marketers,” says Kool director Nick Wilkerson. “We can’t give away branded merchandise anymore [due to federally mandated regulations], but we can increase our brand imagery with gifts.”
While key chains and T-shirts are staples, new items are finding their way into the mix. “Premiums will become a large tool for us in the future,” Wilkerson says. “We’re trying to be creative and find the balance between junk and premiums we can’t afford.”
– Regional premiums can work for national brands. Customers who bought $5 worth of Del Monte small-serve canned fruits and vegetables from Shaw’s Super-markets and Star Markets in New England last month received a free bouquet of flowers.
– GE Financial Network, Stamford, CT, gave away 5,000 wallets this summer in a Tossed & Found guerilla program designed to raise awareness for the company’s new GEFN.com operation. Conducted in the 12 U.S. markets with the highest Internet penetration, the premium offer got better when finders looked inside the wallets, which were dropped covertly in high-traffic areas in cities including New York, Philadelphia, Los Angeles, and Chicago. Inside the billfolds were gamepieces that provided a one-in-five chance of winning an additional prize. Among the biggest incentives were two $100,000 GE Funds investment accounts, five $12,000 credits toward a GE mortgage, and $500 to $10,000 accounts.
A Web site linked to GEFN.com gave clues about where and when wallets would be dropped. Radio stations airing promotional spots received additional wallets containing $100 bills to be used in giveaways; some of the stations took it upon themselves to stage their own wallet drops, according to Dan Sullivan, vp at Westport, CT-based Ryan Partnership, which handled. (New York City-based Momentum Marketing helped recruit “droppers,” who were schooled in such methods as the “pretend-to-tie-your-shoe” and the “hole-in-the-shopping bag.”)
Sullivan says most of the pedestrians who found the wallets were honest citizens. “Most people looked inside right away. But there were some that just stuck the wallet in their pocket and kept walking, and our droppers had to chase them down.”
The lure of something for free has always been part of human nature. What has changed over time is the importance premiums have held within the marketing industry. And with the Internet streamlining the business process, betting on continued growth for the category could be considered found money.
