STILL TICKING

What a difference a year makes.

In 1999 and 2000, the promotional products industry was on a roll. According to a recent survey from Promotional Products Association International, distributor sales soared 19.5 percent to $17.9 billion in 2000. That’s a hefty gain, especially since the industry rose 13 percent to a then-record $14.9 billion in 1999.

Premium incentive suppliers and distributors were also enjoying a more level playing field. PPAI reports that beyond the aggressive growth, the most significant industry change in 2000 was that smaller distributors gained ground as large distributors fell back — a reversal from 1999, when the big boys dominated.

According to PPAI, distributors with less than $2.5 million in sales volume numbered 21,300 and generated a combined sales volume of $9.4 billion in 2000, a whopping 63.9 percent increase over 1999. By contrast, distributors with $2.5 million or more in sales volume totaled 908 and generated a combined $8.5 billion, down 8.1 percent.

Then came 2001. Most observers agree that premium incentive companies are feeling the pinch of the country’s worst economic slump in a decade. The only point of contention is just how much business has slipped this year.

“We haven’t done any immediate research, but business seems to be steady,” says Howard Henry, executive director of the Incentive Federation, Westfield, NJ. “I haven’t talked to many companies that are having large downturns, although a lot of people have said it’s tougher getting business this year.”

Others have a bleaker story to tell. “We’ve had a lot of long-term clients — in some cases going back eight or nine years — reduce their premium budgets to almost nothing, or redirect the money into other marketing categories,” says Linda Joffe, founder of Linda Joffe & Associates, Columbus, OH. “A lot of marketers are doing cross-promotions instead of premiums,” adds Marie Hergenroeder, director of premium sales at HarperCollins Publishers, New York City. “They’re featuring licensed characters on their box rather than offering something extra.”

The tough economic times have exacerbated financial difficulties at two of the industry’s biggest players: Ha-Lo Industries, Chicago, filed for Chapter 11 bankruptcy protection for its core U.S. promotional products business in July; Wakefield, MA-based Cyrk, Inc. sold its corporate promotions operation at the end of 2000.

It’s good news, bad news on the client side of things as well. The good news is that marketers are paying more attention to their premium programs, to make sure they really stand out. The bad news is that, unless they have plans for a massive campaign, many are slashing budgets.

“Historically, premiums have been reactive — or insignificant,” says Kevin Hess, president of Skokie, IL-based Milmour Products. “Today, brands are looking for something more interesting. There is an increasing emphasis on brand-building.”

Trend Watch

Among other trends, PPAI’s study found that business-to-business campaigns still dominated the industry in 2000: The top three incentive categories — business gifts, dealer incentives, and customer-referral rewards, were all business-related. (See chart below for a complete breakdown.)

“Sales incentives are quicker to put together and easier to track than consumer programs,” says Henry. “Consumer incentives require much longer planning times, and they’re expensive. They’re almost like putting together a TV ad — it’s hard to determine how much it directly affects your sales.”

Elsewhere, while the Internet is proving to be a valuable support channel for the industry, there are still relatively few clients using it to make purchases. According to a study released in May by the Incentive Federation, just 15 percent of marketers use the channel for that purpose.

“A large percentage of our members use the Internet as a resource, but there is a growing number using it to secure purchases,” says Henri.

Among product choices, wearables remain the most popular, accounting for 29.1 percent of products distributed in 2000. Writing instruments were second at 10.5 percent, and desk accessories were third at seven percent (See chart, pg. S4).

Despite the economic woes, there sure seems to be a lot of premium offers out there. A review of those listed below will prove that, although shirts and pens still rule, there also are a lot of unique premiums available to ensure attention — if not outright success.

Treat them right: As part of its Perfect Drive customer rewards program, Budget Rent a Car, Lisle, IL, is offering gift certificates from SpaWish.com, an Internet start-up that has linked a network of 700 day spas for redemption purposes. (Other early clients include Diet Coke and MasterCard.)

Book ‘em: Kitchenware manufacturer Chantalis, Houston, is offering a series of free fondue books from New York City-based HarperCollins with purchase; After it acquired a rival, online health resource WebMD, Atlanta, dangled three free medical books (also from HarperCollins) to subscribers who switched to the WebMD service. New York City-based Pfizer took the most novel (pun intended) approach, marketing a new line of mental-health drugs by bringing author Wally Lamb to medical conferences to sign copies of his best-seller, I Know This Much Is True. (The HarperCollins fiction title deals with schizophrenia.)

Country is Cool: This summer, Detroit-based General Motors enticed attendees of the George Strait Chevy Truck Country Music Festival to sign up for a GM credit card by offering a CD featuring tracks from Alan Jackson, Lee Ann Womack, Lonestar, and other festival performers.

Fan favorites: To back the release of The Mummy Returns this spring, Universal Studios, Universal City, CA, borrowed a strategy from rival DreamWorks (June PROMO) by packaging theater gift certificates with the simultaneously released DVD of The Mummy.

Bowled over: Milwaukee-based Miller Brewing Co. this fall unites two sports in an alliance with bowling industry marketer Strike Ten Entertainment, Greendale, WI, and the National Football League, Washington, DC. The Bowl Your Way to the Super Bowl campaign offers new league sign-ups a ball branded with their favorite team’s logo and entry into a sweepstakes that will award a four-person trip to next January’s Super Bowl in New Orleans. Leading Edge, Atlanta, handles P-O-P and fulfillment.

Going extreme: Burger King, Miami, took a break from entertainment tie-ins for a month this summer by putting miniature versions of extreme-sport athletes such as BMX biker Dave Mirra and skateboarder Bucky Lasek into kids meals. DraftWorldwide, Chicago, handled.

Power Branding: Likewise, Subway Restaurants, Milford, CT, bypassed Hollywood and instead teamed with snack supplier Frito-Lay, Plano, TX, to offer Kids Pak premiums based on Cheetos brand mascot Chester Cheetah. The meals contained Cheetos Fun Bags packed with one of four toys and entry codes for ePloids.com, online home of Frito-Lay’s continuity program. Subway handled in-house.

Let it grow long: Budget hair-care chain Cost Cutters, Minneapolis, has run short-term kids premium campaigns tied to properties from Los Angeles-based Saban Entertainment for several years. This spring, however, it took a longer-term view by launching a year-long program giving away a different toy from Saban’s Digimon series every six weeks (which is the average cycle for haircuts). “We’ve heard from a number of franchises that this is very popular,” says Cost Cutters brand director Ralph Schulte. “In the past, we’ve given away toys that skewed too heavily to one demographic.” Wilton, CT-based Marketing Drive Worldwide’s Promotional Services Group handles.

Despite its current setbacks, the new attentiveness to which marketers are approaching premium campaigns bodes well for the industry — if and when the economy turns back upward.

Premium Packaging

The growing importance of mass merchandisers and wholesale clubs in the retail world has provided a new revenue stream for the premiums industry: extra-value offerings that make standard SKUs club-worthy.

“Increasingly, we’re getting calls from clients saying, ‘We need something for Sam’s Club,’” says Kevin Hess, president of Skokie, IL-based Milmour Products. “There is an increased call for special packs with the mass retailers,” concurs John Galinos, president of gift-certificate provider The Properties Group, New York City. “Walk down the aisle at Target and you’ll see so many brands doing this — like Snuggles putting two sizes together with a beanie baby.”

One of the charms of premium packaging is that the same basic concept can be tweaked to meet the needs of several retailers.

St. Louis-based Energizer originally created a battery organizer for use in a “Y2K Kit” sold in Bentonville, AK-based Wal-Mart’s Sam’s Club stores in 1999. The premium offer has now become an annual event. Milmour handles.

In 2000, Minneapolis-based Target Corp. bought into the program, offering the organizer as a gift-with-purchase for battery buyers, while Troy, MI-based Kmart pitched it via tearpads as a mail-in offer.

This year, Energizer threw in a battery tester with the organizer for a campaign supporting the new e2 super-premium battery at Sam’s Club. Meanwhile, Atlanta-based Home Depot packaged the premium with a flashlight.

“This drives incremental placement for us while providing consumers with an every-day solution,” says Stacey Harbour, Energizer group marketing manager.

A little premium can go a long way.

INDUSTRY FAVORITES

Sing For Your Breakfast

They say music hath charms to soothe the savage cereal eater. No, they don’t really say that. But ready-to-eat cereal makers apparently believe it, since the category’s premium offers have been marching to the beat of a variety of drummers recently: Kellogg USA offered a CD single from ‘N Sync in-pack; Post Cereals’ Fruity Pebbles dished out a Bedrock Rocks collection; General Mills dangled eight genre-spanning compilations across a variety of brands. Those sounds you hear at the breakfast table are no longer just snap, crackle, and pop.

Battle Creek, MI-based Kellogg tuned things up again last month, launching a three-month campaign on 40 million boxes of Corn Flakes, Honey Crunch Corn Flakes, Raisin Bran, Crispix, Mini-Wheats, and Frosted Mini-Wheats. Consumers can mail in for a CD featuring leading female country singers such as Reba McEntire, Martina McBride, and Jo Dee Messina for one proof-of-purchase and a $1.99 shipping and handling fee.

The effort is supported through P-O-P displays, a national radio campaign, and a 50 million-circulation FSI. TBA Entertainment Corp., Nashville, and Summit Marketing, Atlanta, handled. BMG Special Products, New York City, helped round up the talent.

“I think this is one of the better uses of music that a company has done,” says Larry Karpen, director of marketing at BMG. “It’s got a little bit for everyone, including big stars and unknowns.”