First In A Two-Part Series
If you sell imprinted t-shirts, drinkware, pens, electronics and other standard promotional products day in and day out to your clients but shy away from offering brand-name merchandise and incentive items because you don’t understand how to sell them or don’t know how the process works, you are not alone. Only about one-third of distributors say they sell incentive/safety programs, according to PPAI research. What’s holding you back from providing your clients even more options to promote their brands, and reward and motivate employees? These six experts explain how to overcome the most common obstacles.
Meet The Premium/Incentive Experts
Barb Hendrickson
President, Visible Communication LLC
Hendrickson spent 30 years as an incentive rep and also ran a distributor division specializing in incentives before starting her current company, which provides web design, branding, inbound marketing, social media, reputation management, content and communication strategies to a number of industries, including the incentive industry.
Norma Jean Knollenberg, CPIM
Owner, Top Brands, Inc.
Knollenberg has been supplying merchandise to the incentive and promotional products industry for 37 years. In 1982 she joined Top Brands, Inc. and became owner of the company in 1993.She is past president of the Incentive Manufacturers and Representatives Alliance, past president of the Incentive Marketing Association and currently serves on PPAI’s board of directors and as a board member and treasurer of the Incentive Federation.
Mike Landry
Vice President, Special Markets, TUMI
Landry has had a long career in the incentive industry including serving as regional sales manager for Oneida before joining TUMI. He is a charter member and a former member of the Incentive Marketing Association’s board of directors.
Pete Mitchell
Director B-to-B Sales, Samsonite and Hartmann
Mitchell is a 25-year veteran of the incentive and promotional products industries. He has served as vice president of corporate markets for Swiss Army Brands and TUMI, and has been a consultant to many branded products suppliers. He is also a frequent speaker and writer on incentives, a former board member for the Incentive Marketing Association and past president of the Incentive Manufacturers and Representatives Alliance.
Chelsea Piereth
Buyer, Hinda Incentives
Piereth spent more than 10 years as a buyer for retail giants Sears and Macy’s before joining Hinda Incentives in 2012.
Sean Roark, CPIM
Executive Vice President, PromoPros/IncentPros, Inc.
Roark is a promotional products industry veteran who wrote his first incentive program in 2005. Since then he has become a respected writer and speaker on the subject and is a nationally recognized authority on safety incentive programs. He serves on the board of directors of the Incentive Federation and the Incentive Marketing Association.
What Distributors Believe:
Premium companies sell direct to my clients. I shouldn’t bother.
The Experts Say:
Hendrickson: It’s true that brand-name incentives are not sold exclusively through distributors like promotional products are. Manufacturers no longer have sales departments to cover the corporate/incentive channel; they depend on manufacturer’s representatives, who are also spread very thin. Good communication is key: The more your local reps know about the customers with whom you work, the better they can provide you with leads and information that might interest your customer. You’ll be able to proactively provide the newest and latest brand name products that should interest your clients.
If your customer contacts a manufacturer directly, that is forwarded as a “lead” to the local rep. If that rep knows you work with that customer, he or she is far more likely to give you the lead than to try to build a relationship with that customer from scratch. But make no mistake: the rep is contractually obligated to follow up on the sale. The path of least resistance is to provide that lead to the distributor who already has the relationship. Many successful reps and distributors have formed mutually-beneficial relationships regarding specific clients.
Knollenberg: In reality, incentive companies want to help promotional product distributors sell incentive solutions to their customers. We don’t care which one the end buyer purchases from, we just want to make sure they buy our products instead of our competitors’ products. Incidentally, promotional products suppliers feel the same way. With such a vast array of products available to the distributor, no one can present the product as well as the supplier themselves. Being involved in the selling process provides the ultimate service to the end buyer to make the best selection for the success of the program. In many cases a large end-user company might have several divisions and each one could run a different program. For example, the sales department might implement an online sales incentive program for its sales staff that could run for a 12-month period. The VP of sales could be looking for a supplier that could set up the entire program, including helping select the right awards to motivate the sales force to sell more. Perhaps the marketing department is looking for the right trade program to introduce their new product and gain shelf space at the retail level. Or, perhaps the HR department wants to implement a whole new employee engagement program. The typical distributor may not know how to sell these types of programs. The incentive companies that exhibit at PPAI’s brand. pavilion every year have made a commitment to help distributors learn how to sell these kinds of programs to expand their business and increase their revenue. The premium representatives for these brands are willing to make those sales calls, together, to help the distributors learn how to sell a wide variety of programs.
Landry: Most brands that play in the promotional products sandbox are thoroughly familiar with the landscape. They understand that there is no better conduit to corporate America than through the promotional products channel. They have price lists set up, they can decorate with a logo (albeit in an understated, upscale manner) and they offer services such as drop shipping and note insertion. In an effort to utilize the promotional product distributorship base, they do not actively solicit in that manner. In fact, many branded companies will refer the odd request that comes in from an end user to a promotional products distributor with whom they have already developed a good relationship.
Mitchell: Yes, some do sell direct. But most don’t, because they don’t have the staffing to do the “hand-holding” end users require. Most brands (like mine) do well over 90 percent of their corporate markets business through intermediaries. The days when we had active efforts selling to end users are so far in the past that only old people (like me) remember them.
Piereth: You always want to offer more tools for your tool belt. You want to offer that one-stop solution to your customer.
Roark: Often premium incentive items are name-brand goods, which are sold through many marketplaces such as catalogs, department stores, even direct from the manufacturer. Some supplier sources for those products also sell through more than one pipeline. Consequently, in some cases, those suppliers may have a competing sales channel that might sell directly to your customers. However, I have not found this to be a significant conflict over many years of dealing with such companies. In fact, this type of situation is a regular occurrence for us in our promotional products business. For example, when we sell wearables, several of our favorite decorator sources are actually competitors in the sale of promotional products who do great screen printing and/or embroidery for us, while our orders are a symbiotic plus for them by filling their excess in-house decorating capacity. So, why would I deal with them? Simply put, I have an agreement in place with those screen printers/embroiderers that they specifically will not sell to my client if I bring them an order from that client.
Another wrinkle to this question is: What about buying name-brand items from a reseller that might actually call on my client? There are two answers here. One, if this issue is important enough to you, make a non-compete deal with that incentive company similar to what I have made with my competitor/decorators. More often than not, though, you are going to find that your sourcing rep is out to support you rather than undercut you, which brings me to my second answer: This whole concern is moot if you sell solutions rather than stuff. The value I add as a consultant pretty much makes sourcing merchandise somewhere else a non-issue with my clients. My customers are virtually never shopping on price; they want to know the watch is going to be in a great presentation box, all wrapped up and in their hands, prior to Bob’s retirement party. I do that for them, meaning they are buying a solution from me, which happens to include the merchandise I sell them. They can’t shop the merchandise separately and still get the solution, and they don’t want to.
As far as the aggregators and reps I buy from are concerned, most name-brand product suppliers would much rather expand their sales volume by having folks like you accessing end-customers that they never have to contact, while they develop their own channels.
What Distributors Believe:
My clients don’t want to co-brand (i.e. adding a corporate logo to a NorthFace jacket).
The Experts Say:
Hendrickson: You might be surprised. Depending on the brand attributes of your client, they might very well want to co-brand to further reinforce their brand messaging. Cadillac and Lexus will want to associate with a high-end brand that also appeals to their audience.
Knollenberg: Not all companies who put together incentive programs want the premium (the award or gift) to have a corporate logo on it. The majority of awards that are earned in incentive programs do not include a corporate logo. Wearables are certainly an exception to the rule. For example, if an award recipient selects an outdoor grill as his award from a potpourri of awards, that individual remembers what they had to do to get that grill and it certainly does not need a corporate logo displayed on the grill as a reminder. However, when an end-user company wants its corporate logo on an award, they want to make sure it is on a brand that is quality and aligns with the image of the company. Most companies want to be associated with quality, well-known brands.
Landry: That’s no problem. You would be amazed at the product that I sell into this channel with no logo whatsoever. Keep in mind that a significant amount of our world is pure corporate gifting. All the right reasons why you might put a client’s logo on a product might be all the wrong reasons to do so when it comes to an upscale corporate gift.
Mitchell: I often tell distributors a story about $100 pens. When you get your first $100 pen, you remember two things: 1) where it is (my first $100 pen is in a hotel room in Chicago); and 2) how you got it (mine was a speaker gift at a national distributor sales meeting). The recipient will always remember who gave them high-perceived-value items.
Roark: The client, of course, is always right. Sometimes, however, they are more right than others. You might remind someone who doesn’t want to co-brand how thrilled their customers were to receive a sleeve of Titleist Pro V1 golf balls decorated with the client’s logo. The fact is, there is a lot of merchandise in our industry that has some type of branding on it—companies like Samsonite have whole lines, specifically made to be decorated and sold through the promotional product channel, that have a higher perceived value because they also carry the Samsonite brand. You mention NorthFace—you see a lot of folks on the Weather Channel and NBC with the peacock logo on the right and the NorthFace logo on the left. The brand appearing on brand-name merchandise is a value add. Your client is associating their logo or message with a high-value name brand, which I find most clients find attractive.
Usually, however, I don’t hear the co-branding issue from end customers, but more often from fellow PPAI distributors. What seems to more often be true in my experience of this particular objection is that the promotional product professional is the one who isn’t comfortable with the dual branding. This is usually the result of cultural assumptions that have been validated for years in the promo marketplace but which fail to recognize current trends.
What Distributors Believe:
My quantities won’t meet the minimum order requirements.
The Experts Say:
Hendrickson: Very often branded products that offer imprinting require much smaller minimums than in the promotional products world. It’s also possible that your client might be interested in the brand name product without an imprint. Or, you may be able to sell an additional product to provide the imprint opportunity (for instance, a custom luggage tag added to a high-end bag).
Knollenberg: Therein lies the beauty of incentive programs and working with suppliers that have a minimum order of one unit (unimprinted). The majority of incentive awards (premiums) are individually drop shipped to the award winner’s home. That means that a single product is packed in a remailer and sent via UPS, FedEx or USPS and the charges for that service, called shipping and handling, are added to the cost of the individual product. The distributor is invoiced as each drop shipment is made and the distributor subsequently invoices the customer.
Landry: Almost all brands selling into this channel will overlook a minimum order requirement. Most can operate on a credit card payment system. So you might not end up with an open account, but you will end up with branded, upscale products that will delight your clients—and who doesn’t love a delighted client?
Mitchell: You’ll be surprised. Many brands have appointed national distribution partners (like Indigo, a PPAI supplier member) to handle one-piece orders. They are competitively priced and do not approach end users. We have a very successful relationship with Indigo and it is an expert in the channel.
Piereth: You can talk to your supplier. There are some we’ve been dealing with that offer lower quantities for new programs. They may be offering more, so costs may be higher, but I feel the higher cost outweighs the inventory risk. You are establishing a partnership with the supplier. Bring them up to speed quickly by telling them who the client is, what they are interested in, the budget, how many items and categories of the items. Any information is relevant. Ask about their top-selling items in that category, too.
Roark: This is very much promo-think. In the name-brand industry, much of the delivery mechanism revolves around single orders, to a degree that it is much more flexible than most PPAI supplier models, mainly because there is no custom decoration. The manufacturer’s rep (often a member of the Incentive Manufacturers and Representatives Alliance—IMRA), serves a function that is not strictly paralleled in the promotional products marketplace. Unlike the multi-line rep that most PPAI members are used to dealing with, the manufacturer’s rep is kind of what we would think of as an “inside rep,” but on steroids. This person is the interface through whom you can get very detailed product and order support, even on smaller quantities.
If you are using incentives frequently in programs, you might want to establish a relationship with an aggregator. These are companies that function as “wholesale to the trade only” and typically have a wide variety of merchandise you can source and have drop shipped. Through this you are dealing with a continuing relationship where your business is not evaluated based on a single-item buy, but rather the culmination of all of your orders. Typically, to participate with an aggregator requires that you be credentialed, such as through membership in the Incentive Marketing Association (much as a promo supplier might require that you be a member of PPAI).
What Distributors Believe:
The margins are too tight on incentives to make any money.
The Experts Say:
Hendrickson: The margins on brand-name products are usually lower, especially if you sell a highly-discounted brand. But if you look at the total dollars as opposed to the margin, you might find selling brand-name products to be a great second-income stream. You only need to sell a few high-end pieces at a 10-percent margin to equal several hundred of a lower-end promotional product at a 40-percent margin.
Knollenberg: Indeed, the margins for selling incentive programs are much smaller, particularly if the items are not imprinted, but the budgets for incentive programs are significantly larger. Once the program is sold, the amount of customer service required on the part of the distributor is much less than with imprinted bulk orders. Also, these incentive programs can be ongoing and that means steady income. Remember, at the end of the day you go to the bank with dollars, not percentages. It is important to be aligned with experienced, committed suppliers who know the importance of timely, accurate fulfillment.
Landry: While it’s true that the margin in branded upscale merchandise does not approach non-branded merchandise from a percentage-point perspective, it does from a dollar standpoint. For example, one TUMI bag might be the same dollar margin as 100 coffee cups. You take dollars to the bank, not percentage points.
Mitchell: My favorite two-word phrase in the English language is “it depends.” Yes, margins are awful on electronics (Apple, anyone?), but distributors make pretty tight margins on a lot of promotional products (portable power devices, anyone?). On the other hand, margins for certain categories of product are quite high. Watches, luggage (sorry, shameless plug) and luxury goods have healthy margins and, since costs are higher, the absolute dollar return may be quite high.
Piereth: I disagree. There are different margins for each category. Jewelry, watches and luggage can make you money but margins on electronics won’t be as high.
Roark: Margins are great on name-brand merchandise, though often not the magic “P” that is elusive even in our industry. Keep in mind that there is no decoration component, which means that order management and supervision is not as expensive either. Add to this that a client can order a quantity of 10 of an item one day, and five more the next day, with no penalty since there’s no decoration or setups. Most importantly, when you sell a lot of things at a smaller margin, you can still make a lot of money. I would also urge you to contemplate that while margin is one consideration, it is not the only consideration. When your client asks for a Hamilton Beach blender or a Samsung TV, and you supply it, you are training your client to view you as a single source. If your clients only come to you when they want “stuff,” then you will be assured you will get all of the margin, narrow or wide.
What Distributors Believe:
It’s too tough to compete with retail on pricing.
The Experts Say:
Hendrickson: Ain’t it the truth? …for all of us, in any industry. But successful suppliers have found ways to add value and additional services. For instance, roll brand-name products into your mix in addition to promotional products, perhaps program design or marketing consulting.
Knollenberg: This is a valid point and we all face it every day. However, there are ways to get around this obstacle: adding value that the retailer can’t, packaging products together that can’t be found at retail, providing a level of service that retailers can’t, forecasting options for the supplier that will assure product availability throughout the program, asking the supplier to protect the price (which a retailer won’t do), etc.
Landry: Look for brands that are price protected—that is, brands that rarely go on sale or are rarely discounted—and they are not too hard to find. This puts you on a level playing field. Also, most brands maintain a discontinued/opportunity-buy list that is available to any and all comers in the promotional product world. These are first-quality unused items that, for any number of reasons, the company simply wants to get out of and is willing to discount heavily. They may be discontinued colors, a result of a change in packaging or perhaps simply last season’s model. These are not items that should be put into long-term programs, but they make for wonderful one-time immediate buys. There is no greater value that a distributor can show his or her client than this list, which, by the way, is not available to the general public. It’s something they could search the net forever and not find.
Mitchell: If price is the only thing you’re selling, then it’s hard to argue this point. However, if price was the only consideration, then every client would be calling us to work with them. Distributors exist because they offer a service to their clients above and beyond the product itself. Ask Best Buy if they will gift-wrap 100 pieces of something. Or, go to Home Depot and give them a list of 15 participants, each getting two BBQ grill tools. Price is always important. But what keeps a client a client is the ease of access you provide and the logistical support.
Piereth: Again,I disagree. We take on the inventory risk, offer customer service, bring items to the clients, handle accounts payable and provide our clients with a one-stop solution. People who are interested in getting into this market need to offer more than what customers can get at retail. We have great customer service, the best merchandising team here, a big warehouse and a lot more to offer our clients that offsets price.
Roark: It’s too tough to compete with retail on pricing, except when it isn’t. The fallacy for me in this argument is that it assumes that you are selling your clients based on price. Assuming that you are providing a service and a complete solution, you can justify any change in pricing against the value added. By the way, there are many of the biggest branded products that I can sell for less than the tightly controlled MSRP contracts that bind most retailers.
Watch for Part 2 of this article in PPB’s August issue in which the experts will debunk five more of the most common myths about selling premiums and incentives.
Premium Prep
51% of distributors report premiums comprise up to 20% of their total gross sales
91% invoice premium programs normally; only 3% invoice them through the factory
57% of clients own the inventory prior to fulfillment; 33% of distributors own the inventory
33% of distributors work with premium reps; 62% do not
Source: PPAI Distributor Business Survey