this article - The Top Brands in Imprinted Products

DEBUNKING THE
MYTHS ABOUT
SELLING
PREMIUMS &
INCENTIVES
FIRST IN A TWO-PART SERIES
BY TINA BERRES FILIPSKI
BE A WINNER!
PAGE 96
50 • PPB • JULY 2015
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F 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.
I
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.
Sean Roark, CPIM
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.
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.
JULY 2015 • PPB • 51
DEBUNKING THE MYTHS ABOUT SELLING PREMIUMS & INCENTIVES
| FIRST IN A TWO-PART SERIES
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 enduser company might have several divisions and
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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.
FIRST IN A TWO-PART SERIES
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 inhouse 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.
| DEBUNKING THE MYTHS ABOUT SELLING PREMIUMS & INCENTIVES
What Distributors Believe:
“
MY CLIENTS DON’T WANT
TO CO-BRAND (E.G. 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
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DEBUNKING THE MYTHS ABOUT SELLING PREMIUMS & INCENTIVES
| FIRST IN A TWO-PART SERIES
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
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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 onepiece 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
FIRST IN A TWO-PART SERIES
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 singleitem 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:
| DEBUNKING THE MYTHS ABOUT SELLING PREMIUMS & INCENTIVES
“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.”
— Barb Hendrickson President, Visible Communication LLC
few high-end pieces at a 10-percent margin to
equal several hundred of a lower-end promotional
product at a 40-percent margin.
The Experts Say:
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.
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
Landry: While it’s true that the margin in
branded upscale merchandise does not approach
non-branded merchandise from a percentagepoint perspective, it does from a dollar standpoint. For example, one TUMI bag might be the
same dollar margin as 100 coffee cups. You take
“
THE MARGINS
ARE TOO TIGHT
ON INCENTIVES
TO MAKE ANY
MONEY.
”
JULY 2015 • PPB • 55
DEBUNKING THE MYTHS ABOUT SELLING PREMIUMS & INCENTIVES
| FIRST IN A TWO-PART SERIES
dollars to the bank, not percentage points.
Mitchell: My favorite twoword 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.
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
56 • PPB • JULY 2015
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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/opportunitybuy 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
FIRST IN A TWO-PART SERIES
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 pro-
| DEBUNKING THE MYTHS ABOUT SELLING PREMIUMS & INCENTIVES
vide 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.
Byy CrosStar Network Solutions
888-I-AM-PPAI(426-7724)
888-I-AM-PPA
PAI(426-7724)
AI(426-7724) or [email protected]
[email protected] for details
ppai.or
ppai.org/members
JULY 2015 • PPB • 57