A recent article about niche markets which appeared in The Advantage prompted several calls from Members pointing out that we missed a growing and profitable niche . . . Awards & Incentives. Interestingly, those calls came both from uniform and promotional products distributors.
Barb Hendrickson, marketing expert and former promotional products and incentives distributor, recently spoke to ASI member on Incentive Opportunities: Diversify Your Business and Grow Your Bottomline. “You have clients that are already using merchandise for incentive programs, but they’re not always getting them from you” Hendrickson stated. “Many companies that you’re already selling go to retail for their incentives; there is a huge opportunity here for you.”
She defines “Incentives” as name brand gifts and rewards. In discussing the difference between incentives and promotional products, Hendrickson pointed out that “incentives” are something offered in exchange for greater effort or performance. “Incentive programs” are based on specific objectives with measurable outcomes, while promotional products are used to build and reinforce brand recognition.
Typical incentive programs include Sales Contests, Safety Programs, Training Programs, Service Awards, Attendance Programs, Corporate Gifts, Performance Achievement, etc. As mentioned in an earlier Advantage article, safety, driven by increasing government regulations, offers outstanding growth opportunities for both promotional products and incentives.
For example, a new safety campaign might be introduced to all employees and reinforced with promotional products such as Logo Mats with the campaign’s slogan located throughout the production area. Pens, tumblers, mugs, tee shirts, etc. are also effective in keeping the safety message top of mind. Many companies want the employees’ families to help encourage safe behavior on the part of the employee. Information about safety campaigns (and the supporting promotional products) is often also sent to the employee’s home. This best practice reinforces that their loved one’s safety is of paramount importance to the company.
As the campaign unfolds, employees earn incentives for achieving the campaign’s goals. Hendrickson recommends that the rewards be name-brand merchandise to convey a high perceived value. For example, one Member, a uniform distributor with significant incentive business, uses in-demand retail brands such as Yeti, Patagonia, Columbia, Costa, Nike, etc. almost exclusively. Understanding that the corporate customer wants the high perceived value of name brands is important to success in this segment.
Many distributors feel the category is too complicated or that their customers don’t use incentives, but Hendrickson sites studies from the Incentive Research Foundation (IRF) indicating that 74% of US Businesses use incentives and 59% use sales contests that include reward merchandise to improve their firm’s performance. The study also found that award recipients perform at higher levels when rewarded with merchandise rather than cash.
According to Incentive Marketing Association (IMA), Corporate America spends approximately $76.9 billion dollars each year on incentives. Among the 1.4 million US Companies categorized as “small” businesses (Revenues of $50 million or less), 632,000* use incentive programs with an annual budget of $23,000 to $44,000 per programs for a total incentive budget among small firms of $16.4 billion.*
In speaking to ASI members, Hendrickson stated that small businesses represent a significant opportunity for promotional product distributors to capture a share of the $16+ billion annual spend. After speaking with uniform distributors who are doing extremely well in the incentive arena, it’s easy to conclude that Hendrickson’s observation applies equally to both promotional products and uniform distributors.
Some Members running very successful programs rely primarily on Preferred Suppliers for a majority of the products in their programs. Name brand image wear in particular is a popular category. Others have reached out to trade groups in the incentive sector for training and additional sources.
Hendrickson says, “You and your clients need to know exactly what they’re trying to achieve before designing a program or selecting reward items. The key to a successful program is knowing you’re your client’s goals are and then identifying items that will drive the behavior they’re trying to achieve.”
Watch for more information on getting started in the incentive business and steps for designing effective incentive programs which you can use to help sell your customers in future issues of The Advantage.