Keeping The Message Cool
There are literally hundreds of thousands of ways to get your marketing message out to the general public and your customer base. Very few executives consider the timeliness of providing your message on a medium that is delivered at the right point in time so as to maximize your return on investment. Quite often in the advertising specialties industry clients are directed not towards the hottest item but instead the most available.
With millions out of work that means even those employed may have someone at home heading to the park this summer. The Family Picnic Cooler Set works as both a functional day to day cooler because the wine portion can be substituted with the new 2 liter soda bottles and as a more upscale weekend cooler for contemporary adults. For those looking for a more practical solution to your summer cooling needs while recognizing the tighter budgets of today the PolyPro Insulated Tote is made from earth friendly materials, can be washed and is available in a multiple colors. The beauty of polypro is that it allows manufacturers to deliver a greater set of features and a larger unit footprint than other materials. If you are looking to provide a recognized brand the California Innovations 12-Can Cooler Sling is a multi faceted bag with PEVA lining. Whenever possible you want to request PEVA lining as it is far safer than earlier liner materials that were made with potentially dangerous substances.
Coolers provide a unique opportunity to not only touch the initial end user but in the case of family oriented coolers thousands of other potential clients. A cardinal mistake that we see many clients making is excluding their number or web address from the logo print area. Any other form of advertising would come with critical contact information. Unless you are major local, regional or national business there is an excellent chance your target audience will have no way of easily gathering your contact information. By placing a simple web address on your bag or directing your audience to the various social media sites you are maximizing your marketing efforts.
With the economy continuing to stutter slowly forward there is little doubt that we have endured one of the longest periods of stagnate economic growth in modern history. Despite historic involvement of the various governmental agencies many critical sectors are still unstable. Marketing budgets are still being trimmed and despite the rapid build in inventories and associated growth at the end of last year this year looks to be a struggle for many.
Two Tiered Memberships Lead to Angry Clients
Everyone is looking to save as much as they can with the bad economic news. Every bit helps and now more than ever your clients are more aware of piece prices and also any charges associated with orders. The same holds true in the regular world as consumers look to save on everything from coffee to cereal. Private label brands continue to outperform more expensive national brands as people try to extend their resources. Memberships in all types of civic organizations are suffering and charities are having some of their worst year in decades. Smart business owners are doubling their efforts to gain customers from weaker competitors but not all of their decisions make sense.
Take for instance the local fitness center that is struggling to increase their membership base as customers have moved to a newer less expensive nearby competitor and others have just decided there was no longer enough money in their personal budgets to pay dues. There are three ways this business could have made an effort to make up for the lost revenues. The first and easiest method would be to increase the per person revenue. In this setting that would be accomplished by extending the services offered such as opening a juice bar or adding equipment or classes that require additional fees. Other opportunities would exist in terms of selling promotional gear to clients but that ship has sailed so to speak and the days of "cool" gym gear are gone. Another option is to simply raise monthly rates which in good times might work but in the recession it would simply result in customers either forfeiting their memberships or going elsewhere. That leaves the third option which is the age old method of increasing sales which is to obtain new customers. This is easier said than done and most gyms have already exhausted potential clients in any given area. After newspaper ads have failed and signage in the streets have blown over the only way to draw people into the gym are special offers. The problem with any second tiered pricing strategy is that it will inevitably alienate the customers that have stayed with you all along.
In this case new customers off the street or those that have been gone for a few months are rewarded with paying one third of what steady clients are required to pay. It may increase sales initially but it will create a significant amount of negativity amongst old members and will cause some to outright leave and go to other facilities. The only way to pull off this type of discounted membership is to offer existing clients something in return which is either a discount on premium classes or at the juice bar. Perhaps giving them a piece of clothing with the gym logo would also help but all too often the gym owners blinded by the influx of what will mostly turn out to be short term customers see the money coming in the door without realizing they have won the battle but lost the war. Newspapers are littered with stories of these types of programs going bad and facilities vanishing. In fact many States have now adopted laws that protect citizens with insurance in the case that a facility were to vanish.
Consider your sales activities closely and weigh the possibility that an existing client may not view it as favorably as new clients. In the end it is customer retention that will keep you profitable not new customers constantly jumping from vendor to vendor shopping only on price. No business will ever survive catering to clients that shop purely on price.
Competitive Bidding Hurts More Than Profits
Day after day the news is littered with instructive pieces describing how all of your daily transactions should be conducted as if you are at an auction. Whether you are at an electronics store or online shopping for some clothes the economy is so bad you are supposed to be able to hammer any seller down on price at your leisure. As a wise person once said it never hurts to ask and as a consumer there is no harm in asking. As a seller and business owner there is harm in obliging bid requests and we will discuss the reasons why in depth.
Studies have repeatedly shown that the least loyal customers are those that shop purely on price. Although times have changed the traditional rule of 80 percent of your business coming from 20 percent of your customers is still consistent to some degree. Knowing that a majority of your business comes from a small portion of your customers typically means your most loyal customers are the basis for your success. The other 80 percent of your customers continually change as customers come and go. Studies have also shown loyal customers are much less sensitive to price so long as they are not being gouged and are instead interested in the business relationship, consistency and meeting of mutual goals. When a new customer calls or emails asking for your business to participate in a time consuming and lengthy bidding process that will come down to the lowest bidder you have to ask yourself is it worth the cost? Do you really want to establish a relationship and tie up financial resources on a customer who values you only for your price and what does that do to the industry you operate in as a whole? Take for instance the story relayed to us today of a customer that asked four different distributors to participate in a sealed bid. One distributor refused to participate probably having previous experience with this organization. Three others submitted bids. Two "finalists" were selected each likely being played off of one another and asked to bid again. The final outcome was a friend of the company President getting the order at between 0 and 5 percent profit not including carrying costs. The customer may think they have "won" in this case but in the end they too lost as there is no way that distributor can continue to effectively service that account at those margins and will either be out of business in a year or will be like the distributor that refused to bid. By the time they reorder that distributor will refuse to take the order or be out of business which means they'll incur new costs associated with acquiring a new distributor and likely expensive setup costs. If the customer saved $500 in real order costs but spent 10 hours of manpower to do it they too had a net loss as those hours should have been spent on revenue producing activities. Meanwhile in this era of decreasing credit the distributor that took the order at 5% is chewing up valuable capital resources to produce an order that they make little money on and are potentially on the hook for a five figure loss if payment is not made.
We will discuss this in more detail tomorrow, meanwhile take a look at earlier entries such as the arrival of custom bpa free sport bottles that we wrote about last spring and our post on retail brands crossing into the corporate channel.
The Invisible Shoe is Already Dropping
With jubilation on Wall Street this week comes the ridiculous news stories and hype of the economic return of the US. The stark reality is the winds pushing against reasonable growth are far stronger than the tailwinds the markets can provide today. There is some good news at first glance with the major banks reporting profits but a closer inspection would again show that the reality of the situation is that without taxpayer funds and massive federal support many banks would still be in trouble.
The single biggest factor that argues for continued difficulties is the rapid contraction again of available credit to both consumers and small businesses. For various reasons this critical issue remains under the radar of the major media outlets and most financial reporters likely because they are disconnected from that segment of the economy. When they report from the floor of the Dow they are not capturing the pulse of a majority of the economy that produces a majority of the new jobs over the last few decades. What they instead see is the one portion of the corporate sector that can borrow which is large corporations. Last week I had "Fools Rally 2009" stamped on an Alicia Klein Bookmark and sent it to an associate in the markets. Why do I say this with certainty? Because the lifeblood of the economy is being cut out of it as credit to small businesses has already contracted 25-30% or trillions of dollars since last year. Even worse leading expert Meredith Whitney reported in a recent Wall Street Journal article that another 1.5 trillion will be chopped from available credit to small businesses and consumers by the end of next year. Some may shrug off this news thinking they are immune as their customers pay via cash or check but that does not account for the fact that your customer may pay you with a check but they likely pay at least a few vendors with credit cards or lines of credit. When those vanish entirely or are decreased they now have less spending power and the previously rapid paying check customer may be on a restricted cash flow. Worse yet the psychological impact of reduced lines or the fear of reduced lines changes consumer behavior and will have a negative effect on commerce as the dismal September retail sales figures show.
So what is being done to support 38% of the US GDP? Not a thing is being done. There are no government programs providing direct loans to small businesses. Banks are not lending which means the engine that drives a third of our economy and 50% of our employment is being strangled. The pace is accelerating and anyone reading financial forums such as creditboards or myfico forums will see that in the past week many big name banks have been furiously chopping lines. Their favorite tactic is slashing lines right after payments are made in full. It's a trap as they don't want to see high balances but the moment a consumer pays off the line to avoid interest they are sometimes being closed out entirely. This can be absolutely fatal blow to a business that had expected to be able to use that credit again the following month. Profitable businesses are failing all over the US not because sales are poor but instead because the recent changes have left them without the cash to operate. Take for instance recent reports of a new tactic by the banks that involves them holding the available credit for up to two weeks after a payment is made. In essence a customer makes a payment today prior to the due date or statement date expecting to be able to use it the next day. Instead the payment is made and credited against the balance but the bank does not release the funds for 7 or sometimes 14 days. No doubt it is a temporary mechanism for reducing potential exposure without directly cutting the lines.
It is likely that banks are about to accelerate the credit closures to prevent the potential exposure that the holidays bring. This may be good news for their losses but it is terrible news for the economy and for anyone running a small business in this country. The question now becomes what will it take for Washington to offer support for small businesses when trillions have been given out with little explanation to major corporations foreign and domestic?
Implosion Continues in the Trinket Industry
Despite the veiled attempts by the various associations and groups to paint the current situation as improving the destruction of the industry continues. Depending on which source the official 2008 sales were down either a little or a lot but there are few suppliers within the industry reporting even mediocre sales. The fact is business was horrible in 2008 and was even worse in 2009 for the majority of suppliers and distributors. There are people that have been in the industry for decades that have never seen it this bad. To find out where the industry is going we have to look at where it has been.
The promotional products industry started decades ago from the concept that there was a market in the corporate arena for branded items. For most of the last few decades that relationship involved three parties, the end user, the distributor and the supplier. Distributors worked to open new accounts by traditional means of cold calling, knocking on doors and networking. They relied on small groups of suppliers to provide product for them and the average distributor historically did well under $200,000 in sales. Along came the associations to act as the de facto referees and central database for the industry. All of these associations would require a membership fee and in turn provide the distributor access to information that would be difficult to obtain elsewhere such as catalogs, pricing, ratings information on the suppliers and credit services for the suppliers. In short they provided a useful service and acted as a go-between greatly reducing acquisition costs for both sides of the aisle. Distributors that did not have entire sourcing departments now had access to hoards of information they would not otherwise be able to gather and suppliers had a targeted and priceless mailing list.
This all began to change in the late 1990's as major online distributors like Branders began to appear. At the same time the use of the internet for sourcing products began to skyrocket circumventing the need for expensive membership services that often did little when subscribers needed them most. Indeed most played a hands off role even in blatant abuses of the system such as suppliers stealing customers directly from distributors. As suppliers began to ramp up their online product listings the ability to jump online and search for the needed product information began to trump the need for expensive and non-eco friendly catalogs. Along came Sage which provided the same basic services as ASI but at a much lower price and the fight was on for the remaining market share. Sadly what the increase in competition did was drive the desire to report success within each association. However the PPAI annual survey has probably summed up the trends most appropriately. Prior to 2000 the industry had experienced consistent and rapid growth. After 2000 the industry has been contracting 50% of the time. Sales are probably still being grossly overestimated as the few companies that reported publicly have taken a huge beating. Several like Norwood and Broder Bros. which occupies the number one spot in the industry for supplier size either threatened bankruptcy or have gone bankrupt. Major suppliers such have Cyrk have also gone off the grid and are no longer in business. Sales for 2008 were atrocious dropping at least 10% and most major suppliers are reporting 20-40% drops in 2009. I am sure the major associations will spin it as just a slight drop but when two of the top 5 suppliers were in danger of or went bankrupt and most of the top 10 had significant staff layoffs the situation is grim. Actual sales will likely be down more than 20% in the promotional products industry in 2009. There will be more failures on both sides of the aisle as distributors collapse under the weight of shrinking credit and increasing delinquencies of customers. Suppliers face the same concerns as distributors are increasingly stressed. Although the data is rarely released it is obvious the credit departments of many suppliers are under strain trying to deal with collections. In general the business credit reporting agencies report the average days beyond terms has extended to 10 up from 2 earlier in 2009. That's a rapid descent and with credit availability scheduled to shrink in the trillions this year and next it will only get worse.
Increased Costs Downfall of Recycled Products
A little more than ten years ago when a major ASI supplier first introduced recycled products made from reclaimed rubber the industry collectively ignored the offerings. Although the brand name was nationally recognized there was very little interest in the products and within three years the offering had vanished from the product line. A couple of years ago recycled promotional items were again introduced into the mainstream corporate channel and almost instantly became a mega success. Several issues have come together to create a perfect storm that is blunting sales.
First consumers and distributors were burned last year with horribly underestimated inventories. With some manufacturers the Spring of 2008 saw entire lines back-ordered for the critical Earth Day celebrations. Other products had serious quality control issues including melted buckles and inferior fabrics. Distributors had to deal with both of these issues in unmet expectations on delivery or worse angry customers when the more expensive recycled products proved to be of lesser quality than their non-recycled counterparts. Adding insult to injury some industry players such as Norwood suffered through inclement weather and flooding at some locations only making the problems worse. Manufacturers rushed to address these issues and the lack of color choices for the 2009 season.
Which leads to the next problem - collapsing sales the result of the ongoing recession. Everyone wants to promote eco friendly options but when budgets are severely cut customers are left with two choices, spend less money or spend no money at all. Although there is nothing official yet released by the major suppliers a quick look at online inventories shows excess quantities and also demonstrated no shortages this year leading up to Earth Day. This is partially the result of the economy but also directly reflects the increased costs associated with these products. Recycled apparel has been a major dud by most accounts with end users not liking the feel of recycled shirts and fleece. Taking a look at second quarter sales from suppliers there is an abundance of recycled and organic items which would again indicate an overstock situation. Higher prices and the recession explain much of the decrease but an overall change in buyer behavior may be behind the shift. It is too early to draw any conclusions but the 2010 "green" season will likely determine the fate of recycled promotional products in general.
Manufacturers need to bring to market some sub $3 items in popular categories to help continue the shift to recycled items. They also need to source some in the USA versus bringing them all in from overseas factories. Given the state of the economy and particularly domestic factories United States sourcing would help sell recycled items.
Broder Bros.appears to have dodged bankruptcy. Although there is no official word as of tonight it would seem they secured the needed percentages to prevent their filing. This is good news for the industry as the recent filing of Norwood already had the industry on edge. Changes are already underway at Broder with Columbia being dumped from the product offering. Once they sell through the remaining inventory it will be the first time in decades that Columbia has no presence in the industry. Meanwhile Callaway has landed at Perry Ellis. Once Ashworth officially exited the business Callaway was left orphaned until the announcement was made last week.
We do have an update to the Major Retailer Provides Lessons in Poor Customer Service but will update that story Monday morning. Suffice to say the demonstration is ongoing.
Major Retailer Provides Lessons in Poor Customer Service
The economy is struggling and retailers are closing all across the country. The cost of acquiring a new customer continues to exponentially increase as retailers fight the battle of not only getting customers to choose their stores but to shop at all. Despite this one major retailer has demonstrated how not to provide customer service and how to lose a customer for life.
First a quick detour as we discuss some new custom coolers. There are many ways to keep your food and drinks cold. Some choose portable mechanisms such as the Gemline Party To Go Cooler which provides for storage of up to 32 cans. With a mega 16" opening even the largest of bottles or containers will fit easily. The less bulky Life In Motion Collapsible Cooler is also heat sealed and has a front zippered pocket. With a top grab handle and sporting PEVA lining it is a safe alternative to less expensive and less safe coolers promoted by some organizations. The limited size of the cooler will make it less popular with the beach crowd which is where the Life in Motion Cooler comes into play. With a huge 36 can capacity it can also hold about any size container. It is also useful in carrying bottles and has an attached metal bottle opener. When in doubt by a PEVA cooler as they do not contain PVC which requires the use of environmentally dangerous materials in production.
Equally dangerous is trusting a major retailer. Sears sells all manner and types of appliances including refrigerators. The recent purchase and subsequent disaster is a perfect case study in how not to conduct the servicing of a client. As an example a fridge is purchased for $170 and lasts exactly three months before the compressor fails. Under warranty for one year as part of the stores premium brand name the refrigerator is repaired. In order to facilitate the repair a technician is first sent to the location. A normal service call from the same company runs at least $125. The technician determines a compressor is needed. The cost of shipping the failed part and installing it runs over $300 per the slip. The part is installed and the refrigerator works for another month before failing under the same circumstances. Another service call is made at presumably a similar cost and another compressor is sent this time overnight. Compressors weigh a substantial amount so this was not an inexpensive shipment. The servicing technician determines the compressor is fine and instead believes another part has failed which is replaced. Total cost to date of repairs in terms of shipping and labor totals over $700 per the slips provide by the servicing firm. Customers suggestion that the refrigerator be replaced after the first failure are ignored. The customer believes there is no justification in repeatedly repairing a refrigerator that costs the store less than $150. After the second repair the refrigerators lasts approximately three days before failing yet again under the same circumstances. The local store realizes how fruitless the situation is and agrees to replace the item with the identical model. The customer has no problems with the identical model but new refrigerator. Total cost to the retailer is over $700 and in the end they ended up replacing the item and taking a dead loss of $150. But they also lost the customer for life but did manage to acquire enough bad will to steer dozens of customers away from the store for years to come. Somewhere along the line executives need to use some common sense and realize the costs of fixing an item repeatedly both in terms of loss of goodwill and hard costs far exceeds the costs of replacing an item and appeasing a customer. As the economy continues to contract retailers of all types are sharpening their pencils. The above example illustrates how an over zealous pencil pusher can inadvertently cost a company dearly down the road. Once a legitimate problem is identified and repeated attempts to resolve an issue have failed sellers need to find and provide alternative resolutions. As the saying goes in this case this particular retailer won the battle but lost the war. They held their ground and may have won the battle initially on getting an item replaced but lost the war in the end as not only did they end up replacing the item but all faith is lost in the business.
You can follow updates to this blog on our twitter page as well as reading previous articles such as Green Promos in time for Earth Day.
The High Cost of Product Samples
During times of strong economic growth the often insidiousexpenditure associated with providing samples for customers gets overlooked. Across many industries the general policy of the early part of this century was to ship first and ask questions later. Entire internet communities sprung up to take advantage of these freebies and in many cases exploit the goodwill of stores that offered these niceties under the guise of potential future business. The end result is a growing list of online stores that no longer offer free samples because after careful analysis they realized it was a tremendous cost with little return.
An item such as the Quest Wheeled Cooler will run between twenty and thirty dollars depending on the distributor offering the product. The cooler is huge and will ship by what UPS calls dimensional weight. That means the cost of shipping will end up somewhere on the higher side of $30. Any vendor that ships this item without restriction would need to sell 7 to 10 of the same item just to break even on the one given away. Now repeat that by dozens of products a day and you get the picture the true cost of free samples is higher prices. A year ago online distributors advertised their very generous sample programs as a bullet point for doing business with them. As the recession deepened those policies have become much more restrictive. An increasing number now require a deposit that is credited to a future order within a set time frame. Otherwise the customer is charged for the item and shipping which seems very reasonable. A quick look at many of the top retailers this evening shows no evidence that those sample policies are still in place.
We talked recently about building custom promotional packages for success in a downturn. With the news now dominated by the spread of a potential pandemic consumers and businesses are rushing to find sanitation products. Bundling opportunities now exist in this area and the wise distributor would begin to combine inexpensive cleaning solutions with higher priced packages. As we highlighted earlier in safety goes mainstream in ad specialties there is a growing focus on product safety.
Build Custom Product Packages for Promotional Success
One of the largest growing segments in the trinkets industry in the last twelve months has been the gift set. What manufacturers have figured out is that customers and distributors are constantly struggling to put together packages of items sourced from widely varied sources. By pulling these all in house and offering one concrete package economies of scale can be realized in terms of reducing shipping and often product costs. Unfortunately though manufacturers offerings tend to go stale very quickly and in fact many are stale from the very beginning.
But that does not mean you cannot create your own packages to keep your customers from straying. Take for example a package that would be geared towards spring and summer marketing events. Many consultants would simply suggest a cooler or similar item. Why not put together your own custom package featuring some popular items? The Front Pocket Koozie Kooler has been a mainstay of the lunch sack market for several years since it was first introduced. By itself it makes a great gift by why stop at that point? Instead combine that item with the Koozie King Kooler and you have one imprinted bag that can be carried inside of another. I have even heard of customers buying multiple smaller items to fit inside of the single larger item but make sure you properly measure and that the promised package fits. Offering a discount on the combination is a great way to keep potential customers in house. Another example may be combining the ever popular and summer mainstay the Zip-Up Bottle Koozie Kooler with another popular item. That may be a cooler if the budget is more limited or a custom bottle of one type or another. But why not combine the koozie with a Captain's Chair and provide the customer with an end to end solution? Rather than opting for expensive additional imprint locations on the chair have your client use that money towards an entirely independent item. There are endless combinations above and beyond the traditional pen with pad and bottle with cooler and you do not have to wait for the manufacturer to provide the incentive. Plus by self branding your own packages you have something others do not.
We received countless questions surrounding our piece on What Plastic Resin Codes Mean and as a result we intend to illustrate the differences in products in an upcoming article. By this we mean we will take imagery of several different promotional pieces to demonstrate how some manufacturers continue to lead by example in terms of recycled and recyclable while others not so much. Pay particular attention to the packaging materials your goods are shipping in as recently we ordered recycled goods that shipped in 100% new cardboard. This seemed counter intuitive to us but undoubtedly it was less expensive for the manufacturer. So far it has been unfortunate that some of the larger retail brands that are crossing into the corporate markets are still not shipping in an earth friendly manner. Hopefully with continued pressure from customers and distributors that can begin to change.