2019 is shaping up to be a complicated year for businesses. The world trade situation from the UKās exit from the EU to the tariff battle with China, we have a volatile atmosphere and our promotional specialty advertising industry certainly is not immune. At the time of this writing, the tariff situation is still looming and it appears that a settlement is not coming any time soon. That leaves big question marks where prices should be in industry catalogs.
A client/customer summed it up this way. āMy need for and interest in marketing has not changed, but neither has my budget. You will have to get me the same results even if part of my budget has to go to tariffsā he said. For most
people I have talked to they immediately think this means cutting prices and profits. I have a strategy that just might offer you a better option.
Move your client/customer to a higher priced item to carry their message. Before you stop reading, thinking Iāve lost my mind, consider helping your client refine their recipient list and move the marketing focus to the most valuable contacts rather than contacts in general. I offer a simple example: Last year Tip-Top Financial Advisers sent new years greetings to 1,000 clients and prospects and included a $4.00(c) item as a gift. This generated a $1,600 GP for the distributor. This year using the same budget sending an $8.00(a) item to 500 clients and prospects, that represent the most likely to do business, it will increase the quality of the response and give the distributor a $2,000 GP or a 20% better margin!
The point is that if you use the same item and now a tariff and/or price increases apply, you have limited opportunity to maintain profits and might even end up subsidizing tariffs by kicking in some of your profit. But by creating a new strategy that targets a smaller but more valuable group, you can bring your client better results and still preserve your profits.
By keeping your discussion on the message and budget while explaining the logic of a tighter focus on the most valuable contacts, you will avoid putting a price on the promotional product that will carry the message. You will be fulfilling the request to accomplish as much as before even if some of the budget is eaten up by tariffs.
In a slightly different direction but certainly quite connected - are you being asked for pricing more frequently and for ideas less? Recent surveys suggest that 60% to 65% of buying decisions have already been made before you even know your customer is looking for something. This can eliminate virtually all the extra value you bring to the table and make the entire conversation about price.
My suggestion is not to be like 90% of the people in our industry and start getting quotes from suppliers. Instead, ask your customer how they intend to use the goods and what they want to achieve. Offer that there are many great opportunities for overstock merchandise as well as short-term specials and other ways to get a lot more out of their budget and finding these high-value deals is not something they can do themselves.
Also keep in mind that any inventory in the US prior to the tariffs going in effect are not covered by them and at least for a while much of the discontinued and overstock merchandise might be in that category. When what you are proposing is not all over the internet for your client to go price shopping for, you can preserve profits, be highly creative for your client and build strong programs.
It is difficult to compete on price and it is getting harder every day. Recently with the holiday Q4 right around the corner, I took a look at some branded gift items available through promotional industry firms and compared pricing to online. I looked at cutlery, appliances, home entertainment and some sports items. Basically online (which includes Amazon and a couple of other sellers) was 6.65% less than EQP net! When the free shipping readily available is thrown in, it makes operating on price a losing proposition for our industry.
But what if the client wants 50 identical items delivered to 50 different addresses and wants each package to have a personal note card hand signed by the client? That is too much service for any online company to do at the prices they list. The online giants need to move as much as possible through their distribution without human intervention.
By working to meet the clients needs and budget - not the price of the product, you get to build back in the value of working with a marketing professional - you!
Gregg Emmer is chief marketing officer and vice president at Kaeser & Blair, Inc. He has more than 40 years experience in marketing and the promotional products industry. His outside consultancy provides marketing, public relations and business planning consulting to a wide range of other businesses and has been a useful knowledge base for K&B Dealers. Contact Gregg at gemmer@kaeser-blair.com.