Disintermediation

“Your margin is my opportunity,”  Jeff Bezos

One of the most important developments within our promotional products media industry during the past 25+ years has been that our concepts and ability to deliver marketing messages became part of mainstream advertising’s “toolbox”. Conventional ad agencies regularly incorporated a promotional component to their marketing programs. 

A well respected New York based ad executive told me that he considered a great promotional product as part of a marketing campaign was the insurance policy that the effort would be successful. Ad agencies built relationships with promotional distributors and clients benefitted from better ad campaigns. 

Smaller businesses that did not use ad agencies found the advice from their promotional distributor to be economical ways to grow their businesses. One successful promotion generally lead to another.

What a difference a generation makes!

This most recent generation (20 years or so) includes the proliferation of the digital world, electronic games from birth, schools with laptops instead of books and shopping for everything from automobiles to anchovies - on line. It is no surprise that the people who make up this new generation have a completely different attitude towards what a successful marketplace should be. We are witnessing a return to product focus transactions and away from “purpose”. The price of the promotional product is again becoming more important than the value of the promotion. 

The door to disintermediation has been kicked open in our promotional products industry. 

Astonishingly, this new generation of promotional products sales people have adopted  the same negative and demeaning terms applied to the tools of our trade by potential customers - swag, give-aways, tchotchkes, trinkets, novelties and worse, do nothing to further confidence in what we do. 

This  combination of unprofessional regard for our industry and the comfort the modern world has with living in an online universe, has led to disintermediation jumping on our industry with both feet! We have suppliers that derive their income from both industry and direct sales. As the direct market overshadows the industry, it is likely that they abandon the promotional distributor (middleman). Yeti has and appears to be quite happy with the decision. Patagonia and others have made the same move.

With an average margin of 40% for distribution through the promotional products industry, Jeff Bezos’s comment regarding our margin being his opportunity is pretty clear. Manufacturers are able to go directly to consumers with a “fee” to Amazon far less than through other distribution. They can even reduce their price and generate greater profit by eliminating the “middleman”.

Where does that leave us? If you change your focus from products to purpose you become a direct seller of your talent, creativity and knowledge, not simply a middleman selling coffee mugs at low profit! You  just might hang on to your clients  a while longer and if you give proper respect to the work we do, your clients might realize that you bring substantial value to every promotion. 

Disintermediation started in the financial market where people began to be able to buy securities directly from companies rather than through a broker.  For those able and willing to research and decide on investments, cutting out the broker commission was a natural way to go. But a majority of investors needed the advice of a financial advisor so it was not practical to eliminate brokers completely. I believe that a marketing advisor is as essential in business as the financial one. 

The near future is not yet established. There are many “business as usual” distributors who don’t feel any of this affects them. There are also those that think the internet is the only way to sell “swag”. This group, the current generation has only price to compete on and developing a USP (Unique Selling Proposition) is next to impossible. Internet based distributors make it easy for prospective clients to  shop the  web for lowest prices and other incentives, leaving you in a race to the bottom.