PPB July 2015

DEBUNKING THE MYTHS ABOUT SELLING PREMIUMS & INCENTIVES

IRST IN A TWO

PART SERIES

dollars to the bank, not per-

centage points.

Mitchell:

My favorite two-

word phrase in the English lan-

guage is “it depends.” Yes,

margins are awful on electron-

ics (Apple, anyone?), but dis-

tributors make pretty tight mar-

gins 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.

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 compo-

nent, 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 con-

sideration, 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.

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 pro-

gram 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 protect-

ed—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/opportunity-

buy 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

56 •

PPB

• JULY 2015

GROW

51% of distributors

report premiums com-

prise 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 fulfill-

ment; 33% of distributors

own the inventory

33% of distributors work

with premium reps;

62% do not

Source: PPAI Distributor

Business Survey

PREMIUM PREP

“

”

What Distributors Believe:

IT’S TOO TOUGH

TO COMPETE

WITH RETAIL

ON PRICING.