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Premiums, Incentives, Promotional Products: A History Lesson

By George Kling

Are you ready for a little semantical sparring, ranting and raving?

Trust me. You'll learn something in the end.

I have always defined the difference between a premium, incentive and promotional product according to whether a person had to do something in order to get it - imprinted or not.

In order to get a "premium," one must perform some act. You have to buy something like a Big Mac to receive a child's toy as a premium. You can't get the toy without making the purchase. You have to test drive a new car, open a bank account or buy something else to receive the premium as an extra gift.

In order to receive an "incentive," a person must also do something. But the primary difference between a premium and an incentive, in my mind, is the price. A toy at Burger King is a premium. A 40-inch color TV earned by selling above last year's quota is an incentive. Both, however, are incentives in that they require some action in order to obtain them.

A "promotional product", on the other hand, is usually given freely with no strings attached. The fundamental purpose of a promotional product is to offer an inexpensive and utilitarian vehicle that carries an advertising message. True, some promotional products are in fact premiums, but that's the exception rather than the rule. Also, some premium merchandise is given freely with no strings attached.

Gets confusing, doesn't it?

Exit Expertise
In today's marketing world, many premium suppliers have been subjected to a phenomenon called downsizing. Many corporations have eliminated their internal Promotions Departments on the premise that they may not really need them full-time if they only run a few promotional programs a year.

It is an equally curious phenomenon that downsizing begets outsourcing. There are major consumer products companies that used to maintain an in-house Promotions Department. Those were the individuals that a promotional products salesperson or premium rep called on to suggest new ways to increase sales, obtain customers, introduce new products, boost trade show traffic, etc. Although several no longer have these departments, they still need the same kind of promotional services. Hence … outsourcing.

Who are these outsourcers? Advertising agencies, sales promotion agencies, incentive catalog producers, premium jobbers and, of course, promotional products counselors.

Are all such entities created equal? No. Can some of them successfully replace the services once provided by a company's in-house staff? Very definitely. In those cases, these vendors are more than simply purveyors of things, they're looked upon as a valuable adjunct to the client's marketing team.

Way Back When
There's also another interesting development in today's marketing mix: In the "olden days" (20 to 40 years ago), most of the individuals within both the premium and promotional products markets grew up in the merchandise business. We discovered that a merchandise offer of something - either free or at a reduced price (if the consumer performed whatever requirements were called for) - far out-produced simple discounts, coupons, rebates, etc.

Companies like Procter & Gamble, General Foods, Ralston Purina, Clorox, et al were consistent major users of consumer premium offers. Why? Because they produced the sales these firms were seeking.

During the past 20 years, however, we've grown an entirely new generation of young, aggressive, intelligent people who are now charged with creating promotional programs for the corporations they work for. Unfortunately, most of these individuals, fresh out of school with an MBA in Marketing, never heard of premiums or promotional products! And if they did, it may have been through a single sentence in their Marketing textbook that said, "premiums, incentives and promotional products are also interesting promotional tools." Period.

This generation's promotional toolbox often includes discounts, free goods, coupons, rebates and contests & sweepstakes. But consumer premiums and incentives are virtually unknown to many of today's brightest marketers. And compounding this is what I call N.I.H. Syndrome: "Not Invented Here - If we didn't think of it, how good could it be?"

A Slippery Slope
Well, I'm here to tell you this is a flawed approach. Offering a customers discounted or free goods ("Buy ten and get one free") is a greased slide to oblivion! Once a customer is offered such incentives, those prices become the expected norm. Running a 30-day "free goods" offer is irrelevant, because the customer knows that the company has demonstrated it can - ergo it will - repeat the offer, and the customer can afford to wait longer than the supplier.

However, if a company has a 50¢-per-case promotional budget, rather than simply drop prices 50¢ per case, suppose that company offered the end-user consumer a tangible product - bought and paid for with multiples of those 50¢ discounts. Would that serve the same purpose … without destroying their pricing integrity? Darn right it would! Marketing history has proven that it will.

So those companies - like yours - that are using promotional products, premiums and incentives should really begin to think about these valuable marketing tactics as more than just a single line in a Marketing textbook. While there's obviously a distinct separation between the promotional product and premium/incentive industries, both these marketing tools are now coming together to form a synergistic partnership that easily outperforms other competitive practices - which means it's worth knowing what they are and how they work, and that's what Imprint is all about…

And what if your company is but a mouse-sized version of the big bears that associate with multimillion dollar promotional budgets and billion-dollar sales expectations? All the more reason to turn to your promotional products counselor to help make your expectations come true.

Thus endeth the lesson.

COPYRIGHT © 2002 The Advertising Specialty Institute. All rights reserved.
George Kling is a marketing consultant for the Special Markets arena.

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