Feature Article - July/August 2010

Keep On Giving

Our Annual Guide to Business Gifts

By Dawn Klingensmith


W

ell-heeled Americans who could afford to do more than just window shop during this Great Recession fueled demand for an unlikely commodity—the brown paper sack. The dismal economy gave rise to a phenomenon called "stealth wealth" as shoppers started asking high-end retailers to disguise their purchases in plain sacks without store or brand names so as not to incite resentment. Conspicuous consumption had become suspect, and waste downright criminal.

Given this broader context, not to mention incentive travel's bad publicity, it made sense for companies to reassess and scale back on business gifting. What's interesting, though, is that some industry insiders don't expect business gifting to return to previous levels as the economy strengthens.

"Business gifts will always have their place and time, but I don't believe it will ever return to what it was five to 10 years ago. Between corporate compliance, reduced budgets and less competition, gifts may grow with the economy but never get back to what they were," said Dennis O. Borst, president and COO, Patriot Marketing Group, West Hollywood, Calif. "By less competition, I mean with fewer companies gifting, other companies feel far less pressure to compete by spending large sums of money."

"For the most part, the value of gifts has been reduced to about half of what it was just two or three years ago," he added. "Also, we are seeing a 'tiering value' of gifts sent. Top customers still receive a gift of greater value, but lesser customers are receiving gifts of lesser value or none at all."

"People are starting to feel a little more comfortable about spending money on corporate gifts and incentives for their employees at the end of the year," agreed Kevin Dougherty, director of corporate sales for Orrefors Kosta Boda USA. He added that while the corporate junkets and banking missteps that took place early in the recession had an impact, businesses are starting to recover their appetite for gifts and incentives. "People realize now you don't have to be so extravagant, but you can still spend some money on gifts."

That's perhaps the most salient trend right now in business gifting, and it may prove to be a lasting legacy of the Great Recession.

" We're seeing more and more people ganging up budgets to get something nice, an aspirational item. So instead of giving $25 gifts to all of their accounts, they're giving it only to accounts that exceeded a certain amount of revenue," said Mike Landry, director of special markets, Tumi, South Plainfield, N.J. "That way, they can do something a little more special, and those recipients feel a little more honored and important."

Citing the conventional wisdom that 80 percent of a company's business comes from 20 percent of its customers, Landry said, "Now, in the new economy, it's probably 90-10. Those top 10 or 20 percent of customers are more critical than ever to the success of a business. You really want to be good to them."

Internally, the same ratio applies—80 percent of a company's productivity comes from 20 percent of its employees. "These are people you have to take care of," Landry said.

That being the case, it would perhaps behoove vendors to think in terms of "one-stop shopping," making it easy for clients to choose or customize gifts according to tiers with varying price points. Omaha Steaks, for example, offers a variety of business gift packages. "And we can customize packages for our customers based on what they are looking to spend per person," said Melissa K. Paladino, B2B marketing and gift card manager, Omaha Steaks Special Markets.

A word of warning: "It's advisable to buy the same gift for employees or customers from the same company so you are not differentiating between recipients," resulting in resentment or hurt feelings, explained Barbara Hendrickson, president, Design Incentives, Livonia, Mich.

Gift premiums or promotional items don't necessarily reflect how well a company is doing—nor should they, said Hendrickson. "For instance," she explained, "casinos in particular seem to recognize that the time to promote and reward loyal customers is when attendance or sales are down. Any company that has a customer loyalty program in place would be wise to step up those efforts rather than cut back benefits during a down economy—that's the perfect climate to steal customers."

As far as customer retention goes, "If profits are down and you cannot be generous with customers this year, send a handwritten card—'We want you to know how much we have appreciated your business this past year and look forward to going out of our way to continue serving you.' It is the acknowledgment that is so important," said professional etiquette consultant Gloria Petersen, Global Protocol, Phoenix. "The worst thing you can do is ignore a customer or individual because the budget is tight. This is a time when everyone will understand and appreciate your restraint or limitations."

Acknowledging employees also delivers a return on investment. "Especially in this difficult time in the economy, you need to continue to motivate and reward your employees for a job well done," Paladino said. "Currently, motivation levels are potentially at risk. So, more than ever, keeping them happy and encouraged is very important."