Guest Column - July/August 2010

Are Merchandise Incentives Dead? Discuss…

By Pete Mitchell & Barb Hendrickson, CPIM


Editor's Note: We asked incentive industry leaders, Barb Hendrickson and Pete Mitchell, to discuss a critical topic in the incentive industry. They chose the recent kerfuffle over merchandise incentives' rumored demise. What do you think? Write to editor@pipmag.com to weigh in with your thoughts on this issue, or others raised on these pages.


ABOUT THE AUTHOR

Pete Mitchell is a 20-year veteran of the incentive and promotional products markets, and is currently Director of B-to-B Sales for Samsonite Corporation. He has served as Vice President, Corporate Markets for both Swiss Army Brands and Tumi. He is Vice President of the Incentive Manufacturers & Representatives Alliance and is a frequent presenter at PPAI (Promotional Products Association International) and IMA seminars.

Was that an asteroid, or did the sun just go behind a cloud?

A long time ago, some time just after the Jurassic Period, corporations started recognizing their employees for outstanding performance. Back then, it was often a Gold Watch—a symbol of enduring value that would remind the employees of all their hard work over the years. But now, recognition has evolved into something very different, and I wonder if the whole "merchandise" thing is either dead or dying.

Now, realize that as a supplier of merchandise this is scary stuff. And by no means am I predicting the death of merchandise as a viable way to reward and recognize outstanding achievement within corporations. But the rules of the game have changed, and some of us haven't kept pace.

This is the Golden Age for consumers. Never before has there been more choice, more quality and more value than there is now. A few clicks can tell you everything you want to know about a product. You can read the opinions of others who own a given thing. It's now much more than the "stuff"—it's the "experience."

"Typical" incentive and recognition programs are stuck in the '80s, a time when 300 items comprised the entire universe of possible redemptions. True, most programs have more than that, but they're still far short of the experience offered by retailers like Amazon or "category killers" like Best Buy. This bodes ill for a program with "only" 100 or so items in a given category.

Couple this with gift cards, the ultimate "employee empowerment device," and it's not a stretch to wonder how merchandise can compete. Retailers offer almost unlimited choice (albeit in sometimes-narrow categories), and the participant can pick whatever they think is the appropriate reward.

A recent program that redeemed through an online retailer (names excised to protect the innocent) illustrates this. Out of 15,000 or so redemptions, the most popular item redeemed 70 pieces. There were more than 12,000 redemptions of one item each. No "traditional" program developer can offer this kind of variety. And it's not a foregone conclusion that anyone should offer it—but "competition" causes us to do crazy things sometimes.

Does this mean Merchandise is dead? Far from it. But the way in which program participants get their merchandise is changing. And generational differences may exacerbate this trend. Do Millenials really want to be told, "Thanks for being a high achiever. Pick one of these 50 items instead of what you might really want"?

Everybody's challenge is to avoid the fate of the dominant species of the Jurassic period. The sooner we learn new ways of delivering product, the sooner we can benefit.