Feature Article - March/April 2013

IMRA Roundtable

Examining Trends in Merchandise Incentives

By Deborah L. Vence

Q: What are the advantages of merchandise incentive programs?

Sharp: A person does not forget how they earned the merchandise or who gave it to them. A merchandise award is imprinted into the recipient's memory for life.

Martocci: The tangible nature of merchandise is one of the greatest advantages for its inclusion in incentive programs. Their item is something they can see, touch and refer to the purpose of receiving the incentive. Also, the perceived value of a merchandise gift is typically considerably higher than the expense outlay for other forms of incentives, meaning more bang for the buck.

Renk: Study after study on the effectiveness of incentive programs illustrate that the awards that are strong motivators are tangible and have a high perceived value for the participant. Merchandise incentives, in particular, are tangible and long-lasting symbols of accomplishment.

Landry: Merchandise is going to have a certain trophy value that cash is not going to have, that gift cards won't have. Travel is always recognized as a great incentive and great reward and planning tool for employees, and for sales employees, in particular. And, our category fits right in—hand and glove with the whole travel thing. We are a destination brand for upscale travel.

Mitchell: Brands motivate. Everyone is a consumer, and we aspire to own products we see at retail. A tangible award creates "trophy value" and a strong link between the item and the company that gave it out. There's an old story about pens—when you get your first $100 pen, two things happen: first, you always know where it is; second, you always know how you got it. Giving non-merchandise items like cash or gift cards creates less impact—the cash mixes in with the other cash in your wallet and you forget how you got it all.

Q: What are a few challenges that can come about with merchandise incentive programs?

Sharp: In today's world, technology and fashion are changing all the time so what is hot now may not be hot in a couple of months. So, how do you put items in a program? It takes a little more work and communication with your representative and supplier, but you constantly need to pay attention to what items are in your programs and refresh them. Just because an item is still being sold does not mean it should stay in your program. It takes a little more work to keep merchandise programs fresh, but it is worth it and it will help keep your challenges to a minimum.

Martocci: We live in an immediate gratification world, and there is a process to ordering, shipping, then receiving a piece of merchandise. Many times the thought of offering a quick electronic redemption is somehow more advantageous for the recipient than waiting for their item to arrive. But, typically, the extra value provided by merchandise is well worth that over a gift card.

Landry: One of the considerations is fashion. Everybody wants to talk about fashion styles and colors and the newest, hottest and greatest. Typically, with the brands, [they are] set up on different calendars. When companies come to me and say that we want to do this spring color program, we really have to think ahead a little bit. What are the redemption expectations? Spring merchandise is obsolete by summer. So, communication [about the merchandise] is key.

Mitchell: Product sold at retail is dynamic—it changes with consumer tastes, retailer preferences, new technologies. If a program runs for a longer term, there's the chance that some of the items offered will have been discontinued or replaced with newer models. That's why working with a supplier that understands the incentive business (and the reps that work with that supplier) helps keep the assortment "fresh."

There's also the ongoing issue of fulfillment. All that product has to be shipped to the program participants, and there can be ongoing issues with delivery. Again, working with suppliers or providers that understand the importance of every single box will help alleviate the "headaches" that can come with product fulfillment.