Departments - November/December 2016

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Reaping the Benefits
Small Businesses See Success in Merchandise Incentive Programs

By Deborah L. Vence

Small businesses are seeing the benefits of merchandise incentive programs, according to results of a recent study by the Incentive Manufacturers and Representatives Alliance (IMRA), a strategic industry group within the Incentive Marketing Association (IMA).

The IMRA Small Business Merchandise Study was produced by IMRA through a grant to the Incentive Research Foundation (IRF), an organization which funds and promotes research to advance the science and enhance the awareness and appropriate application of motivation and incentives in business and industry globally.

"This study is important because it highlights the special place merchandise already has in reward and recognition in small businesses," said Melissa Van Dyke, president of the IRF.

Ted Moravec, president of IMRA, said the study is important because it was "an eye-opener in terms of both how extensive the use of merchandise incentives is in this segment and how large the annual spend is for them.

"It clearly indicated that potential new sales exist to those who can devise the most effective way of connecting the buyer with the merchandise," he said.

Results from the study revealed that small businesses believe that merchandise incentives, including apparel, food and beverage and electronics, improve morale (82 percent), are an effective motivator (80 percent) and are more memorable than cash rewards (61 percent).

The study also took a look at how the small business market used merchandise reward incentive programs for sales people, employees, distributors and customers. Small businesses were defined as companies with between $1 million and $50 million in annual sales, which represented more than $16 billion in merchandise spend.

Small business owners generally are unfamiliar with the services and advantages a merchandise representative can provide, such as below MSRP pricing, according to the study.

"Incentive merchandise representatives have traditionally focused on resellers such as incentive solution providers and promotional products distributors," Moravec said.

"It is not a surprise that most small business owners would be unaware of merchandise reps as the reps have never really targeted this market. The small business owner is an end user and the market is evolving to where reps increasingly call on end users," he said. "The other reason this market has not been targeted is the perception that wasn't worth the effort to do so. This is still a challenge to figure out how to economically reach potential buyers."

Making small businesses aware of the services merchandise representatives can offer really is a function of education, Van Dyke noted.

"Most often, broad information and education on this topic has been available through industry platforms, such as IMA or SHRM, etc. Oftentimes, small businesses do not have the luxury of being a part of these forums," she said.

Intellective Group was chosen to conduct an online survey of small business merchandise decision-makers in April 2015. The idea behind the study was to better understand the incidence of various types of programs (sales, employee, channel, customer); use of merchandise; the types of merchandise used; sourcing for merchandise; buying behaviors; awareness of other options for sourcing merchandise; merchandise purchase criteria; and size of this market opportunity.

Findings from the study include the following:

  • The vast majority of small businesses reported using merchandise for reward/recognition of employees (89 percent), salespeople (87 percent), distributors (83 percent) and customers (80 percent).
  • Small businesses provide top merchandise rewards for a variety of objectives, including customer gifts (60 percent), top performers (59 percent) and sales quotas (53 percent).
  • Small businesses using merchandise to motivate key partners tend to be in good health: 72 percent report growth in the past year.
  • Nearly half (47 percent) of small businesses using merchandise have budgets of $10,000 or more, and many report their budgets are increasing.
  • Many different types of merchandise are used, and the top types of merchandise used by small businesses are apparel (76 percent), food and beverage (70 percent), electronics (58 percent), writing instruments (57 percent) and sporting goods (53 percent).
  • Personalization is key to small business rewards. In-person presentation of merchandise rewards (at company meetings/functions, or on the spot) are most preferred (70 percent).
  • Most small businesses often source the merchandise they use for rewards online (76 percent) and/or from retailers (61 percent).

"The research demonstrates that merchandise incentive programs are an effective business practice for small businesses," Van Dyke stated in a September press release. "Both IRF and IMRA have a wealth of research, benchmarks and best practices that can help small businesses create new incentive programs or enhance existing programs."

To boot, the study indicated that activities reported by these smaller companies look in many ways like their larger counterparts, with the exceptions that their budgets are smaller; and they use online and retail for merchandise more than they do representatives of manufacturers.

Merchandise reward sourcing, merchandise-purchasing small businesses source items online or from retailers more often than they do via sales representatives. And, results show that they use multiple channels to source their merchandise. Among those who purchase merchandise from sales representative(s), it is equal from those selling promotional products and those focused on brand name merchandise. And, many firms use both types of representatives.

In addition, merchandise purchasers who work with sales representatives also are likely to source items online or from retail. The opposite (that those who source online or from retail also work with reps) is less likely.