COVID-19's Effect on the Corporate Gifts & Incentives Marketplace
By Mike Landry, CPIM
These are truly difficult times for the corporate gifting and incentive (aka Special Markets) channel. On the vendor side, travel has been prohibited, new product introductions have been postponed, marketing has been suspended, and too many direct reports and dearest friends have been laid off or furloughed. The revenue forecast for the balance of 2020 for us all is not quite good enough to be called "grim." COVID-19 has changed everything.
The other side of the mask is that suppliers are reevaluating every system, every product, every employee, every SKU, every support relationship and frankly, every customer. Like many companies, mine has been restructuring to enable us to navigate through the current challenges and emerge on the other side with an appropriately lean and nimble team.
I'm not going to paint a rosy picture. The workforce, the target of the most Special Markets programs, has been permanently altered. What a team member used to value has been rendered worthless. What used to be inconsequential in a team member's environment is now of paramount importance. Organizations' affinity for their people working remotely has changed forever. We are fewer, and we've all learned to do more with less. I am deeply concerned about the viability of large-scale national trade shows in any industry. If you work for a vendor and you cannot substantiate your value to the organization, good luck. If you are a small rep or reseller, I have always had the highest degree of admiration for the fortitude it takes to open the doors every day—never more so than now. Again, good luck.
We Lead the Upside
In the incentive, recognition, corporate gifting and customer loyalty sales channel, I see a definitive upside. Here's why: On the supply side, we typically look at our businesses as a pie with various slices representing various sub-channels. Participants in the pure "incentive" channel, which has historically been the heart and soul of our business, still have points to spend. These points are a form of currency and simply cannot be spent anywhere else other than with us. The same can be said for length of service and classic recognition programs, a subset of the pure incentive world. At my company, these orders continue to come in. Sporadic and uneven to be sure, but a trickle of optimism in the context of other sales channels that have been completely and absolutely shut down. The patient still has a heartbeat. We saw the same thing in the aftermath of Sept. 11, 2001 and the recession of 2008.
Breaking Down the Sub-Channels
The consumer loyalty segment continues to chug along uninterrupted, albeit with less promotion. There are no hardcopy support mail pieces being sent out, and these programs are not being promoted via e-mail, but again, there are miles/points that recipients have accumulated that cannot be used anywhere else other than with us. In this space, we are still entertaining quotes for future business. I find myself having occasional discussions with marketing agencies that are preparing for some return to normality. Yes, there are a lot of "when's" and "as long as's" attached to these conversations, but I'd sure rather be having these dialogues than not, as is the case with my colleagues in the retail sector.
The key factor here is that, when we do get back to normal—whatever normal looks like post-COVID-19—consumer brands will most likely engage in a market share battle the likes of which we have not seen in our careers. Whether it's a casino, an airline, a hotel chain, a liquor brand, automotive or any other consumable, when travel restrictions are lifted, it will be game on. Given the cash flow picture that COVID-19 has painted for these organizations, their long-term survival will depend on their short-term tactics. The stakes could not be higher. Believe me when I tell you that there are conference rooms filled with analysts, agencies and consultants as I write this strategizing for this eventuality right now, and you may be called upon to help. I have been.
In the classic corporate gifting space, senior management of companies that have dished out furloughs, layoffs and pay cuts will be desperate to immediately engender loyalty and immediate engagement for their employees and distribution partners. Their success, as always, has depended directly on the commitment level of their people, and there will be no more opportunistic time to ensure that than when some degree of normalcy is achieved.
In the event space, I am truly encouraged by the major events and sales meetings that have been postponed rather than canceled. An Incentive Research Foundation (IRF) study published in late April indicated that almost 62% of the incentive trips that were scheduled for the first two quarters of 2020 have not been canceled, but postponed to later this year. The logic and business rationale for bringing a substantial chunk of an organization to an off-site location and celebrating their culture and brand has not waned. The ROI that was valid six months ago is every bit as valid today.
Seneca Was Right
Our sales channel's place in the context of corporate America has always been what we make of it. We serve so many different sub-channels from brands to length-of-service providers to the promotional products folks (which overlap all of the sub-channels I've outlined above). Instead of focusing on short-term disruptions, let's get our houses in order and take the time to improve our infrastructure. Let's prepare to do our part to get the economy back online and make the most of the upcoming opportunity. The Incentive Marketing Association (IMA), the Incentive Manufacturers and Representatives Alliance (IMRA) and the IRF are three organizations that you can lean into for support and networking now. The saying, "luck occurs when opportunity meets preparation" has been attributed to everyone from Oprah Winfrey to John Wooden. This quote actually belongs to Seneca, a Roman philosopher who also said, "man is affected not by events, but by the view he takes of them". Seneca was spot on.