Where Promotional Products Fit In A New Product Launch

Marketers know that innovation is what drives continuing profits. So, when they introduce a new brand, product or service to the market, what are the main attributes they look for in the media they choose? Targetability and memorability—characteristics of promotional products—are the principal media requirements discovered in a recent study, Launching Brand Innovations To Market, conducted exclusively for PPAI.

Relentless competition and market pressure continually drive businesses to reduce the time, effort and costs involved in bringing products and services to market. A 2005 survey of C-level BusinessWeek readers concluded that product development “is now one of their highest business goals, and that enhancing their ability to collaborate internally and with partners is a priority.” Importantly, corporate leaders proved “eager to learn more about how to optimize their new product development processes, so they can achieve their revenue goals.”

Implications For Promotional Products
Media sellers—including the companies in the promotional products industry—are interested in how marketers go about the process of mounting a new brand/product/service launch and why they make the choices they do. Consequently, PPAI’s Marketing, Research and Information Committee asked us to conduct a mail survey of marketing executives in various industries to determine how they budget and select media for their new product roll-outs and what the implications are for promotional products sellers. Further details are included in the sidebar “More About Our Methodology.”

Getting a better handle on current business conditions was a key reason for the survey. Another factor: There seems to be very little published about marketing executives’ thinking as it relates to making promotional choices in launching new brands, products and services. Our inquiry covers several audiences involved in a new product launch, including salespeople and employees addressed by internal promotion.

Frequency Of Roll-Outs
Good news! Marketers tend to freshen up their lines frequently. More than half (56.5 percent) of respondents report they launch something—a new brand, product or service—at least once a year.

In follow-up phone interviews, we asked several executives how the current state of the economy might affect their organization’s plans. Are they cutting back? Larry Hedeman, vice president, sales and marketing for World Magnetics in Traverse City, Michigan, says his company recently launched two new products and is preparing to launch another one.

“My take is that it’s a good time to do that. You need to offer something that hasn’t been offered in the past. Even though the economic times are hard, we’re going to push forward and launch new things,” he says.

His firm manufactures ultra-sensitive pressure and vacuum switches. His biggest concern, other than whether or not his firm’s launch is successful, is other companies’ products. “Our product is primarily designed into someone else’s. I guess when a new product might be used, my concern is that the other manufacturers are going to shelve their projects or put them on hold because of the economic situation … A lot of people have said they’re going to launch their new products, [but now] they’ve decided to postpone them.”

Jennifer Foshee, marketing director for Guardian Credit Union in Montgomery, Alabama, reports, “Loan demand is down, so that would tell us we need to find new loan products that would help bring a [credit union] member in for loans. We are looking at member education initiatives. That may not be a new product, but it would definitely be a new service. Educating our members more—their credit, the basic budgeting, balancing their checkbooks [is a priority]. We see 2009 as more of an educational year.” Her biggest concern is ensuring ROI.

Kimberly Dermit, marketing manager for Allied High Tech Products Inc. in Rancho Dominguez, California, caters to firms in microelectronics, materials science and manufacturing. “We’re actually in the midst of a new product roll-out right now,” she says. “So, [the recession] did not stop us because our fear was if you don’t keep in front of the consumer—in front of the businesses that we service—when the money does come back they’re going to forget about us. So, we are coming out with a new product; we’re putting tons of money into it. … [Buyers] may not be able to buy it right now, but they’ll see it and want it and they’ll put it on their wish list. And when the money does come back, they’ll come to us.”

She adds, “Our biggest concern is that we’ll be able to sell enough units to justify the amount of money put into the product. That we can trust our salespeople and the companies we know are asking for this product, that it is something that is viable and will sell more than, say, 10 units.”

Media Choices And The Reasons For Making Them
As pressure to become more cost effective is only likely to increase, there are opportunities for those providing promotional products to make a case for this unique medium at all budget levels. Mass media no longer have the lock on budgets for new product introductions. In a hand-raising count by the Association of National Advertisers, 33 percent of a 1,200-person sample signaled they expect to keep their 2009 ad spending constant but would be doing some reallocating in the marketing mix.

As Mark Lawrence, owner of California Scientific Inc. in West Sacramento, California, indicates, “I used to do it the old way—send announcements to magazines, buy print ads, get into business reply card decks. It was a huge waste of money and time. Print media is dead.” Lawrence’s firm is engaged in neural network-based artificial intelligence, and as a sideline he also sells specialized equipment for motorcycles.

As more businesses reexamine their practices and make changes in their marketing mix, the promotional products industry would naturally like to have much of the rearranging done in its favor. This need not be an unrealistic expectation. So while the survey findings here may be surprising, they can prove lucrative for innovative packagers of promotional products solutions. Based on what our respondents told us, we found that:

• Telemarketing is the medium least used in roll-outs, with the exception of high-tech firms.

• Trade association products are the media option most often cited by respondents to introduce new products to pertinent audiences. Among companies large and small, seven out of 10 included trade media (e.g., trade shows, direct mail and industry periodicals) in their roll-out budget. A correlate of this is the finding that respondents’ most-often-cited use of promotional products is to support roll-outs at trade shows.

• The heaviest use of promotion, which includes promotional products, is found among the Other Manufacturing and Services segment. The 59.1 percent usage by companies in that cohort puts promotion in close proximity with trade, mass media and abreast of interactive (internet). Advancing to a higher promotional products usage ratio seems doable, provided that all opportunities are explored (see Table 1).

Table 1: Roll-Out Media Used

	High-Tech	Biotechnology/Healthcare	Other Mfg & Services	All Companies n = 195
Mass Media	17.6%	58.9%	65.9%	51.3%
Trade	92.2%	67.9%	60.2%	70.8%
Interactive	66.7%	48.2%	59.1%	57.9%
Promotion	13.7%	33.9%	59.1%	40.0%
Telemarketing	17.6%	14.3%	10.2%	13.3%

*Since respondents were asked to check all media choices that apply, the sum of percentages is more than 100 percent.

Our follow-up interviews also asked marketing executives if they are considering incorporating media that are different from what they are currently using. Hedeman of World Magnetics told us his firm’s sales involve B2B. “We always seek out new ways to market our products. I’m constantly looking for various [individual] mediums to use, whether it be print or to have a presence on the web or e-mail marketing. We’re certainly open to other avenues.”

Dermit reports Allied High Tech Products “actually increased our marketing budget for print advertising. We’re doing more print advertising than we’ve ever done.” On the other hand, Foshee indicates Guardian Credit Union doesn’t have any plans to change ad media.

Perhaps the greatest threat as well as opportunity for promotional products manufacturers and distributors involves that conglomerate called “interactive.” In terms of sales, this medium is poised to soon overtake everybody (maybe not direct mail just yet). Note that Table 1 shows Interactive was the second-most-mentioned medium for introducing new products (57.9 percent). Those in the promotional products industry are well-advised to maximize the ways that promotional products can be integrated into the online world.

The medium does have an Achilles heel, however. Glut. An e-mail specialist in Media Post says: “Our industry is currently facing one of the most significant threats to its health and existence. What has me concerned is self-inflicted by those of us within the e-mail space: the rampant over-mailing of promotional messages.”

Most Important Media Considerations
To ascertain how marketers prioritize campaign elements in new product launches, we asked them to state the two most important attributes they considered in making their media choices. The seven choices were:

• Reach
• Economy (e.g., cost per impression)
• Impact
• Targetability (to reach specific audiences)
• Ability to create good will for company
• Ability to sustain long-term exposure and impression
• Other

As it turns out, reach wasn’t a prime consideration for those in the survey sample, but targetability, a characteristic often associated with promotional products, is by far respondents’ most important attribute. It was mentioned by 69.2 percent and was the dominant attribute by company size and across the three industry classifications, most notably in the high-tech category. In other words, marketers need to target their messages to the audience that’s most likely to buy. And when the audience is known, promotional merchandise has a slew of advantages—if properly positioned. Once they learn the makeup of customer audiences, promotional products salespeople—the experienced ones anyway—usually have a gut feel for what the end buyer needs. They instinctively know to show Catalog A, not Catalog B. Nevertheless, their aims for targeting can always be enhanced with a thorough understanding of targeting metrics.

Two options associated with memorability—impact and long-term exposure—were also among the choices listed. If new products fail to achieve memorability, they seldom live long enough to become old products. Among the memorability attributes, impact was the most mentioned when respondents made media choices, followed by long-term exposure and then impression, which is tied with economy. Impact and long-term exposure, critical in a new product/service launch, are also qualities commonly associated with promotional products.

Surprisingly, creating good will, another attribute of promotional products, did not rate as an important consideration in planning a new product launch according to survey respondents (see Table 2).

Table 2: Most Important Media Attributes

	Small Companies < $25 Million	Large Companies $25 Million Or More	All Companies n = 195
Reach	24.2%	26.0%	25.1%
Economy	31.6%	26.0%	28.7%
Impact	29.5%	40.0%	34.9%
Targetability	70.5%	68.0%	69.2%
Good Will	7.4%	6.0%	6.7%
Long-Term Exposure, Impressions	31.6%	26.0%	28.7%
Other	2.1%	3.0%	3.0%

Use Of Promotional Products
The findings demonstrate strong agreement that promotional products are widely used and effective. Seven out of 10 respondents say their companies incorporate promotional products in their roll-out programs. The application most frequently cited for promotional items are for tradeshows and for roll-out announcements and as motivators for employees and salespeople. Among industries, the highest incidence of usage is seen in the Other Manufacturing & Services category (see Table 3). Worth noting is that the services sector contains a large number of banks and financial institutions—one of the top customer segments for distributors.

Table 3: Use By Industry

	Percent (n = 136)
High-Tech	24.3%
Biotechnology/Healthcare	27.9%
Other Manufacturing & Services	47.8%

Advertising And Promotion Budgeting/Spending
Only three out of 10 respondents reported ad/promotion budgets of $500,000 or higher (see Table 5).

Table 4: Percent Roll-Out Spend vs. Total Ad Budget

	High-Tech	Biotechnology/Healthcare	Other Manufacturing & Services	All Companies n = 2
Less Than 5%	23.4%	28.8%	31.3%	28.6%
5 – 10%	27.7%	28.8%	31.3%	29.7%
More Than 10%	48.9%	42.3%	37.3%	41.8%

• Most companies (72.3 percent) allocate more than five percent of their total ad/promotion budget to new product roll-outs. The largest segment (more than 41 percent) of that subset allocates more than 10 percent to product launches. There is virtually no difference between small and large companies.

• The strongest expense concentration on new product launches is found among high-tech companies. Almost half of that industry group designates more than 10 percent of their ad/promotion budget to roll-out campaigns (see Table 4).

Table 5: Ad/Promotion Budget

	Percent (n = 197)
Less Than $100,000	36.0%
$100,000 – $499,999	34.0%
$500,000 and up	29.9%

Price Points For Promotional Products
What are the typical price-point ranges for respondents’ companies that buy promotional products for roll-out purposes? Respondents purchasing promotional products tend to prefer inexpensive goods. This is true for both imprinted items and for premiums and incentives.
• For imprinted gifts, low-end items are the preference for an overwhelming majority (73.4 percent) of buyers.
• Price points for premiums and incentives show a fairly even distribution over three price ranges. Slightly more than half (53.7 percent) of respondents report a preference for items costing less than $10 (see Tables 6 and 7).

Table 6: Price Points For Free Imprinted Gifts

	Percent (n = 143)
Less Than $5	73.4%
$5 – $10	18.2%
$11 – $25	7.0%
More Than $25	1.4%

Despite the emphasis on lower-end items, roll-outs can be profitable business for distributors if the volume is sufficient and margins aren’t sacrificed.

Table 7: Price Points For Premiums & Incentives

	Percent (n = 93)
Less Than $5	24.7%
$5 – $10	29.0%
$11 – $25	23.7%
More Than $25	22.6%

Effectiveness Of Promotional Products
Promotional products are viewed as being “very effective” or at least “somewhat effective” by an overwhelming majority (70.3 percent) of purchasers. This figure is consistent with other research conducted for PPAI. Respondents who were not the least bit impressed with their experiences with promotional products constitute only a small subset (5.4 percent), again a typical finding for these studies.

Importance Of Trade Audiences
To introduce new brands, products or services, companies reporting in this survey focused most heavily on trade audiences. Besides industry periodicals and direct mail mentioned previously as trade media examples, exposure is widely provided through tradeshows (71.4 percent). Roll-out announcements and motivators to employees and salespeople (49.0 percent) were the other applications most frequently indicated by respondents (see Table 8).

Table 8: Promotional Products Uses

	Percent (n = 136)
Trade shows	71.4%
Roll-out announcements and motivators to salespeople and employees	49.0%
Sports and community events	28.6%
In-store free gifts and incentives	25.2%
Dealer/retailer incentives	23.8%
Other	17.0%

* Since respondents were asked to check all uses that apply, the sum of percentages exceeds 100 percent.

In our phone follow-ups with marketing professionals, we also asked about how they incorporate imprinted merchandise (i.e., promotional products) in their roll-outs. Allied High Tech Products’ Dermit says her company finds them useful. She mentioned typical items being calendars and coffee mugs. Hedeman at World Magnetics also commonly uses a variety of promotional products, but not so much with roll-outs. He adds his company has been “pretty much satisfied” with items and services received from vendors. Foshee says Guardian Credit Union’s promotional products’ vendor is “basically user-friendly.” Her distributor visits frequently, plus she gets catalogs, e-mails and websites from which to order.

Tracking Results
About two-thirds of respondents say their companies track results obtained from the media they use for roll-out campaigns. Online click-throughs and webinar registrations are the methods most frequently cited, followed by leads gained from tradeshows and events, and coupon/promotional code responses. Other comments about tracking results focused on the following methods:
• Comparing new/lost customers from year to year, comparing type of product being purchased
• Requests for data sheets or white papers from targeted customers
• ROI reports from media companies
• Sales force and customer polls, feedback
• Surveys; perception tracking
Market Testing And Promotional Products Business Potential

The survey also included questions about market testing with the purpose to explore whatever business potential there might be for distributors. Somewhat surprisingly, slightly fewer than half (46.2 percent) of those respondents say their companies undertake actual market testing before committing to a new brand/product/service roll-out. Failure to test the waters through extensive consumer research may seem contrary to prudent marketing practice. However, many line extensions require little or no R & D and the accompanying expenses. Often what is passed off as new is simply a slightly altered version of what someone else has been doing successfully; hence, little risk for a new product.

Considering the large number of respondents to this study who say they don’t market test (although they may invest in inquiries such as customer satisfaction studies), is there an opportunity for distributors to enlarge their receipts from customer research?

Answering the market test question, one respondent stated: “No—but would like to.” For distributors to convert marketers with that mindset, they would have to be convincing. The selling point, of course, is information—securing an edifying picture that every marketer should want. At a time of declining response rates, marketers are fairly desperate for something to juice up participation, using rewards and incentives such as $100 cash, discounts or coupons. Are promotional products a better, less expensive, more efficient choice? Also keep in mind that of the majority of companies that do conduct market testing, about half give incentives or reward participants—an opportunity those in promotional products can build upon.

From Concept To Launch
How long is the typical gestation period (planning, agency consultation, media buying, prepping dealers, retailers, sales force and employees) before launching a new brand/product/service? For the largest group of respondents (40.4 percent), the span from new product concept to launch is three to six months. This is a critical window that media sellers and service vendors have to pursue for a place at the table and a bigger slice of the pie (see Table 9).

Table 9: Roll-Out Preparation Time

	High-Tech	Biotechnology/Health care	Other Manufacturing & Services	All Companies n = 185
Less Than 3 Months	38.0%	13.5%	16.9%	21.6%
3 – 6 Months	30.0%	44.2%	44.6%	40.4%
More Than 6 Months	20.0%	23.1%	25.3%	23.2%
Varies-Nothing Typical	12.0%	19.2%	13.3%	14.6%

A Final Word
As previously noted, the marketing method most respondents chose for their new product and service launches were the trade association offerings. Primarily a business-to-business venue, this includes tradeshows, industry periodicals and direct mail. A correlate of this is the finding that respondents’ most-often-cited use of promotional products is to support roll-outs at tradeshows.

Those marketing executives surveyed generally reported they opted for inexpensive promotional products. Despite the emphasis on lower-end items, roll-outs can be profitable business for distributors if the volume is sufficient and margins aren’t sacrificed.

Brand equity is the sum of all components comprising the reputation value of an organization and what it sells. An element of brand equity is brand expression—an organization’s properties, products, presentations and promotion. Promotional products are indigenous to brand expression. It seems curious that as stewards of brand equity, marketers so often choose options with widely acknowledged tendencies to commoditize the brand—options such as deals, discounts and coupons.

Despite a tough economy, or perhaps because of it, there remain excellent opportunities for promotional products distributors to expand their media market share. But meeting customer needs requires more than simple legwork. Moving beyond the notion of a specific product to providing solutions to marketing problems requires insight and commitment to clearly educate potential buyers of the benefits of promotional products.

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More About Methodology
Translating the potential into the practical required that we contact decision-makers directly in order to get information useful to PPB readers. Data were collected by a mail survey of marketing executives in several selected industries, supplemented by personal interviews. These industries included:
• High-Tech (computers, software, electronics, telecommunications, etc.)—26.5 percent
• Biotechnology & Healthcare (biotechnology, pharmaceutical, chemical, hospitals, medical appliance manufacturing, etc.)—28.6 percent
• Other Manufacturing & Services—44.9 percent

About seven out of 10 respondents held job titles in marketing ranging from executive vice president to administrator. Other survey participants came from communications and public relations, brand management or company ownership. The survey was conducted for PPAI during October and November 2008, supplemented with follow-up interviews in February 2009. The mailing drew 200 usable responses, “usable” meaning the respondents’ organizations actually created new brands, products and services and introduced them to the marketplace as either stand-alones or line extensions. In terms of revenues, the Large Company group (sales of more than $25 million) totaled 48.6 percent of those answering the questionnaire, while the Small Company group (sales less than $25 million in sales) comprised 51.4 percent of respondents.

For more information and help finding promotional products that fit your marketing goals, visit GallantGifts.com