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Promotional Products - A changing industry - Chapter Two.

Monday, 31 May 2010

 

 

Welcome back, we hope that our previous article on why the changing perceptions of promotional products was useful and provided some insight into the changing industry.

Taking up where we left off, we identified that there was a certain recipe for disaster when choosing a promotional product supplier to engage your marketing initiatives.  That recipe was to use price as the defining reason behind selection.

The answer is again one that is pretty easy to understand.

With increased competition also comes a change in the fundamentals of the market.

In an infant market life is great for the major players.  Margins are high and repeat patronage is a given through the lack of viable alternatives.  When competitors move into these markets, you will often find aggressive pricing structures as they attempt to cement themselves a viable position.  In the short term this is of great benefit for the consumer, however it will inevitably lead to an adverse effect on an industry, as the aggressive nature of competition takes hold.

With the lowering of prices, the tightening of margins inevitably becomes an issue that needs to be addressed.  It is an unsustainable situation to fight purely on price for extended periods of time, eventually something has to give.  For the promotional products industry it has been more product quality than anything else.

At the end of the day, if you use cheaper prices to gain market share, you will surely lose it when the prices go up.  That is where the inherent problem lies.  Many wholesalers have sacrificed product quality to increase their margins to maintain market share.

So to highlight exactly why using price is a hit and miss option, I’ll give you a simple observation that I like to use, using the example of promotional pens.   I can show you 4 pens that look exactly the same, that come from different domestic suppliers, which are produced in different countries, which have varying degrees of quality and are supplied at dramatically different price points. 

Obviously when you can see a 50% reduction in cost from one supplier over the other and the pens look exactly the same, you think the selection process is obvious.  Well not really, as the change in price is most closely correlated to a drop in product quality, not margins, overheads, availability or economies of scale, which would be an acceptable basis for choice.

What is the point of selecting a product that will fall apart the day or week after it’s unpacked?  Obviously none, so it’s the guidance required by your promotional product supplier that will help you navigate the mine field that can be promotional products.

So the reality is that whilst increased competition has greatly enhanced the promotional products industry as a whole, it has also opened a very large door of failure that your amateur promotional product user can easily walk though.

So the question stemming from this information is, how do you decide on a supplier and how can you protect yourself from the pitfalls discussed?

Well that is exactly what we plan to address in our next post where we look into the relative strengths and weaknesses of promotional product suppliers and how to choose one that most closely matches your needs.

No one promotional product supplier is suited to every organisation or industry.

Untill then take it easy, we'll be back soon...

Related Tags

Promotional Product Industry - Australian History

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