Special Report: Premiums and Incentives: Retailers are getting into the game

Premiums market often helps retailers boost the bottom lineTraditionally, the premium and incentive market in Canada has been dominated by hundreds of small-scale suppliers and a handful of agencies that either source motivational products specific to a marketer's request or package...

Premiums market often helps retailers boost the bottom line

Traditionally, the premium and incentive market in Canada has been dominated by hundreds of small-scale suppliers and a handful of agencies that either source motivational products specific to a marketer’s request or package products from a variety of sources into an umbrella program.

In the past couple of years, however, retailers – always on the lookout for ways to bolster sales – have started vying for the chance to supply product to marketers who want to motivate their employees or reward their customers.

And there is every indication those retailers have made the right move.

At Consumers Distributing, for example, sales last year of premium and incentive products grew to about $2.8 million, up from just $800,000 in 1990, says Colin Brownlie, director of the retailer’s p&i division.

‘I believe it’s a thriving business,’ says Brownlie, who anticipates next year’s sales will be in the neighborhood of $5.4 million.

‘In the long term, this division will grow so big it will have to become a separate entity,’ he says.

Ironically, Brownlie credits corporate downsizing for his division’s burgeoning sales.

Consumers provides redeemable certificates and merchandise for companies that want to reward their employees for good work, increased sales, or just about anything else they feel deserves recognition.

Brownlie believes companies that shrank during the recession see the wisdom in treating well those employees that remain.

‘You’ve got to motivate the people that are still there with incentives or cash awards or something,’ he says.

Consumers has always catered to companies offering incentives to their employees, but the company decided two years ago to create a specific division after a business study showed the possibility of even greater sales in this area.

Under Brownlie, who was hired last September, the two-member division has branched out to provide premiums for three types of programs: sales and marketing promotions, health and safety initiatives, and simple employee motivation.

Brownlie says incentive programs are particularly useful for inspiring sales forces.

‘You’ve got to motivate them with something more than just the traditional, with something they might not buy themselves – a certificate from someone like [Consumers,] where it doesn’t cost anybody to use it,’ he says.

Consumers has supplied incentive programs to Bell Mobility, Chrysler Canada, Glidden Paints, Kraft General Foods, Cotton Ginny, and many others.

The retailer will provide clients with custom printed catalogues, designed in-house.

Brownlie says many of the incentives are sales-driven, using as an example the corner store owner who gets a set of dishes for ordering eight cases of Kraft food, as opposed to ordering his regular six and getting nothing.

Chrysler Canada awards its associates on the sales floor with a $200 gift certificate, on top of the commission, when they sell their first car.

Consumers is not alone in recognizing the marketing opportunities in supplying incentive programs.

Kitchener, Ont.-based specialty meat retailers M&M Meat Shops has also established a program to supply companies with product gift certificates.

The store supplies gift certificates in $5, $10, and $25 denominations, which come in envelopes labelled with the company’s name.

With 138 stores spread across much of Canada, and a line of products ranging from family packs of steaks to vegetarian lasagnas and gourmet desserts, m&m is prepared to satisfy a certificate holder from any company, with any tastes.

‘I bill it as something everybody needs, and they can choose what they want,’ says Gail Chapman, corporate sales co-ordinator for m&m.

‘[The companies] usually know their business well enough to know what type of incentive would work best,’ Chapman says.

She says some companies use incentives as often as monthly, while others only once or twice per year, usually in the busy pre-Christmas weeks, or during the barbecue months of July and August.

Unlike Brownlie, Chapman is hesitant to credit the recession with an upturn in the incentives business.

‘It seems that during that time incentive programs were something people let slide,’ she says.

‘It’s been quite successful. But let’s just say we’d like to see it more successful.’

Chapman markets the service at the Motivational Marketing Expo, and through targeted mailers, but she also finds that these days a number of clients are coming to her.

Linda Maynard, administrative manager for Superior Rustproofing in the Toronto/Etobicoke area, uses the m&m certificates to reward sales staff who have reached certain quotas.

‘It’s something everyone can use,’ Maynard says. ‘It’s been very successful. Everyone likes to see some reward.’

Canadian department store Eaton’s’ long history of marketing gift certificates to consumers has evolved into a thriving corporate incentive program.

‘Businesses have always used them, but not to the degree they have in the past three or four years,’ says Michael Kodama, marketing manager of corporate programs at Eaton’s.

Kodama says that during the recession many businesses downsized and cut corners but still wanted to motivate their best performers, in spite of not being able to give them salary increases.

‘If you don’t give your top performer a reason to stay, he/she could go to your competition,’ he says. ‘By giving them remuneration of some sort, it gives them reason to stay.’

Eaton’s certificates allow employers to avoid the merchandise selection process, transportation and storage fees, and they do not have to deal with returns for damaged merchandise.

‘The advantage for the giver is that there’s less administration,’ Kodama says. ‘If there’s any problem, we’ll deal with it.’

He also stresses the flexibility of being able to choose from the vast array of merchandise at Eaton’s, as well as services available through the company’s in-store beauty salons, optical departments and travel agents.

The gift certificates come in denominations of $5, $10, $20, $50, and $100, and discounts are available to companies that buy in bulk.

Not surprisingly, hardware, houseware, auto-part and sports equipment retailer Canadian Tire also has a large certificate program in place that caters to corporate clients.

‘Over the years, we typically have not had a focus on non-retailing activities. We started looking at other ways of enhancing the total sales equation,’ says Eymbert Vaandering, manager of Canadian Tire’s retail marketing group.

‘Knowing that there’s a developing market in [incentives] of hundreds of millions of dollars per year, Canadian Tire saw itself as a natural for people who don’t want to give out cash bonuses,’ Vaandering says.

A formal strategy for an incentive program was developed in 1993, which included making Canadian Tire’s existing certificates more consumer-friendly.

Now, the certificates are pre-printed and pre-denominated in $5, $10, $20, $50 and $100 amounts. Similar to Canadian Tire’s cash bonus coupons, in that they also have Sandy McTire’s face emblazoned on one side, the certificates also contain steel imprints to prevent counterfeiting.

Smaller orders can be placed at local stores, while volume purchases are made through Canadian Tire’s corporate headquarters where volume discounts can be negotiated, and customized envelopes and brochures can be arranged.

While sales of corporate gift certificates do not yet make much of an impact on Canadian Tire’s total annual sales of about $3.5 billion, they certainly have proved themselves worth trying.

Vaandering says certificate-based sales tripled in the first year alone, and he expects as much as another 50% increase in 1995.

Another advantage is that the certificates ‘get the name out there’ and encourage recipients to visit the store.

‘It’s seems a good idea for everyone,’ says Gordon Jacques, purchasing supervisor at the Falconbridge nickel mine in Sudbury, Ont.

At the plant, various incentives, including Canadian Tire certificates, are given to employees for avoiding accidents.

Staff get a certificate automatically once a month if there have been no accidents in their department. If there is an accident, they go three months without.

‘When nickle prices dropped off the market about a year ago there was a suggestion of not doing this anymore,’ says an amused Jacques.

‘There was one hell of an uprising, and we did not discontinue,’ he says.