It’s time for promotional products distributors to start thinking about their companies more like the idea factories that ad agencies are, rather than order takers. Their success depends on adopting a Don Draper-esque, Mad Men approach to their business.

In a highly commoditized market – where price rules many buying decisions – creativity is the key to differentiation. And, this specifically describes the environment that ad specialty distributors are operating in today.

A full 60% of distributor companies said in the most recent Counselor State of the Industry survey that their clients shop for promotional products primarily based on price. The definition of a commoditized business? Yep, it’s happening right in your backyard.

Some companies, though, are fighting the price-driven go-to-market model and restructuring their business into an agency model. It’s a business approach where ideas are king, and where they’re becoming marketing consultants for their clients

This tactic, however, means going from “tote bags are on sale this week,” to “we have great ideas to grow your brand at your annual convention.” To support this model, companies need to add creative services, change the way they hire and bill, and transform their corporate culture to support imaginative ideas.

The founder of a world-renowned agency says the good news is promo firms aren’t creating an agency from scratch since they already have existing client relationships. “While they may be thought of as supplying promotional materials, there is an absolute opportunity to evolve and improve their standing in the client’s eyes by being a company that solves problems,” says Paul Venables, chairman of Venables, Bell & Partners, an agency that serves Audi, Reebok, and Google, and was named by Advertising Age as one of the top 10 “A-List” agencies in the country.“The challenge is for these companies to prove through their thinking and their attacking of their client problems that they’re looking at the client’s issues through a lens greater than just ‘what promotional item can I sell them today,’” says Venables.

Want to improve your standing with clients, increase your margins, and create a lasting business model that can be built on in the future? It’s time to adopt the agency approach. Here are the steps some industry companies are taking to do just that.

“Even the ideas that seem ridiculous can take you down a fertile road.”

Mark Ziskind, CSE Three Distributors.Three Agencies

In its 36 years, Top 40 distributor CSE (asi/155807) has evolved to meet the ever-changing needs of the marketplace. What started as an incentive company grew into promotional products, then online catalog programs, and then uniforms and laser capabilities. In 2014, CSE surpassed $40 million in revenue, and recently, it opened operations in Rotterdam, Netherlands, to serve customers in Europe, the Middle East and Africa.

While the company’s structure has changed to support these capabilities, the constant is creativity. “The demand for creativity and the demand for people that can truly help build brands is really critical in this industry,” says Mark Ziskind, chief operating officer of CSE. “The key to the growth of this industry is to become much more brand-focused and less transaction-focused.”

Ziskind once asked at an industry event, “How many people would sell a bowling ball to Mercedes if they asked you?” and almost all hands went up. Instead, an agency would consider the demographics and seek items which better portrayed the luxury of the brand.

It’s an idea-based and consultative approach that has worked for CSE – and that Ziskind believes is necessary for distributors to be successful today. “We have to build brands and not just slap a logo on anything and sell it,” says Ziskind.

The brand-building strategy is one that Mitch Mounger has tried to employ since he started Sunrise Identity out of college in 1993, after selling T-shirts to the Greek system at the University of Washington. Mounger soon realized apparel was a “very crowded competitive landscape” and sought to differentiate his company. First the company expanded into other products but experienced bidding wars.

“I’ve never been a big proponent of selling price,” says Mounger, president & CEO of Sunrise Identity (asi/339206). “We had to morph into an agency-type model where we can charge for our services outside of just the product.”

Mounger sought to be involved in idea generation, remaking Sunrise Identity into a one-stop shop which could provide full marketing campaigns. They built a creative department, began designing websites including a secure IT department to handle confidential data, then started importing directly and opened an office in China.

Overture Premiums & Promotions (asi/288473) began in 2001 with two employees and a “boutique agency” mindset. In an industry with more than 20,000 distributors with access to the same products, Overture decided to distinguish itself by investing in cutting-edge technology including e-commerce and in-house services like screen printing and embroidery. Today the company has 125 employees.

“Our approach has been creativity, stellar account management and delivering valuable products to our customers that are relevant to their brand,” says Tej Shah, vice president of marketing & e-commerce, who adds that in a saturated marketplace creativity has enabled business to skyrocket.
Structure and Charge Like an Agency

CSE has a nine-person creative team, including design and sourcing. Salespeople are relationship-driven. They uncover opportunities and help understand the brand and the company’s goals. They bring the opportunity to the team for brainstorming, then present solutions to clients. This structure has moved branded merchandise to a higher level than “selling stuff.”

Even smaller companies that can’t hire full creative teams can change to an agency structure by ending the “drop off a catalog” approach, say executives at distributor firms who are fully invested in the agency approach. “If you spent more time listening to your clients you might get these nuggets of insight that help you come up with incredibly creative solutions for their challenges,” says Ziskind.

The Sunrise structure includes a department which Mounger believes sets it apart in the minds of its clients and prospects. “We spent a lot of money building a compliance department where we could test products and evaluate our factories and give peace of mind to our customers that the products that they were purchasing from us were not only safe, but they came from a socially-responsible supply chain,” says Mounger.

Mounger points out that the higher overhead of this structure means charging differently too. Instead of bundling service with product, they have a rate card showing line items for import fees, creative, IT and other services.

The agency structure doesn’t have to mean hiring new creative people and adding services right away. Shah recommends changing your approach by simply using a different method of selling by trying to prove to clients the value that promotional products provide. He suggests having an ROI conversation with customers, and elevating the sales and purchasing process by showing customers exactly how promotional products provide a return for their marketing dollars.

Hire Top Talent

Even at Venables, Bell & Partners, recruiting and retaining high-level creative talent is competitive. “In the advertising industry, there is a dearth of talent and the talent is in demand, as it should be,” says Venables. “These are people who solve problems and come up with big ideas. So, it’s a tough game.”

Venables says one option for promo companies is to seek advertising veterans who want out of the “crazy” agency world and into a more stable environment. Another is finding promising young people who showed a flare for creative thinking in college and then training them.

“Whether they’re good writers or had to create videos for projects or did some internship work, tap into people that have the creative sense and unleash them on the issues of the clients,” says Venables.

Creative people are curious. They ask questions. For example, they imagine they’re in the shoes of a person walking a trade show floor, immerse themselves, and come up with unique observations. It’s the opposite of the “we’ve been doing it this way for 25 years” attitude.

Then, it’s incumbent upon agency-driven distributor firms to form a team that’s free to look at problems from new angles. “Giving that free rein is probably the most powerful thing you can do because then what happens is you’ve unleashed them and you’ve given them permission to come back with radical ideas,” says Venables, who adds while some ideas may be too wild to be practical, you’ll often arrive at a solution you never would have found by traditional methods.

His agency lives by the motto, “our intentions are good,” and has found that value of integrity is a “competitive business advantage,” which helps them attract great employees.

CSE seeks sales reps who are coachable, ask the right questions, and listen well so they can learn about the target audience and what the customer wants to accomplish. “We’re here to help them grow their business, build their brand, motivate their employees, and get better engagement with everybody involved with the brand,” says Ziskind. “That’s our role, not selling stuff.”

To start building a creative staff that can be vital for an agency atmosphere, Shah suggest beginning with a talented in-house graphic designer with solid product knowledge. “Creative people that understand branding and messaging and can really do wonderful things with the clients’ brand are more important than anything,” he says.

Foster a Creative Culture

Mounger says that while you can tinker with operational excellence, corporate culture is a lot harder to get right. Sunrise has earned “buy in” from employees because it is transparent, shares goals and financial results, and encourages them to challenge decisions. Also, Sunrise tries to target clients that want to grow partnerships, rather than just purchase products.

“One of our corporate values is to work with customers that value what we bring to the table,” says Mounger. “So, over time, we’ve had to fire customers that don’t share that value and treat us like regular product salesmen – trunk-slammers, as we call them in the industry.”

Employees and customers at CSE get a big hint about their corporate culture as soon as they walk in the door, where they are greeted by a 15-foot-high bright red Adirondack chair. In the conference rooms, named after movies from The Matrix to Goodfellas, there are no “stupid” ideas in brainstorming sessions.

“There’s no real bad idea because even the ideas that seem ridiculous can take you down a really intriguing and fertile road,” says Ziskind.

Every two months, CSE holds an internal town hall meeting where employees share successes and focus on priorities for the coming months. New clients get more than a presentation – they are welcomed with a building tour, where they meet everyone from the warehouse packers to IT people and the creative team so they “get a feeling for the people and their passion.” They see all facets of the in-house manufacturing, from embroidery to laser engraving. Ziskind says the result is clients see passionate and committed employees

“There are two things we really sell: creativity and service,” says Ziskind. “So, if you can do a good job helping people understand how your creativity will help drive their brand and they get this vibe for service orientation in a highly, highly commoditized industry, those are two certainly differentiating factors.”

A creative environment is best nurtured with different rules than that of the traditional workplace. The best culture for creative types is not nine to five. They thrive with fewer policies and rules, less office politics and more flex time. Venables says his creatives are “never here.” Instead, they may be at a coffee shop or working out, but their brains are still going.

“You don’t quite shut creativity off, especially if you have a juicy problem to solve, you’re going to keep thinking about it,” says Venables.

Market New Capabilities

Once the creative environment is set and a team is on board to execute it, the key step is approaching clients in a vastly different, less transactional way. Market to existing customers with a meeting to explain how you’ve changed your organization to better meet their needs.

Take clients to coffee to pick their brain, not sell to them. Ask questions to expand your knowledge of their customers and what will appeal to them. Be proactive by asking what campaigns are coming up. Learn their budget, know their annual calendar and which events and trade shows matter most. Let clients know you’d like to get into the pipeline earlier to better solve their issues.

Venables points out that it’s flattering to have that conversation with existing clients where you tell them you’re developing new services and would love their advice and insight on the best way to help them with their challenges or marketing campaigns moving forward.

“A lot of people want to have that conversation because you’re doing it for the right reasons,” says Venables. “You’re trying to help clients minimize pain, reduce waste and be more effective.”

The point of the conversation is to shift from selling to being a strategic marketing partner. “Get into the conversation with clients further upstream where you’re tackling the problem with them and you’re shedding your bias and you’re dropping your sales pitch and you’re really listening to and reacting to what that client might need,” says Venables.

And, to pursue new customers with the agency business model, do extra research up front before even speaking to them. Since everyone is calling on Fortune 500 companies, take the time to tailor your story, break through the barrage of sales calls they receive, and ensure promo products are relevant for their business.

“Be more strategic and less transaction oriented – that would be a huge step forward for the industry,” says Ziskind. “Our challenge and our job is to make sure it plays a bigger role in the marketing mix by adding value. We need to grow this category and not have it be something where the brand people look down their noses at it.”– Email: susan@susantspringer.com