Key Takeaways
- As marketing budgets tighten, distributors can demonstrate promo’s measurable ROI by positioning themselves as strategic partners.
- Strong client relationships, data-driven insights and creative, budget-conscious solutions help distributors preserve business.
For Bryan Goltzman, an inexpensive product can still have value.
The founder and president of Liquid Screen Design (asi/254663) says one of the promo campaigns he’s most proud of was for a university with a very limited budget. He and his team created a program that distributed eyeglass wipes to the student body of 20,000-30,000. With most Americans owning either a pair of eyeglasses or sunglasses, this item was inexpensive to produce but incredibly useful.
But Goltzman and his team took it a step further: Instead of printing a spot logo on the piece, they created a map of the campus that included different buildings.
“We consult clients on which products make sense for what they’re trying to achieve, even if their budgets don’t necessarily allow for the biggest expense,” he explains. “If it’s good marketing, it doesn’t necessarily matter how much it costs.”
Inflated Numbers
While average order value increased by 5% for distributors overall, larger distributors experienced a 9% decline, driven in part by steep tariff increases. And even for small and midsize distributors, the picture isn’t entirely positive. Given that distributors raised prices by an average of 11% last year, much of the growth in order value simply reflected price increases rather than meaningful gains to the bottom line.
Average Distributor Order Value
That mantra of “doing more with less” has permeated the promo industry. There’s no shortage of potential threats to a client’s marketing budget; the latest include ongoing tariff uncertainty, geopolitical conflict and inflationary pressures that are fueling buyer hesitancy.
Chris McKee, chief revenue officer at Counselor Top 40 distributor Geiger (asi/202900), says the company’s sales were high at the start of the year, but those numbers decreased when the Iran war started in late February. “Clients don’t like uncertainty,” he notes. “And I think people are holding off for a little bit. They’re saying, ‘let’s just see what happens. Let’s see how this thing pans out.’”
In addition, rising prices mean promo merch budgets simply don’t stretch as far.
Under all that mounting pressure on marketing initiatives, how can distributors protect client spend?
“It’s getting clients to shift from asking, ‘What’s the cost?’ to ‘What’s the outcome?’”Jennifer McCauliffe, ePromos (asi/188515)
McKee, for one, says it comes down to good customer service. “Some of this is so basic, but you have to remember to be proactive and communicate with your client, just talk about what’s going on,” he explains.
There can often be a tendency to avoid difficult issues like tariffs and wars. But McKee says distributors are doing themselves a disservice by not having conversations with their clients.
“That’s what humans do,” he says. “When there’s an issue, we talk about it. It’s the same thing with your customers. By doing so, you go from being a client’s ‘swag person’ to a valuable partner.”
Todd Bold, chief revenue officer at Counselor Top 40 distributor ePromos Promotional Products (asi/188515), adds that distributors should make a habit of showing their value every day, helping promotional products earn a reputation as a marketing vehicle rather than a discretionary giveaway.
“When we’re conveying that message to our clients, we challenge them to recognize how many impressions that T-shirt makes versus a print ad and a billboard or a digital ad,” he says. “Yes, those things get impressions, but someone might wear a T-shirt for 20 years.”
Marginal Decline
Distributor margins declined for the first time since 2020, with an average profit margin sliding from 37.8% to 37.1%. The impact was especially significant for extra-large firms, whose margins dipped by over two percentage points. According to Jake Himelstein, president of Counselor Top 40 distributor BAMKO (asi/131431) and a member of the Counselor Power 50, the promo industry was affected due to many factors. “Across the industry, several things hit at once: Tariffs and supplier increases pushed product costs up faster than many distributors could pass them through,” he explains. “Competition stayed intense, clients negotiated harder and program mix shifted toward lower-margin categories.” Himelstein notes that BAMKO was able to mitigate the impact by “sourcing smarter, qualifying alternatives quickly when costs moved and being disciplined about passing through the increases we had to absorb on the cost side.”
Average Distributor Profit Margin
That gospel is an especially important one to preach right now as distributors become increasingly vulnerable to changes in marketing spend. “It’s getting them to shift from asking, ‘What’s the cost?’ to ‘What’s the outcome?’ and ‘What does this investment deliver?’” adds ePromos SVP of Sales Jennifer McCauliffe. “And if you can change their thinking, the merchandise line item isn’t going to be the first thing cut.”
Ann Vidro, who co-owns Michigan-based Creative Studio Promotions (asi/170976) alongside her business partner Menda Wright, says there’s a way to spin it so that promo can be a value add for clients who are struggling financially. For example, companies “going through layoffs want to boost morale with their current employees, so they’re giving them promo.”
Profit Pressures
From client base growth to employee recruitment, distributors are facing their fair share of issues. Profitability remains a heightened pain point – more than one in five distributors (22%) named it their top challenge, a figure that increased for the second year in a row. Product price increases and heightened operating expenses (particularly around technology and data security) are having an impact. Also, “some clients are seeing their finance departments really put scrutiny around dollars and justify spend,” says Todd Bold, chief revenue officer at Counselor Top 40 distributor ePromos (asi/188515). “For us, it’s all about showing value and helping them quantify the ROI of spending with us.”
Most Difficult Challenge for Distributors in Upcoming Year
Wright and Vidro, who were named Counselor’s Distributor Entrepreneurs of the Year in 2021, have invested a lot of money up front in sustainability certifications like EcoVadis and tech that offers visibility for clients on what’s selling and trending, which allows them to better track ROI. Those efforts have paid off: One of Creative Studio Promos’ clients just renewed with the firm for five more years due to the data capabilities it provides.
Investing in the relationship, adds Wright, is crucial. She routinely hosts clients for lunch-and-learns and other events, noting that customers feel more comfortable sharing their pain points in person. “Despite the rise of tech and AI, the in-person relationships that can be built around a conference room table or at a restaurant lunch table are just the best,” Wright says. “We always say, ‘Bring them in and feed them and you’ve got a client for life.’”