Who is Buying Promotional Products ? Promotional Products

POUR BUSINESS IS PROMOTING YOUR BUSINESS

1. Pfizer � $85.7 million
For Pfizer, ad specialties aren�t an afterthought by any means. Of the Top 100 end-buyers, this pharmaceutical firm ranks No. 1 � according to our estimates, it spent approximately $86 million on promotional products in 1999.

Whether it�s to introduce a new drug to the medical community, increase market share for a particular product or thank buyers and supporters, Pfizer uses a variety of promotional items.
For instance, to generate interest in the release of the antibiotic Zithromax in a new grape-flavored oral suspension for children, Pfizer developed a promotional campaign built around Max the Zithromax Zebra. Logoed �Max� plush toys, puppets, stethoscope clip-ons, charts and children�s books featuring the character were handed out to pediatricians� offices for use in examination and waiting rooms.

�As a buyer for Pfizer Premium in supporting our top sales force, we strive for excellence in achieving the top- quality promotional items at the best price,� says Marianne Giangreco, purchasing manager for Pfizer. In 1999 alone, 39% of Pfizer�s $16 billion in revenues went to marketing and administrative expenses.

With its three business segments � health care, animal health and consumer health care � Pfizer has developed five of the world�s 20 top-selling medicines. Also, nine of Pfizer�s medicines are No. 1 in their therapeutic class in the U.S. market, and eight will earn revenues of more than $1 billion globally this year.

Today, Pfizer�s Global Research and Development continues to build from a foundation of remarkable success. In 1998, Forbes magazine named it �Company of the Year,� and Pfizer made this year�s Fortune list of the Best Companies to Work For (No. 20 overall and best in the pharmaceutical industry).

And while Viagra has been one of its most successful drugs � in the first quarter of 2000, worldwide sales increased 73% to $333 million � some of Pfizer�s greatest discoveries are yet to come. Sources say Pfizer is developing new treatments designed to control and/or eliminate illnesses such as heart disease, schizophrenia and even some of the most fatal types of
cancer � colon, breast and pancreas. If this is true, just think of the major role promotional products will play in Pfizer�s future marketing strategies.

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2. General Motors � $80.8 million
General Motors Corp. (GM) is the world�s top producer of cars and trucks and ranks number one in the Fortune 500. Its 1999 sales exceeded $176 billion, resulting in a net income of $6 billion.
Its car brands include: Buick, Cadillac, Chevrolet, GMC, Oldsmobile, Pontiac, Saab, and Saturn.

The company also manufactures cars through its Holden & Opel and Vauxhall units, and has affiliations with Isuzu and Suzuki. Besides cars, GM has several other divisions and subsidiaries, including Hughes Electronics, Allison Transmission, GM Locomotive, Delphi Automotive Systems, AMI Instruments Inc., Delco Defense Systems Operations, Delphi Delco Electronics Systems, Delphi Harrison Thermal Systems, General Motors Corp./Powertrain, HRL Laboratories, L.L.C., Hughes Network Systems, Hughes Space & Communications Co., Lexel Imaging Systems, Inc., Packard Hughes Interconnect, Rockwell Collins Passenger Systems and Spectrolab, Inc. and GMAC financing.

The company, which employs nearly 400,000, ranked second on The Counselor�s list of the Top 100 End-Buyers. Our calculations put GM�s promotional products spending at nearly $81 million in 1999.

GM uses promotional products for a variety of purposes, both internally and in campaigns aimed at consumers. For example, it recently conducted a joint-venture promotion with MP3, the online
Music purveyor. Free CDs were given to people who test-drove a new Buick. The specially-created disc featured 15 artists who regularly post their music on the MP3 Web site.

The company has also created a separate division that focuses primarily on promotions. GM R*Works is GM�s in-house promotions, events and sponsorship marketing company. In 1999, the company conducted over 1,000 events. GM R*Works uses a variety of vendor sources for a number of sales- and marketing-related tasks, including direct mail, display services, incentive programs, premiums, promotional products and signage.

Partnerships and joint ventures are just some of the other activities for which the company uses promotional products. For example, it recently teamed with Warner Bros. to promote child safety for owners of its minivans. Specifically, Chevy Venture minivans and Warner Bros. held a �VentureTainment� program where premium packets were given to owners. The packets included headphones (the vans are equipped with a video system), keytags and activity books for children, among other items.

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3. AT&T � $58.5 million
As almost everyone past pre-school age knows, AT&T is one of the world�s largest telecommunications and data-processing firms, servicing businesses, consumers and government. Founded in 1885, it employs 160,000 internationally and has annual revenues of approximately $62 billion. The former parent company of the Bell Telephone System, AT&T was � as a result of an antitrust suit by the U.S. Government � ordered to divest itself of all Bell
companies.

AT&T today consists of numerous divisions, including, but not limited to, AT&T Labs, AT&T Broadband LLC, AT&T Latin America, GRC International, Net2Phone and AT&T Wireless Group. In addition to telephone communication (it handled 88.5 billion calls in 1999; an average of 280 million every day), AT&T�s other services include digital wireless networks, Internet access/technology, data services, outsourcing, consulting and network integration.

The firm has used imprinted products for years in a variety of ways. It now does so on a global scale, with different products being used for varied purposes in its many divisions. These include consumer and business mailings (not done as frequently today as in the past); employee incentives/rewards; gifts to key clients and/or prospectives; trade and consumer-oriented show giveaways (remember those plastic Princess phone key chains? It was a �key� part of the marketing mix even all those years ago); wearables and other items for events it sponsors either fully or partially; and company stores.

Its most recent major foray was a selection of specially-imprinted products tying into its support of the 2000 Summer Olympic Games in Sydney, Australia. The items bore both the AT&T logo and Olympics logo, and were made available to AT&T employees worldwide.

�It�s difficult to realize what the company receives in return for our use of promotional products,� says AT&T spokesperson Burke Stinson. �But when you�re known as well as we are, when you�re in the Top 10 of the Fortune 500, there are certain expectations. If we didn�t use an assortment of promotional items, people would wonder why.

�At minimum, they absolutely serve to place a reminder in the hand of the recipient and to expose countless other people to our name and logo when they see others wearing the T-shirt, drinking from the mug or handing over their car keys to a parking attendant.�

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4. PepsiCo � $52.6 million
PepsiCo Inc. is one of the most successful consumer products companies in the world, with over $20 billion in net sales during 1999. The brands that come out of its divisions � Pepsi-Cola Company, Frito-Lay Company and Tropicana Products Inc. � are household names. Such success in sales and recognition is in no small part due to the aggressive promotion the company delivers.

In 1996, Pepsi-Cola put large-scale, reward programs on the map with its historically unmatched �Pepsi Stuff� campaign. In 2000, it�s revisiting the theme with a new version, PepsiStuff.com � an online/offline promotion developed in conjunction with Yahoo! Inc.

Launched in August, the Web site registered one million users in the first month, and the promotion is scheduled to run through the end of December. The program enables consumers to earn points via an under-the-cap promotion appearing on 1.5 billion single-serve bottles of Pepsi-Cola products.

Points can be redeemed for awards such a digital music files and video games, discounts from promotional partners such as Foot Locker, GoJane.com and Global Sports, and Pepsi-logoed merchandise. �PepiStuff.com enables consumers everywhere to experience a familiar program in a new and innovative way,� says Anil Singh, chief sales and marketing officer, Yahoo! Inc.

Pepsi spokesperson Dave Cheeco agrees, pointing to the way the campaign has evolved to incorporate a new range of incentive products � such as the digital music files and video games. �More products are becoming available and are geared toward many types of audiences,� he says, adding that there�s also a place for imprinted products. �Even though we think the trend is in premium items, moving away from [logoed] promotional items, there is still an important
supporting role. Promotional products are good for us as far as getting our logo out there. The
visibility is important.�

A few other recent campaigns/sponsorships that keep PepsiCo one of the Top 10 buyers of promotional products include a five-year agreement signed with NASCAR driver Jeff Gordon and Hendrick Motorsports; a Pepsi/Frito-Lay �Halloween Party� promotion involving Scooby-Doo plush toys; Frito-Lay�s Cracker Jack �Nothing But Nuts� series of baseball prizes; a Pepsi World Series Sweepstakes for Major League Baseball gear; and a new online Pepsi-Cola store of logoed merchandise.

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5. Procter & Gamble � $52.2 million
Long considered a marketing powerhouse and the world�s leading manufacturer of consumer products, Procter & Gamble should be as familiar as sorting clothes on laundry day, changing your kid�s diaper or powdering your nose. Using an array of advertising, P&G markets over 300 products in categories like laundry and cleaning, paper goods, beauty care, food/beverages and health care to nearly 5 billion consumers worldwide.

Though it has many firmly entrenched brands like Tide, Bounty and Pampers, Cincinnati-based P&G prides itself on product innovation. It�s had several successful product introductions in the last year, including the Reflect.com beauty care Web site, Swiffer cleaning aids, Febreze
odor elimination products and Dryel at-home dry cleaning system. The company�s recent acquisition of pet food manufacturer The Iams Co. is expected to add approximately 2% sales growth in the fiscal year 2000.

Promotional change is in the air at P&G: Industry experts say the company�s focus seems to be shifting from expensive mass advertising, like TV commercials, to more targeted consumer communication approaches and in-store advertising. New advertising strategies will no doubt involve increased use of promotional merchandise.

For instance, P&G�s push of its new Physique hair-care products earmarked a higher percentage of its advertising budget for promotions than for television or print ads. �We still think that there�s something important about mass advertising, but there�s also something to be learned from a more targeted approach,� says Tracey Long, spokesperson for P&G. �Our full compliment of brands are looking to find the right balance. Physique has focused better than 50% of its marketing plan on non-traditional avenues like our �Hurricane� parties, leveraging our Internet site and getting the word out to encourage people to sign up for Club Physique.�

Physique used direct mail and a Web-based �viral� e-mail promotion to create brand awareness and generate trial of the product. At parties held in four cities, free samples and Physique logoed promotional products like T-shirts, beach towels, beach balls and cosmetic cases were awarded during interactive contests.

�For Physique as a brand it�s very helpful to have fun items that are interactive for our target group,� says Long. �How do we reach them in different ways that are provocative, that are interactive? Promotional items certainly provide us with that opportunity.�

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6. Sears � $45.2 million
As part of a multi-faceted corporate strategy to revamp its image to one that�s hip, haute and techno-savvy, Hoffman Estates, IL-based Sears, Roebuck & Co. has plugged into the power of promotional products, spending just over $45 million in this industry.

Paramus, NJ-based Einson Freeman is one of the lead sales promotions agencies that works with Sears, and certainly one of the largest, handling between 50 to 100 promotions of varying size and scope each year. Senior project manager Jeff Shapiro says that Einson Freeman is responsible for conceptualizing and implementing the retailer�s sweepstakes, games, gift-with-purchase and overall marketing strategies. Ogilvy and Mather, Einson Freeman�s sister company, handles Sears� radio, TV and print advertising.

�We just worked with Sears for their local sponsorship in the �Taste of Chicago,� and we�ll also do promotions targeting the Black and Hispanic communities in certain geographic areas,� says Shapiro. �Then there are the full-blown national campaigns, which involve structuring programs around different Sears departments.�

A lot of the company�s marketing and promotion success lies in joint ventures with such corporate powerhouses as Disney, AOL and Levi�s. Sears had its hand in such fruitful promotions as this year�s sponsorship of pop sensation Christina Aguilera�s 35-city tour.

Designed to make Sears and Levi�s, the tour�s co-sponsors, the epitome of back-to-school cool and the ultimate teen shopping destination, the marketing campaign offered Aguilera�s fans an exclusive, available-with-purchase CD featuring previously unreleased and newly-remixed material � a new disc each week for three weeks. In addition, �Christina Boutiques� were heavily promoted and set up in stores to carry T-shirts, back-to-school supplies and accessories bearing the singer�s image and tour logo.

Shapiro recounts another immensely successful gift-with-purchase promotion in which imprinted hammocks were given to customers who bought certain products in Sears� Lawn & Garden departments. He also notes that holidays such as Mother�s Day and Father�s Day are the perfect anchor for a gift-with-purchase program. �We pick products that relate to the theme of the holiday and are specific to the consumer group we�re targeting,� he explains.

Based on his 12-year tenure with Einson Freeman, and his six years working with the Sears account, Shapiro says he�s a firm believer in the effectiveness of promotional products and acknowledges their role in the many successful Sears promotions he�s been involved with that have surpassed expectations. �It�s pretty simple,� Shapiro says. �I use promotional products because they definitely work.�

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7. IBM � $45.1 million
Talk about power. On October 18, the Dow Jones Industrial Average dipped below 10,000, and analysts blamed IBM. The company earnings report � released the day before � showed third quarter revenues down more than had been previously predicted.

Investors feared this was a poor bellweather for tech companies. When IBM software revenues fell in September, the company still reported that earnings met expectations. This time, however, the lower-than-expected sales did them in. The Dow finished the day at 9,975.02, and shares for IBM closed at $95.50 � down $17.50 from that morning�s opening price.

Yet IBM�s resilience and ability to move forward has proven successful throughout its nearly 90 years in business. It builds new and different business products and usually purchases products to promote them.

Example: When The Counselor profiled IBM in a recent issue, Jeff Hales, then marketing communications representative at IBM PC Direct, noted, �We use promotional items to create excitement and make less tangible products appear tangible.�

When IBM teamed up with software developer J.D. Edwards to provide computer programs for the petroleum industry, it targeted a promotion at CEOs who needed reassurance that the technology would be installed without affecting overall efficiency.

Key execs were sent a set of three imprinted juggling balls. They came packed in a box that opened to reveal two flaps. On one flap the copy read, �With the IBM and J.D. Edwards complete petroleum solution, juggling everything you have to do is easier than ever.� On the other flap the thought continued with, �Wouldn't you like to have a system that guarantees no one drops the ball?�

Each ball bore the IBM and J.D. Edwards names on one side, and a different slogan on the reverse. One read, �Work smarter,� another, �Respond faster� and the third, �Be more competitive.�

Many CEOs displayed the balls on their desks. And more importantly, the sales force scheduled a record number of interviews to talk about and sell the software.

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8. Intel � $44.7 million
The world of semiconductors is ruled with a silicon fist by Intel, supplier of 80% of the PC market, easily making it the No. 1 chip maker in the world with $29 billion in sales in 1999. Forbes magazine has called it the greatest manufacturer since the U.S. Government during Wold War II, �throwing up billion-dollar fabricating plants the way McDonald�s opens restaurants.�

Intel�s primary products are the Pentium and Celeron microprocessors that have powered PCs since the early 1980s and whose largest customers are Compaq and Dell. Its latest chip, XScale, is touted as the first of a future generation used to power hand-held devices such as computers and mobile phones with but a single AA battery. Intel is also expanding outside of the semiconductor market into network services and the �communication infrastructure.�

Intel relies heavily on advertising to help keep itself in the public eye. A vital role in that effort is played by our industry, as the firm�s 8th-place finish (at $44.7 million) on this year�s inaugural list would suggest. �Intel�s use of high quality promotional merchandise is one way we broaden the awareness and image of the Intel brand,� says John Travis, Intel�s worldwide consumer promotions director.

Like many of today�s top companies, Intel has campaigned to brand its name, even going a step further than most with the creation of its now familiar �Intel Inside� five-note sound logo. A 1997 TV spot used �The Bunny People� � characters in the shiny technician suits � to promote the release of its Pentium II chip. Currently it�s unveiling a series of commercials featuring the performance art organization Blue Man Group to showcase the innovative ways to explore the Internet with its Pentium III processor.

While most PC makers� profit margins reach only 25%, Intel�s fourth quarter results from last year were an amazing 61%. A contributing factor is its success over the Internet, where it sells $1 billion worth of chips each month, making it the largest e-commerce company in the world.

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9. Philip Morris � $44.0 million
Not many companies have the problems spending their advertising dollars that Philip Morris does. In addition to having its cigarette pitches banned from the airwaves for the past three decades, the firm is forbidden from using promotional products for that purpose as well, starting a little more than a year ago.

So with $2.2 billion to spend � including $843 million in �unmeasured� non-traditional media � you might think Philip Morris would be throwing up its promotional hands.

But just when the tobacco/food products conglomerate should be at its most defensive, it has attacked instead. Realizing it has a controversial product, Philip Morris is using its promotional dime to tell its side of the story. Its various cigarette brands � which include Marlboro, Benson & Hedges and Virginia Slims � are for adults who want to smoke, the company insists in its advertising. It doesn�t target kids and is fully committed to the recent settlement with the various state governments where tobacco companies agreed to forgo sports sponsorships, large billboards and promotional products for its cigarette brands.

However, Philip Morris is using promotional products to help tell another part of its story. Example: The company has been distributing packets of material and promotional products in the �We Card� campaign that encourages stores to check IDs. �When we talk about those programs, it�s a different way of communicating,� says Tom Ryan, spokesman for Philip Morris USA. �We have undertaken those projects to communicate more about who we are.�

Of course, there�s a lot that Philip Morris has no need to apologize for. The conglomerate owns Kraft brand foods, Miller beers, Post cereals, Maxwell House coffees, Altoids mints and many other household names. Each brand is supported by an assortment of promotions, many of which naturally feature promotional products, given the company�s long and successful history with imprinted merchandise.

For example, the Philip Morris Gateway program to improve adult literacy used logoed freezer mugs, AM-FM radios and watches as rewards for program participants who generated referrals of potential learners. The number of referrals increased six-fold during the promotion, and the benchmark cost-per-learner dropped from $100 to $10.

When it�s all tallied up, The Counselor estimates that Philip Morris spent $44 million on promotional products in 1999. Not bad for a company so well-known in the profession for the ways it�s not allowed to advertise.

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10. J.C. Penney � $39.8 million
Founded almost a century ago by James Cash Penney, his namesake company ranks 10th on our Top 100 list of end-buyers of promotional products, spending roughly $40 million on imprinted merchandise in 1999. Penney, the $33 billion, No. 5 U.S. retailer, has long provided fashion and basic apparel, accessories and home furnishings through its retail stores and
catalogs, but these days the Internet is where it seems to be having the most success. J.C. Penney estimates the company�s Web sales to be about $300 million this year.

The firm views its target customers mainly as �modern spenders� (mostly dual-earner households with up to two children) and �starting outs� (single or a young family with up to one child). Target customers have a median household income of $48,000. The company now sees multi-channel sales as the key to its growth, calling the approach �three-tailing� � equally promoting the company�s physical stores, catalogs and online retail operations.

Promotional products factor into the marketing mix in building both customer and employee relations. Throughout the Penney establishment, different promotional awards are used in the many internal programs used to recognize associates for their efforts. Making � and leaving � an impression is important to the organization, according to Stephanie Brown, senior public relations coordinator.

�We go to many conferences throughout the year, and along with our catalog � we always have
promotional products to give away at our booth,� Brown says. �Whether it�s a T-shirt, pens, notepads or other items people can use in their home or office, it gets our name out there. It�s all about building customer relations. It leaves an impression of J.C. Penney.

�Of course, we want them to come into our booth and see our merchandise,� she continues. �But when we give them something, they�ll come across that item with our name and logo on it in the course of cleaning out their bag after the conference. That might trigger their thinking, �Oh yeah, I liked what I saw and I want to check that out� � whether they do so through our stores, catalog, or Web site.�

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Who is Buying Promotional Products ?

Top 100 Buyers Of Promotional Products

Promotional Products Spending Rank

POUR BUSINESS IS PROMOTING YOUR BUSINESS

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