The Confidence to Evolve Paul Bellantone, CAE| President & CEO Promotional Products Association International August 2019

“Promotional products are welcome in places and spaces no other advertising medium can touch and deliver pass-along rates that are the envy of advertising industry.”

Our challenge as businesses, trade associations and industry is not about the obsolesce of promotional products as an advertising medium.

Our challenge as businesses, trade associations and industry is not about the obsolesce of promotional products as an advertising medium. Our challenges and opportunities are commoditization and distribution of products.

The past 20 years have been transformational for our industry due to access and transparency.

The past 20 years have been transformational for our industry due to access and transparency. Our major value was the ability to procure product. Product procurement is now attainable by everyone.

The past 20 years have been transformational for our industry due to access and transparency. Our major value was the ability to procure product. Product procurement is now attainable by everyone. How do we develop and communicate our (next) value proposition?

“The pace of change will never be as slow as it is today.”

The reality 23,000 distributor companies. 3,500 supplier companies. Same price. Same customers. No territories. And the internet can serve 28 million businesses & any product, 24/7/365, for less.

It is not your customer’s job to remember you. It is your job to make yourself UNFORGETTABLE.

be the deciding factor… …when VALUE is equal to zero. Price will be the deciding factor… …when VALUE is equal to zero.

PPAI

Discussion Points PPAI Industry and Marketplace The Challenges and Opportunities Buyer Research Consumer Research Questions and Discussion Discussion Points

I am an optimist PPAI dates back to 1903 Promotional products predate the Association by at least 125 years Our industry has withstood wars, depressions, recessions, manufacturing and technological revolutions, trends, culture Promotional Products Work!

International Trade Association PPAI Based in Irving, Texas, USA Primary Members Governance Management International Trade Association Suppliers & Distributors, Business Services, Multi-line Sales Representatives Board of Directors, Committees, etc. 80 staff Grow And Protect The Industry

PPAI Strategic Plan Drive meaningful member value How we get members to love, trust, appreciate and engage with PPAI Advocate for the industry How we evangelize the power of promotional products and the profession Develop and leverage strategic foresight How we help PPAI, the members and the industry capitalize on market changes Manage an efficient and progressive organization How we continually retool PPAI to deliver second-to-none member experiences, interactions and engagement

Industry vs Marketplace

We define the INDUSTRY as the value of products that MARKETPLACE We define the INDUSTRY as the value of products that are purchased through traditional suppliers and resold to buyers for distribution to consumers We define MARKETPLACE as the value of product in the hands of consumers regardless of how it got there VS

Industry versus marketplace Over the past 20 years, the MARKETPLACE is growing 2 to 3 times faster than the INDUSTRY. YEAR INDUSTRY MARKETPLACE TOTAL 1998 $13.2 Billion $1.3 Billion $14.5 Billion 2018 $24.5 Billion $40-50 Billion $75 Billion

VUCA

Volatility. Uncertainty. Complexity. Ambiguity VUCA VUCA is an acronym used to describe or reflect on the volatility, uncertainty, complexity and ambiguity of general conditions and situations The term was first used in the 1990’s and derives from military vocabulary

Volatility VUCA The nature, speed and dynamics of change, change forces and catalysts

Uncertainty VUCA The lack of predictability and understanding

Complexity VUCA The multitude of forces and the confounding issues Non-linear and no clear or apparent cause-and-effect

Ambiguity VUCA The haziness of reality, the potential for misreads and the mixed meanings of conditions Cause-and-effect confusion

VUCA

VUCA

VUCA

Uber, the world’s largest taxi company, owns no vehicles Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content, Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world's largest accommodation provider owns no real estate. Something interesting is happening. -Tom Goodwin, 2015

The world’s largest taxi firm, Uber, is buying cars The world’s largest taxi firm, Uber, is buying cars. The world’s most popular Media company, Facebook, now commissions content. The world’s most valuable retailer is now Amazon, and has more than 350 stores. And the world’s largest accommodation provider, Airbnb, increasingly owns real estate. Things change. -Tom Goodwin, 2018

Mature Marketplace Our industry must show the Confidence to Evolve.

Our industry must show the Confidence to Evolve. Thoughtfully Mature Marketplace Our industry must show the Confidence to Evolve.

Our industry must show the Confidence to Evolve. Thoughtfully Courageously Mature Marketplace Our industry must show the Confidence to Evolve.

Our industry must show the Confidence to Evolve. Thoughtfully Courageously Mature Marketplace Our industry must show the Confidence to Evolve. Quickly

Trends

2018 $24.5 Billion +5.5% US Industry trends

US Industry trends 9 consecutive years of distributor growth Sales Volume 2007 - 2018 2007 $19.4 3.5% 2008 $18.1 -6.9% 2009 $15.6 -13.6% 2010 $16.6 5.9% 2011 $17.7 7.0% 2012 $18.5 4.4% 2013 $19.8 7.2% 2014 $20.0 1.1% 2015 $20.8 3.8% 2016 $21.3 2.4% 2017 $23.3 9.3% 2018 $24.5 5.5% 9 consecutive years of distributor growth Uneven and inconsistent based on company size, structure and geography

US Industry trends Distributor sales volume Less than $2.5 million 22,721 $9.8 billion +0.89% More than $2.5 million 889 $13.5 billion +16.34% Industry total 23,564 $23.3 billion +5.5%

US Industry trends The disparity between large and small distributors continues to grow. Large distributors now account for 56% of industry sales.

US Industry trends Distributor sales from non-industry suppliers increased by 11% over 2018 to $3.7 billion. Annual Growth +20.8% +4.8% +10.6%

US Industry trends 2018 online sales are estimated at $6.0 billion (24% of total sales) up from $5.4 billion (23%) in 2017.

US Industry trends

US Industry trends Distributor member size breakdown (2019): Less than $250,000 94% $250,000 – $1,000,000 3% $1,000,001 – 10,000,000 2% $10,000,000 + 1% 97% of distributors report less than $1 million in promotional products sales volume.

US Industry trends Supplier member size breakdown (2019): Less than $250,000 53% $250,000 – $1,000,000 22% $1,000,001 – 10,000,000 19% $10,000,000 + 6% 75% of suppliers report less than $1 million in annual promotional products sales revenue

By Product Category Wearables 34% Drinkware 9% Travel 8% Writing 6% Technology 6%

Distribution Services 16% Brand Awareness 12% Business Gifts By Program Category 9% Trade shows 8% Employee recognition 7% Distribution Services

Why buyers (marketers) use them Buyer trends 55% Create brand and product awareness 42% Retention and appreciation 41% Generate conversation and referrals 25% Drive traffic Why buyers (marketers) use them

Buyer trends How buyers (marketers) use them. 79% In stand-alone campaigns 69% In conjunction with other media 72% With social media 60% With email 58% With internet 54% With sales promotions

Buyer trends Powerful Results 96% say promotional products are effective 88% moderately / extremely effective

Consumer findings Travel Technology Date & Time

Consumer findings

Consumer findings

Consumer findings

Consumer findings

Consumer findings

Consumer reaction to promotional products Consumer findings Consumer reaction to promotional products 79% research the brand 87% of Millennials research the brand 83% more likely to do business with the brand 88% of Millennials are more likely to do business with the brand 80% like receiving them 71% want to receive them more often

Where do consumers keep them Consumer findings Where do consumers keep them 48% keep them on or with them 48% keep them in their kitchen 34% keep them in a vehicle 32% keep them in bathroom Nearly one in three Millennials use them at all times.

Consumer findings What do consumers say? 89% recall receiving a promotional product in the past 6 months 100% of Millennials recall receiving them 85% recall the branding 76% recall the messaging 71% recall the call to action

88% of Millennials had a more favorable impression of the advertiser Consumer findings 88% of Millennials had a more favorable impression of the advertiser What do consumers say? 82% had a more favorable impression of the advertiser after receiving a promotional product

Consumer reaction to other advertising 68% avoid online video ads 66% don’t watch TV commercials 57% ignore digital ads | 38% block mobile ads 50% discard direct mail 48% skip print ads 46% delete email marketing 46% don’t listen to radio commercials Less than 20% discard or pass-along promotional products Consumer reaction to other advertising

So what now?

B2B Business to Business

B2B Business to Business B2C Business to Consumer

B2B Business to Business B2C Business to Consumer H2H Human to Human

Volatility Uncertainty Complexity Ambiguity VUCA

Volatility VUCA The nature, speed and dynamics of change, change forces and catalysts Be RELIABLE in volatile situations

VUCA Uncertainty The lack of predictability and understanding Be TRUSTWORTHY in uncertain situations

Complexity VUCA The multitude of forces and the confounding issues Non-linear and no clear or apparent cause- and-effect Be DIRECT in complex situations

Ambiguity VUCA The haziness of reality, the potential for misreads and the mixed meanings of conditions Cause-and-effect confusion Be UNDERSTANDABLE in ambiguous situations

The Power of your brand

Power of Promotional products The most valuable forms of marketing are consumed voluntarily. You can no longer market at people. You must market with them. - Seth Godin

Thank you! Paul Bellantone CAE| President & CEO Promotional Products Association International