Study Indicates Industries Embrace Incentives to the Tune of $46 Billion

 

NEW YORK, January 8, 2008 - An increasing segment of the apparel industry is generating incremental sales and taking advantage of the valuable visibility offered by the corporate market for incentives, rewards, and recognition. Leading players within the apparel industry now include Polo Ralph Lauren, North Face, The Timberland Group, T.J. Maxx, Marshalls, & HomeGoods, and many others. In addition to incremental sales and profits, the benefits of this marketplace also include increased product and service visibility when they are featured in corporate rewards, incentive, promotion and recognition programs. While many companies often give away products for promotional tie-ins, others have realized that this is a valuable profit center.

Why the interest in the corporate marketplace? Travel and merchandise incentives, rewards, and recognition now represent a $46 billion industry, according to the Incentive Federation's 2007 United States Incentive Merchandise and Travel Marketplace Study. Approximately $32.7 billion was spent on merchandise incentives and $13.4 billion on incentive travel in 2006. Companies whose products are featured in external and internal marketing programs and promotions get extensive visibility aimed almost precisely at the same audiences they are trying to reach in the retail market, making them valuable target marketing opportunities.

"The incentive industry is booming," says Frank Katusak, Incentive Federation Board Chairman. "What's particularly exciting about the results--besides the dollar figure--is that incentive end user executives view incentives as an investment rather than a cost because they can quickly and easily measure the financial return of these initiatives." To put $46 billion into perspective, Katusak offered these two points for comparison. It is 1) more than the global profits for the top 18 electronics manufacturers (Sony, Sharp, Samsung, etc.) and 2) more than the sales of GlaxoSmithKline, Novartis, Roche, AstraZenca, Merck or Abbott Laboratories.

Key findings:

-Thirty-four percent of U. S. companies used either incentive travel or merchandise incentives in 2006. Almost one third (31 percent) of companies used merchandise incentives, while 10 percent used incentive travel.

-Incentive travel is seen as an investment by 85 percent of companies with revenues over $100 million in the study. Merchandise incentives are seen as an investment by more than three-fourths of respondents.

-Companies with revenues over $100 million are more likely to use both travel and merchandise incentives than smaller companies.

-The most common incentive travel application is for sales incentives. Other widely-used applications are non-sales employee recognition and consumer/user promotions.

-Merchandise incentives are most often used for non-sales employee recognition and business gifts.

-The average budget for travel incentives was $164,271. More than three fourths of incentive travel end users spent between $100,000 and $500,000.

-The typical budget for merchandise incentives last year was $119,008. Almost half of the merchandise incentive users spent between $100,000 and $500,000.

The incentive industry shows no sign of slowing. More than half of large companies queried state their budgets for incentive travel have increased over the past two years, and believe they will continue to increase over the next two years, while almost one third say they have remained the same. On the incentive merchandise side, 30 percent of respondents report their budgets have increased over the past two years and 59 percent anticipate these budgets will continue to increase over the next two years.

The study was prepared by GfK, the fourth largest marketing research organization in the world. GfK conducted telephone interviews with executives responsible for the development and budgeting of incentive travel and merchandise incentives. In total, 1,121 executives were interviewed.

The Incentive Federation represents the legislative interests of the incentive marketplace. The following members of The Incentive Federation sponsored the study: Incentive Marketing Association, The Motivation Show by Hall-Erickson Inc., The Incentive Research Foundation, Promotion Marketing Association, and Promotional Products Association International.

A complete copy of the study will be available shortly from The Incentive Federation Inc. at www.incentivecentral.org.