A nose for ethics

As companies come under increasing pressure to reduce their carbon emissions, the sourcing of items for promotional campaigns will be scrutinised more closely.

Figures from the UK Promotions and Incentives 2006 industry report, sponsored by the British Promotional Merchandise Association, reveal that more than a quarter of goods are now being sourced from the Far East – and the figure is rising year after year.

The lifting of quota restrictions on many goods imported from China is fuelling the growth, as is the fiercely competitive UK market, which means margins for suppliers and clients are constantly under pressure when planning campaigns. Lead times for orders placed in the Far East are also falling and the quality of items has improved considerably in recent years.

Yet the increase in sourcing from countries such as China comes at a time when the Government is urging every business to do more to reduce its carbon footprint and deliver low carbon products and services to consumers.

A company’s carbon footprint is a measure of the impact its day-to-day business has on the environment in terms of the amount of greenhouse gases it produces. This includes the use of energy in manufacture and, importantly when discussing the future of promotional gifts, transportation.

However, while many companies are willing to undertake a carbon investigation across their core supply chain, they are not always as eager to include the sourcing of premiums in their analysis.

The BPMA believes the industry should act sooner rather than later. It feels that in the same way brands have had to tackle traditional concerns over product quality and factory working conditions in the Far East – both of which have been closely monitored by organisations such as the British Standard Institute – members must face up to this new challenge.

Carbon Footprints
The fear is that customers may look disapprovingly at brands that distribute a promotional item – whether it is a traditional pen, cuddly toy or t-shirt, or a technical gadget – that has travelled thousands of miles. "Consumers are becoming more aware of climate change issues and brands must weigh up the negative impact there could be if customers discover a free gift has travelled so far," says BPMA European spokeswoman Margot Parker. "Clients will be the driving force behind this debate, with the smarter brands appreciating the commercial and marketing benefits of changing how they source promotional items and associating themselves with issues their customers are becoming passionate about."

The Carbon Trust has published a study into how the public perceives climate change and claims nearly three-quarters of UK consumers are concerned about their own carbon footprint and two-thirds are more likely to buy a product with a low carbon footprint.

Dave Lawrence, a director at The Promotions Practice, says the promotional products that companies choose will have to change over the next few years as clients are forced to take the issue of sourcing and carbon emissions more seriously.

Lawrence, who joined the company from Logistix last August, has worked with clients such as Kellogg, Coca Cola Enterprises, Burger King, Nestlé and Premier Foods during his career. He is now heading The Promotions Practice’s strategic consultancy arm called The Insight Practice. "There must be an environmental stance on everything a brand does these days and there is certainly a marketing opportunity for clever companies to communicate that they are sourcing and choosing their promotional gifts ethically," he says. "Clients can often look for the lowest cost promotional items and not consider the ethical angle, but this can create inconsistencies if a company is claiming to have a robust CSR strategy."

Lawrence adds that if technology were used effectively it could be the solution to the carbon emissions dilemma that brands face, and to the concern that to be seen to be ethical, companies will have to significantly increase their promotional gifts budget.

He cites free downloads featuring entertainment content such as music and films as one answer. "Free incentives through digital formats offer financial and environmental benefits because the operational costs are so much lower," he says. "It does mean brands will need to build stronger relationships with the music and film companies to ensure copyright issues do not scupper campaigns and the entertainment businesses do not feel brands are devaluing their content by giving it away."

While a virtual gift such as a music download might appeal to some consumers, many people will always prefer a gift they can actually touch. This is certainly something toilet paper brand Andrex has found over the years with its bean puppy toys.

Granby Marketing Services supplied Andrex Red Nose puppies for the brand’s Comic Relief promotion. Consumers were asked to send £5 and a pack token to get a puppy and £1.70 was donated to Comic Relief. Yet there is arguably an ethical dilemma here because the puppies were sourced in the Far East. This adds to Andrex’s carbon footprint despite the positive contribution it is making in raising money for UK and African-based charities.

The quandary suppliers also face is that many products popular with consumers cannot always be sourced ethically within a client’s set budget.

According to the UK Promotions and Incentives 2006 industry report, among the products likely to see a jump in demand this year is promotional clothing such as sportswear and silicon wristbands. This trend will be driven by big sporting events up to the London Olympics in 2012. This year’s Rugby World Cup, for example, will see a surge in scarves, t-shirts and caps.

Some suppliers have seen an increase in orders for t-shirts made from 100% organic cotton, which means no pesticides were used in their manufacture. Yet at the same time there is a growing interest in gadgets such as Wi-Fi searchers and digital photo frames which still tend to be sourced in the Far East.

All incentive companies have to address environmental concerns. Marriott Individual Incentives provides clients with incentive programmes to increase productivity and improve staff morale using coupons that can be redeemed at its hotels based at shortand long-haul destinations. This could be perceived by green campaigners as encouraging unnecessary flights. Sales manager for UK and Europe, Julian Bonnett, points out that even though customers are able to choose from a global selection of hotels, in reality most are rewarded with oneor two-night stays and tend to choose short-haul trips.

Techno trial
echnology is helping Marriott too. In January it launched its e-incentives programme where vouchers and hotel bookings can be made online. One of the first clients is a Danish Investment bank which is running an international referral campaign. It buys incentives in bulk and distributes them via e-mail. "It is the same voucher product but the whole system is more efficient," says Bonnett.

Whether environmentally sourced or not, products using new technology do seem to be where the future for gifts and incentives lies. The price of electronics is coming down all the time, particularly in the Far East. It means incentives such as digital downloads, plug-in flash drives and even products such as iPod accessories and MP3 and MP4 players are becoming accessible to more brands’ budgets.

Graham Howarth, director of merchandising sourcing company e-source, says consumers in the UK are fixated with the next big thing, and even when it comes to free gifts they want fashionable gadgets. "It is all about knowing your audience and understanding what will engage them in your promotion," he says. "The MP3 player used to be associated purely with the under 25s but now all ages surf the internet for music so such a gift is no longer unsuitable for more mature consumers."

He adds that although there will always be a place for traditional gifts such as keyrings, stress balls, caps and even aromatherapy products, consumers appreciate gifts that give them bragging rights among their friends and family. "If other people want to receive the same promotional gift or incentive it generates excitement around a campaign and, ultimately, helps to increase sales," says Howarth.

Influence on sales
But what effect can free gifts and incentives really have on long-term sales? Granby Marketing Services, chief executive Stephen Bentley says it depends on a number of factors. "When you carry out an initial analysis of the impact on sales there will always be variables such as what activity competitors were doing at the same time as your promotion was running. That will certainly affect response rates whatever the gift," he says. "But we know very early on whether a promotion is ahead or behind forecasts."

These predictions could become harder to get right over the next few years as brands have to assess more carefully how they source items and which products they choose.