Today's economic climate is uncertain, to say the least. Media outlets are using terms like "financial crisis," "market meltdown," and "economic collapse," to describe the current fiscal climate. For many, the situation is perceived as dire, and people are increasingly more concerned with how and where they are spending their money. While promotional labels are an addition to a product's packaging as well as an added marketing expense, they have the potential to be a difference maker when it comes to closing a sale. This is key, as consumers are as aware as ever when it comes to spending.
Marketing professionals, in the wake of the economic downturn, have tough decisions to make, and investing in promotional programs is one of them. There are two sides to the discussion. Marketers can see promotional labels as a chance to increase a brand's market presence by playing on consumers' interest in saving money on individual purchases. On the other hand, manufacturers, like the consumers themselves, are also struggling to make ends meet, and will factor into their budget the added expense of a promotional labeling campaign. This line of thought questions whether it's worth the cost.
From concept to printed product, marketers and converters come from different places. However, a variety of industry professionals can provide insight, perspective, and thoughts on a host of applications.
NCH Marketing Services, Deerfield, IL, USA, is a global coupon processing and promotion information management company. Basically, NCH calculates data regarding coupon usage.
According to NCH, in 2007, the last full year of compiled data, a total of 285 billion coupons were distributed. This was a 2.2 percent increase from 2006. Of these billions of coupons printed and distributed, 2.6 billion were redeemed. This number was flat from 2006. The redemption rate translates to this: About 1 percent of all coupons printed were actually used.
Charles Brown, VP of marketing for NCH, reports some good news for the label industry amidst all this data. "While on- or in-pack coupons account for just 1.2 percent of all coupons distributed, their response rate is the highest of all: 16.2 percent of them are redeemed," he says, adding "What's amazing to me is the number of these coupons, which are on the packaging itself, that never get turned in."
Despite this year's data thus far, however, from the consumer's point of view, Brown thinks coupons are making a comeback. "Consumers are paying closer attention to promotions and coupons. It's the marketers who are using them more cautiously."
"Most smart companies know that you need to promote more than usual during tough economic times," says John Shanley, president and owner of Labels West, Woodinville, WA, USA. "Manufacturers want to distinguish their products from their competitors and the way to do this during an economic crunch is through reducing costs."
Promotional labels come in a variety of forms. Converters list coupons, games, sweepstakes, hang tags, expandable booklets, bumper stickers and much more when listing products that fall into the promotional category.
While Shanley acknowledges that the gamut of promotional labeling products is broad, he points out what he feels they all have in common: "Ultimately, promotional products are designed to get a person to act or do something, and very often that something is the purchasing of a specific item." But the purchase doesn't always have to be the immediate act, he says. "The promotional label can serve as getting a person to look at a website, go to a location, or even make a phone call. It gets the process going."
Shanley notes that promotional campaigns can be effective through other means aside from direct price reduction. "Products can promote energy savings or longer lasting characteristics – attributes that will indirectly result in long term cost savings," he says.
Labels West provides its customers with a number of promotional labeling options. Shanley says that IRCs (instant redeemable coupons) are currently quite popular. "People are looking to save money, and the notion of a certain amount of cents off is important to people. Consumers are paying attention to that," he says.
Another effective promotional product Labels West offers is the shelf talker, or shelf dangler. "Shelf danglers and talkers are designed to get the attention of the consumer at the point of purchase. They are right on the shelf next to the product and are designed to influence the buyer's decision by displaying price reductions, special offers, or specific product advantages," Shanley says.
Labels West also produces a wide variety of custom printed products containing variable data. The content can range from simple consecutive numbers and bar codes to full color variable graphic images. Variable content can be sandwiched between layers of material such as protective laminations or scratch off ink. "Studies have shown that when items are personalized, people tend to pay closer attention. Products have higher response ratings when their name is on it, or when it contains a serial number," Shanley says.
When a product wins an award or is featured in a magazine, Shanley sees Label West's promotional business rise. Examples of this can be found in the software or wine labels business. Shanley says a manufacturer will order a promotional label that reads "As seen in Wine Spectator," or names an award the product has won.
"Couponing is making a comeback," says John Hickey, CEO and owner of Smyth Companies, a label printer with headquarters in St. Paul, MN, USA. The company also operates production facilities in Minnesota, Virginia, and Colorado.
Hickey talks about the state of the economy's effect on the promotional niche of the labeling industry. "As the economy weakens, promoting and discounting becomes even more compelling than it has ever been," he says. "There was a point in time when a lot of major companies were minimizing on-pack couponing using 'everyday low prices,' but that's changing. I think it's human nature to want a 'deal' – to get something special. And on top of that, the linkage from combining coupons with the internet really gives it more legs."
Smyth offers customers a variety of promotional products including secure pocket labels, perforated two-ply, dry peel labels, and custom placed pieces. The options are versatile. Applications include game pieces, coupons, on-pack or in-pack, and sweepstakes.
Hickey discusses how the games and sweepstakes angle is an effective way to reach consumers. "People like to play with packaging. If it has some value, people are going to try it." Hickey says that when it comes to sweepstakes, "promotional labels are like gambling in a way – playing on people's desire for instant gratification and the hope that they may become instantly wealthy."
While promotional labeling can be an effective marketing tool, manufacturers have to contend with the issue of applying the product to the package. This step in the process can be costly.
"Often times plants will charge the marketing department whatever they determine is the cost of the slowdown in the manufacturing process, citing the application of the promotion interferes with production," Hickey says, adding that "Smyth can minimize the deviation."
Hickey is referring to Smyth's subsidiary company Red Rock Technologies, which has recently unveiled the Red Rock G2, the next generation of the Red Rock label applicator. The machine's primary function is the application of promotional labels to the interior and exterior of carton packaging such as beer, soda, and breakfast cereal cartons.
The G2 has been in development for two years, and has recently finished line trials and other testing by both Red Rock engineers and users of first generation machinery. In these trials, G2 performed beyond design benchmarks and was deemed ready for general implementation. "We are very pleased with the way the G2 performed in the testing phase and we're excited to unveil it and make it available on a general level," says Steve Ivens, operations manager of Red Rock Technologies. "Our clients loved the original, but they should be ecstatic when they get G2."
In addition to carton labeling, the Red Rock G2 can be used to apply labels at very high speed to a variety of other packaging, including cans, plastic bottles and containers, flexible packaging, and jars. The machine is not limited to packaging. Web printers can utilize the G2 to apply labels, samples, and other promotional items to their printed products like brochures, mailers, and inserts.
"This is an extremely versatile and capable machine, and it can add value to our clients' product offering," says Hickey. "Carton and other packaging manufacturers as well as web printers can differentiate themselves to a great degree by making promotional labeling an addition to their product offering, and the Red Rock G2 makes it extremely easy to do this."
In addition to the Red Rock line of equipment, the company also provides full-service technical support and project consultation services. The G2 will be available to other qualified converters in 2009.
Scratch Off Systems, located in Independence, OH, USA, is a company that specializes in promotional scratch-off labels. The company produces its labels using flexo presses.
Joshua Teaster, marketing coordinator, describes the production process and its advantages: "Our production process results in a clear label coated in several layers of a specially formulated, water based scratch off ink, commonly gold or silver, on a white liner. This clear label protects any information under the scratch off label from being damaged by the scratching. This is an advantage over applying scratch off ink directly to the surface over sensitive information.
Teaster says that the labels can be made in an assortment of sizes and shapes, with today's technology influencing what's now popular. "Because most applications do not require a large amount of information under the label, the 1" diameter circle is the most popular. With a growing number of businesses attempting to direct traffic to websites, a 40mm x 8mm rectangle label covering an online code is growing in popularity," he says.
Scratch and win games can be used for a number of applications and industries. Teaster says the most common use he sees is for retail promotions. "Retailers increase sales and repeat business by providing a discount or reward under the scratch area and giving them to customers entering their business or for making a required amount of purchases. They are also popular tools in employee incentives, trade show giveaways, fundraising, and more. Scratch Off Systems can vary the hardness of the scratch material, allowing direct marketers looking to increase interaction with their customers to use them on direct mail pieces without fear of the material getting scratched off in transit," he says.
While scratch-off games work by appealing to the end users' desire for gambling and game play, Scratch Off Systems recently unveiled a product line called the Fusion Series that appeals to manufacturers that are looking for more value in today's tough economic climate.
"Most label rolls contain around 10,000 labels. After each roll has been used, the applicator has to take time off production to change the roll and reset the machinery. Fusion Series rolls can be run on the same equipment as regular rolls but contain around 40,000 labels, up to 80,000 labels, on a continuous liner, cutting the time spent off production in half."
Expanded content, also known as booklet or foldout labels, are another promotional product that converters are reporting to be popular with customers. The typical expanded content label consists of a booklet or pamphlet that is attached to a pressure sensitive label. While the content of these labels can range from instructional to informational, to anywhere that additional copy space is desired, there are loads of promotional possibilities.
JH Bertrand, based in Buffalo, NY, USA, has been in business since 1981 and maintains that it is the only company in the US that focuses on copy expansion products alone. The company is capable of producing a broad range of products, including expanded content booklets of up to 96 pages, with some capable of even more depending on the dies used.
"In general, promotional labels is the biggest growth market in the expanded content industry," says Jeff Bertrand, CEO of JH Bertrand. "Consumers are used to seeing cents off a product, a rebate, or an IRC. Those are used all the time. IRCs make the most sense as a promotional product. The great thing about them is they go right on the product. Also, promotional pieces do pick up during tough economic times."
Bertrand comments on what he feels makes an IRC label such an effective promotional label, the type of product that sticks directly onto a package. "People are realizing more and more that a product's packaging is an excellent direct mail delivery device. What better customers are there than your already existing customers? These are the people that you'd want to award for buying more, by giving them more."
Bertrand also brings up that ironic marketing conundrum when it comes to the promotional IRC market. While manufacturers want a good response to their promotion, often times they don't want it to be great. "It's all about the offer itself," he says, referring to whether a promotional campaign will work. "But some manufacturers want the coupon or the promotion encapsulated, making it more difficult to get to, thus reducing the redemption rate. They want it to be popular, but not too popular."
Another problem with promotional labels is the unpredictability of the market. A manufacturer's promotions come and go. "One year you could have a $200,000 account, and the next year it's zero, because the promotional campaign has ended. You cannot build your business only on promotional products, but it's a really good supplement."
For JH Bertrand, most of the promotional business they get is larger run, orders for a million units or more. Bertrand mentions what he sees as trends in the promotional market that utilize today's technology. "We've seen a request for variable data coding where we'll get furnished with codes to apply to the label, and the end user will take this code to the computer in order to redeem the promotion. We recently had a job with cellphone ringtones that incorporated this."
Peter Renton, director of business development at Lightning Labels, an all digital label printer based in Denver, CO, USA, says that the company has had great success in producing promotional labels for one specific product in particular – lip balm.
"In the promotional niche of the industry, our lip balm business continues to grow. The vast majority of our lip balm business is promotional. And relatively speaking, it's a very inexpensive item," Renton says.
Renton explains that Lightning Labels works with distributors of promotional products, who sell the lip balm to doctors or dentists offices, for example. "Just a small area of the label itself will have the lip balm's ingredients. The rest of the label is promotional," he says, adding that the products are not sold, but simply handed out to office visitors.
The lip balm label is an example of a product where promotional and custom labels meet. Other label products Lightning Labels manufactures using this same concept are those for water bottles, sunscreen, and hot sauce. "We're typically selling our labels to distributors, and the end users are giving these products away as a means to promote their business."
The promotional game
The promotional labeling conversation discusses a number of different themes, and cost savings and game playing certainly comes up quite a bit. In some respects, it seems that this niche of the industry is really a big game where the primary players are the consumers and the marketers.
The converter's role in this game can be said to be that of the delivery person, at the whim of those making the game. It seems that here is how the game is played: Marketers offer promotions designed at enticing the consumer to spend some money. Yet there are rules, limits, and expiration dates that consumers contend with, designed to protect the manufacturer from getting fleeced. Meanwhile, the consumer's goal is try and save as much money as possible, and have the option of watching and waiting for the best promotion available that meets their needs. But it's the converter that's in the position of paying attention, examining what works best, and offering its customers promotional products that stick, hang, expand, scratch and promote as effectively as possible.
Adding to the mix of all this is an uncertain global economy that may or may not make the stakes a little higher.