3 Key Vertical Markets to Watch and How to Sell Into Them
Whether you’re new to the industry or a seasoned pro, the decision to target one, three or five verticals is one that you should make with care and research. Choosing a vertical that is regulated or easily influenced by outside sources may come back to haunt you; on the other hand, positioning yourself as an expert in a single area, selling on the merits of creativity and resourcefulness, could pay off in a big way.
Although we can’t tell you what’s best for your business, we can provide you with the knowledge and tools to, hopefully, boost your bottom line, because distributors who venture into new markets unprepared risk not only their reputations, but, by extension, the reputations of those who know the niche.
To help you along in the process, Print+Promo consulted with leading suppliers in three key verticals. Here, they expand on industry trends, the sales cycle and pitfalls to avoid.
Remember the ʼ80s? Back then, it was totally rad to wash the taste of a ham-and-cheese-white-bread sandwich out of your mouth with a Hi-C Ecto Cooler juice box. Then, perhaps, burn some of those calories off alongside a Richard Simmons workout video. Those days are long gone, with consumer demand moving away from industrial-scale processed food in favor of organic, gluten-free options. Devices, such as the Fitbit and Apple Watch, are giving people access to personalized biometric health statistics. Boutique fitness studios and “high-value, low-price” health clubs are becoming the norm. These factors and more are contributing to a historic boom in the $30 billion health and fitness industry.
According to the IHRSA (International Health, Racquet & Sportsclub Association), the U.S. portion of this sector has grown by at least 3 percent to 4 percent annually for the last decade, showing no signs of slowing down. In a recent Forbes post, contributor and Crunch Franchise CEO Ben Midgley wrote that 20 percent of American adults have a fitness club membership, and he expects that number to double in the next 10 to 15 years.
This is all good news for distributors. Though, in order to take advantage of these selling opportunities, it is important to partner with a supplier that clarifies questions and concerns, provides ideas and makes itself available—no matter the market. All you have to do is ask.
“If you’re going to see Disney or Procter & Gamble, or somebody like that, why would you not take advantage of that credibility and that understanding?” posed Bill Mahre, CAS, president of ADG Promotional Products, Hugo, Minn. “It’s almost like having a third-party person who’s not really a salesperson; it’s a resource.”
Promotional products are tools used to market, create visibility and generate conversation about a brand. Hydration bottles, apparel, bags and technology items continue to serve as narrative devices. But as Mahre, who recently began his four-year term on PPAI’s board of directors, pointed out, just because the end-user happens to be in the fitness marketplace does not mean every item should be centered around that particular theme. Everyday items like key chains and writing instruments are examples of cost-effective options.
Speaking to the needs of the fitness market is one of the best ways distributors can come out on top. The biggest challenge for distributors, Mahre argued, is to meet the price points that fitness centers need to market and merchandise their brands, because several commonly used items are too expensive for giveaways and marketing efforts, or patrons already have their own personal supplies. He has seen his fair share of distributors request samples of water bottles, T-shirts and Bluetooth speakers for their fitness club client visits.
“If you think about it, a lot of people who are very much into fitness clubs and things like that already have their own gym bag, their own set of headphones, their own water bottles and apparel workouts,” Mahre said. “... I use the analogy that if you’re going to go work with someone in the construction world, you don’t necessarily come in and give them a hammer or a screwdriver—they already have those tools. Sometimes, we have to be careful that we don’t overcomplicate this and try to say, ‘Well, the only items that are going to be appropriate for this particular vertical market are items that people use.’”
Other obstacles to overcome in the fitness vertical are constantly changing memberships and a need for fitness clubs to market their services and benefits to the community. Again, this is where creative ideas that stray from the stereotypical “gym-based items” come in. Caps, for instance, may not be worn during a high-impact cycling class, but they will be outside of the gym.
Personalization also is a trend that may serve knowledgeable distributors well. “Being able to provide a personalized solution in a cost-effective manner can turn a simple $2 item [like a keychain] into something with much higher-perceived value,” Mahre noted.
He went on to make a case for this value-added service, recalling an open house that a fitness club held in celebration of its 10th anniversary. The goal of the event was to recognize current membership, which roughly amounted to 700-800 people. The easy solution would be to pass out a tumbler imprinted with the club’s full-color logo and pictures, and call it a day. But how would that stand out from the rest of the drinkware likely overcrowding patrons’ cabinet shelves?
The distributor, aware of ADG Promotional Products’ personalization capabilities, provided the supplier with an Excel spreadsheet containing the names of each member, and, together, they came up with a personalized, full-color acrylic tumbler with a straw.
“It’s like anything else, if I gave you a really nice pen, you’d say ‘Wow, that’s a really nice pen,’ but if somebody took it, or you gave it to somebody, it wouldn’t be a big deal,” Mahre said. “If I put your name on it, now all of a sudden it has a completely different perceived value and ... I hate to use the phrase, but it becomes priceless because it’s got your name on it and it’s your pen.”
The Selling Process
There are certain things to keep in mind when selling to the fitness vertical. First, think about timing. Gym memberships spike every January as well-meaning people work to hit their fitness goals for the new year. That being said, these facilities will be making decisions in the fourth quarter. (And they’ll most likely need to purchase holiday gifts.) Not surprisingly, Mahre has observed a drop in business during summer months. He encouraged distributors to ask specific clubs when they renew memberships and concentrate on bringing in new patrons.
People in this category tend to be emotionally attached to their fitness center. Understanding the demographics of a specific club before beginning a conversation can put distributors in a positive light because it shows that they understand the challenges and needs of their client. This includes age group, gender and location.
“You might have a club that’s predominantly female or one that’s predominantly male, so the real [challenge] is understanding the clientele that the [gym] is trying to appeal to,” Mahre explained. “Once distributors understand that, then they can put together a marketing program, because it’s like anything else ... if you’ve got a facility that’s mostly male, like a Gold’s Gym, for example, suggesting a pink hat for Breast Cancer Awareness Month probably isn’t going to have the same appeal.
“You can have a chain of health clubs and fitness organizations, but you can have one that’s in the inner city and one that’s in the suburbs, and the needs of the clientele might be completely different—not only in age, but demographics, in terms of the way they use the club and stuff like that,” he added. “You really just have to understand, and that’s where the questions come in with the marketing people and the people who are making the decisions at the club. Tell me about your clients. What are things that appeal to them? What are things that don’t appeal to them? I always tell folks from a strategic standpoint that sometimes people think strategy is only about what you do, but it’s also about what you don’t do.”
Businesses have been quick to track the benefits of President Trump’s Tax Cuts and Jobs Act, but what about the very forms that are submitted to the IRS each year? Chances are, you probably don’t think much about the lucrative tax vertical. With the exception of a few form modifications here and there, not much changes with this seasonal product line.
Customer needs are simple. “There is typically federal, state and often local government requirements to report wage and information (e.g., W-2, 1099 and 1095), in addition to getting the employee/recipient copies mailed by Jan. 31 of each year,” said JB Hunt, account manager for Broker Forms.
Since 2001, the Grand Rapids, Michigan-based company has helped distributors navigate the complexities of wage and information reporting through its expert account managers, customer service and electronic sales support, and marketing tools. Because it can be hard to decipher whether or not said complexities are just hype or the new standard, partnering up with a pro is a must when infiltrating this vertical.
“Although there was discussion of lowering the e-file threshold, a move that would require more businesses to file the red federal copy electronically [starting in 2021], it was quickly stopped due to politics,” said Hunt when asked what to expect in upcoming tax seasons. “There is a small change that could affect some 1095 reporting, related to the repeal of the individual mandate for carrying health insurance, taking effect in 2019. However, the impact on reporting volume is unknown at this time.”
Jim Magdaleno, channel sales product manager for ComplyRight Distribution Services, had a different perspective when it comes to the tax vertical.
“Tax filing is an integral part of [your clients’] end-of-year business; therefore, they are open to new tax filing solutions if it saves them time and resources during a most crucial time of the year,” he shared. “They want compliance information, new technology and a strong execution and delivery process from their vendor.”
The Oxnard, California-based company offers a complete suite of solutions—from tax forms and software to e-file Print & Mail services—to fit every tax situation; however, based on the findings published in its white paper titled “The Tax Industry Today: 5 Major Shifts Impacting the Market—and How You Can Respond,” ComplyRight believes that offering new services, like e-filing, will keep your customers happy and help maximize your revenue. While the transition to e-filing hasn’t occurred at the lightning pace once predicted, its growing popularity is undeniable. To provide a bit of perspective, courtesy of ComplyRight’s research, in 1986, e-file began as a small pilot program with five tax preparers in three metropolitan areas: Cincinnati, Raleigh-Durham, N.C. and Phoenix. By 1990, IRS e-file was operational worldwide, and in 2017, there were 3.6 billion W-2s and 1099s electronically filed with the IRS.
“[Customers] won’t look elsewhere when they’re ready to make the switch from traditional, time-consuming paper filing,” Magdaleno said. “It also provides you with additional revenue streams to offset the declining sales of forms you may be starting to see.”
In fact, ComplyRight recently helped a tax form reseller recover lost revenue on the forms side due to the move to online tax solutions. The supplier was tasked with developing an online business where businesses and accountants could manage the 1099/W-2 process.
“We set up a private-labeled e-file website for them,” Magdaleno said. “We also provided a marketing plan that included emails, blog content, banner ads and direct-mail pieces.”
The results were staggering. First-year sales were $21,000 and the second year, they jumped to $105,000 with an 80 percent retention rate.
There are numerous reasons given for this exodus from paper, with the rise of cloud-based processing topping the list. From our homes to our workplaces—it’s no secret that we live in an increasingly digital world. ComplyRight argues that, from a tax standpoint, e-filing offers convenience, affordability and accuracy. Mountains of paperwork are eliminated, saving users trips to the office supply store or the headaches of paper jams in printers; the online filer pays only for the number of forms filed, even if it’s only one; and E-files do the heavy lifting in regard to complicated calculations, reducing the amount of data entry errors.
Other factors effecting change include skyrocketing manufacturing costs and shifts in distribution channels. By now, distributors and suppliers alike are well aware of ongoing paper price increases. Prices for the pulp necessary to manufacture paper have increased up to 40 percent. Manufacturers are absorbing a large percentage of the cost, but they must raise prices in order to survive.
In its white paper, ComplyRight assigned part of the blame to e-commerce. Via the report:
As Americans shop more online, the need for packaging materials increases. Many mills have stopped traditional bond paper manufacturing and, instead, are producing cardboard boxes and other packing materials. Other mills have converted to producing different types of paper products, such as toilet paper and diapers. This drastic decline in bond paper production has led to the price increase.
Then, there were the mill closings of 2017, which reduced North America’s capacity to produce paper for pressure-sensitive labels and printing grades, and increased freight pricing, tariffs on paper imports from Canada and rising labor costs.
As for what many call the “Amazon effect,” this easy form of shopping has disrupted the tax form market. ComplyRight’s white paper noted that anyone can sell through the site, and there’s no real limit on how many resellers can offer the exact same product. If consumers are looking at a 50-pack of paper tax forms from numerous sources, and everything about the product is the same, they will opt for the best cost. A key way to wound the online giant is through knowledgeable customer service.
This is where it pays to maintain symbiotic relationships with experts like ComplyRight and Broker Forms. “I would encourage distributors to call [us] to understand their options,” said Teresa Budzynski, partner relationship manager for Broker Forms. “Selling and supporting electronic solutions is very different than selling paper, and requires a much higher investment of time and resources.”
All of this isn’t to say that printed tax forms have lost their value. Just ask Hunt.
“There has been a consistent push over the last two decades toward e-filing to government agencies; however, this has not translated into electronic delivery of employee/recipient copies,” he said. “The government does allow for electronic delivery to employees/recipients, but the process is cumbersome, and most businesses do not find it worth the cost.
“The rise of online retailers has impacted tax forms, in the same way as many other markets,” Hunt continued. “However, due to the government requirements, annual order frequency and headachesbsurrounding wage and information reporting, most businesses are cautious when considering commoditizing their tax form needs.”
The Selling Process
Before calling on prospects, understand that there is seasonality to tax orders. According to our sources, peak busyness for this vertical is December through January, but the selling process starts as early as September.
“In order to best serve customers and secure orders early, distributors have worked to schedule early order offers before the holidays so as to avoid the already hectic month of January,” Budzynski said.
Magdaleno let distributors in on a little pro tip: “Many vendors offer early ordering discounts from September through November to avoid the rush orders and panic of December through January.”
When you are ready to reach out to clients, preferably in the preceding months to ordering, ask them if they are satisfied with their current method of year-end tax form processing. It’s like Magdaleno said, “This is a once-a-year purchase; you only get one chance to get the order right.
“Competing with others selling tax forms may not get you the order, but offering new services will allow you to continue the conversation with the prospect,” he added. “End-users will not want to disrupt their year-end process and [are] not going to move their business for price of forms. But, if you introduce a related service option, like e-file or a complete outsource of the tax processing, the reseller stands a chance to capture the business.”
And, of course, remind customers of the positive experience you gave them last year, and update them on any important changes mandated by the IRS.
Budzynski recommended that distributors simply ask their customers if they do their own wage and information reporting.
“It’s important to understand that even if a business doesn’t have a large number of employees, it may have a high volume 1099 reporting need,” she said. “Distributors should inquire beyond a prospect’s W-2 needs and find out if they have any other types of 1099 reporting needs.”
3. BAR AND RESTAURANT
It’s Saturday night and the bar is hopping. Throngs of people come together under the glow of neon lights to take advantage of drink specials as Bret Michaels’ vocals fade into the background. That’s right, they don’t need nothin’ but a good time, which is where you, the distributor come in. After all, bar and restaurant marketing needs to be just as good as its food, customer service and atmosphere.
Think about it. Who doesn’t remember the cool T-shirt they won on trivia night, or the bottle opener keychain giveaway they scored when the local radio station teamed up with a major beer distributor at their favorite tavern?
Here are some other encouraging statistics pulled from Upserve, a restaurant management platform. Did you know that there are over one million restaurants in the U.S., and that more than 200 million U.S. consumers visited a sit-down restaurant in 2018? That means millions of eyes to focus on your client’s brand.
Suppliers like ProRose Inc. can steer you in the right direction. The Stamford, Connecticut-based company offers a full line of drinkware for the bar and restaurant market, including disposable cups, re-usable cups, souvenir-style drinkware, trays, bottle openers, coasters and restaurant caddies.
“When we match up with a distributor specializing in this industry, we provide them with samples, ideas, virtuals, specs and anything else we can do to assist their efforts,” said Ron Rosencrans, CAS, president.
When targeting this vertical, be creative, think like a patron and “wow” them with great ideas that will increase their traffic and revenue, Rosencrans instructed. But know that credit can be challenging in this industry.
“You want to be sure your client can afford the program you are pitching them, and be sure that you are properly covered on payments for your goods and services,” he warned.
Another point that Rosencrans brought up is that many of the products he sells are supplied free of charge by beverage advertisers.
“Napkin holders, bar mats, condiment caddies, etc., are samples of products [distributors] can sell to liquor and beer wholesalers, but would not be purchased by restaurants,” he said. “Distributors should avoid those products when selling to bars and restaurants, and focus on products that individual operators would need.”
The Selling Process
Depending on the geographical location of the bar or restaurant you’re calling on, there will be peak selling and usage seasons.
“Summer season is big for northern climates and beach season for coastal locations,” Rosencrans mentioned. “Holidays are big for bars and restaurants—Fourth of July, St. Patrick’s Day, Cinco de Mayo, Labor Day, etc.”
Holidays are an easy opportunity for a bar or restaurant to create a fun event around an already-known celebration. These establishments can invite their guests and reward them with a few giveaways or photo opportunities. It’s about selling experiences—something that Holly Spillers, co-owner of Proforma MVP Marketing, has mastered.
Print+Promo spoke to Spillers in 2016 about a particular holiday-centric promotion that she handled for a client in the bar and restaurant vertical that stood out. The client owned and operated 23 regional British-themed pubs, and Halloween was a big annual celebration for them, complete with costume contests, live bands and drink specials.
The Katy, Texas-based distributorship helped this client promote these events through a variety of items, including custom drink coasters and banners, which advertised the upcoming activities. At the events, Spillers noted, patrons loved to take photos with their friends in front of a printed background, so she even supplied a red carpet. Stadium cups were provided for beer specials and table throws decorated the official location for customers to register for the Halloween costume contests. Beaded necklaces and can coolers served as giveaways.
“For us, this client is one of our top five customers, so the partnership is extremely profitable,” Spillers told Print+Promo. “They look at us as solutions providers—helping them come up with new ideas to make their promotions better year after year.”
As you try to determine the best way to help your client meet its goals, have an exploratory conversation. Rosencrans said to ask about the clientele. Is it mostly adults? Kid-friendly? Is the establishment trying to push certain times of the day or specific food or beverage sales?
“Have some product ideas or theme concepts ready as your discussion progresses,” he concluded. “You want your client interested and dependent on you for ideas and sourcing.”