Promotional Products Industry: Balancing Risk and Reward
After Labor Day, I'm looking forward to spending some time with the Ohio Promotional Professionals Association at their "Promotions At the Bay" event, at which I'll be speaking to a group of both suppliers and distributors. In preparation, I've been doing some research on recent Consumer Product Safety Commission fines for the presentation. The latest update to the CPSIA is anything but light reading, but provides much insight into the agency's current direction.
Many of the folks attending the OPPA event are sales reps who are out in the trenches, actually making the sales of promotional products on a day-to-day basis. But the fact is, not everyone sells to the Fortune 500 end-user every day. Likewise, not every company ships product to California, where it's imperative to understand and deal with Prop. 65 concerns. And, of course, not everyone works for an organization with unlimited resources for monitoring the thousands of regulated chemicals and products, as well as the many changes made by the CPSC and Food and Drug Administration.
So, for me and my team, one of our biggest challenges is the question of how we can help those promotional product reps actually closing the sales and working with limited resources make it part of their decision to deliver safe and socially compliant product? It's all in the balance of risk and reward.
The Basics of the Risk and Reward Equation
When you're evaluating a potential customer relationship or a sale and thinking of it in the terms of risk and reward, simply consider these three questions:
- What does my company expect?
- What does my customer expect?
- What does the state of destination require?
Let's First Consider The Risk
The CPSC lately has turned to widely publicized fines, rather than simply creating new regulations, to gain more attention for product safety responsibilities. Not every situation merits a $3.9 million fine like repeat offender Ross stores, or the $400,000 fine to Kolcraft, or $987,500 to Williams-Sonoma.
But every situation could result in a personal civil penalty of $100,000 per violation. Well, that's getting serious, isn't it? Unless, of course, there is a death involved with a product failure. Then the fines go to $250,000 per incident for individuals and $500,000 per incident for companies. In short, choosing to sell a product that does not have a readily available certificate of conformity means the question becomes, "Is it worth that risk?" Risk has a way of finding its way all the way down the supply chain—from supplier, to distributor, to end-user. And in the eyes of the CPSC, everyone shares in that risk.
Now Let's Consider the Potential Rewards
When it comes to that risk-reward decision-making process, risk, of course, is balanced against the potential reward. For the sales rep, of course the reward of revenue (and commission) from the sale is the end game. Unfortunately, the CPSC has a thought about that, too.
Should the commission choose to seek criminal penalties, they can also include forfeiture of the assets gained from the sale of a product that failed. Huge sale, huge commission, new boat for a sales rep? Yes, that's an asset gained from the sale of a product that failed. As far as the CPSC is concerned, any asset purchased as a result of profit from the sale of a product that failed is fair game.
As you might imagine, between fines, costs of recalls, PR nightmares, and the ill will generated among present and future customers, it's the kind of thing many companies (and individual reps) could not survive.
How to Mitigate Risk
Even though you might be working with limited resources, there are a number of ways to mitigate risk. It starts with the transparency of the supplier's supply chain and the importance of understanding that getting a good price is not mutually exclusive to getting a safe and compliant product. Asking the tough questions of a supplier, making sure they can prove they have the right answers is just good sourcing practice. And that conversation should not come separately from the discussion of price and service. I'd be remiss not to mention that if you really want to be confident that you've mitigated your risks, one sure way (though, not the only way) is to buy from a QCA-accredited supplier. No matter how it's done, it is about doing what's right for the customer, even more than being the right way to do business.
Ultimately, we're not just talking about risks and rewards and making sales and growing businesses—we're talking about the overall sustainability of the promotional products industry. Do you want to be the last straw for an end-user and the reason that she, or he, potentially steers away from promo products in lieu of "safer" alternatives, like gift cards? Or do you want to be part of the effort that's fueling confidence and trust on the part of customers, as well as growth and prosperity for the promotional products industry as a whole? It is, after all, our collective choice.
Jeff Jacobs is the executive director of Quality Certification Alliance (QCA), the only independent organization accrediting supplier processes in the promotional products industry. QCA is setting the standard for safe and socially compliant manufacturing. Prior to joining QCA, Jeff was the director of brand merchandise at Michelin N.A., serving on its worldwide quality committee for promotional and licensed products. Prior to that, he worked with brands in publishing, home video and broadcasting.
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Jeff is executive director of the Quality Certification Alliance (QCA). Prior to that, he was responsible for developing safe and compliant brand merchandise for Michelin. He has worked with brands in publishing, consumer products, broadcasting and film for over 30 years. Follow Jeff on Twitter, and QCA on Facebook.