It is hard to succeed in a big tender without careful and on the limit price calculation. But there are times when such calculation is almost impossible … Like for example when client provides not exactly clear image of a bag or backpack and expects quick price calculation for large quantity. On top of that the price needs to be quoted for transport by air.

With no time to produce the sample there is no chance to calculate the cost accurately. The unit cost can only be estimated. Too high estimate results in no business, too low estimate results money loosing production. Make your pick.

With no samples on hand the packaging info like carton dimensions and weight can also only be estimated. May be manageable if only sea shipment is expected. But estimating a bit too little or bit too much can mean big money when it comes to shipping by air …

And then the cost of air shipment itself. With airfreight costs effectively doubling in past month or two and no clear direction for the near future what rate to select for price calculation for goods expected to be shipped in about 3 months time ?

Pricing can be fun …

The current global financial crisis is slowly but surely spreading from banks and financial institutions to other sectors of (global) economy. How it does, can or will affect the BizGift industry ? I say it will but hopefuly (thanks to the nature of this industry) less than some other industries. Here is why that can be the case.

BizGift industry does not target the retail customers (at least not directly).

When crisis hits people start spending less. First go the pricy items (cars for example) but if the crisis hangs on even cheaper but non essential things remain unsold. Retail sales suffer. But BizGift products are not out there for people to buy. They are out there to motivate people to buy other stuff.

When sales are falling companies have even more reason to invest in marketing.

When sales are falling companies can either give up and shut down or do something about. If the pie is shrinking (buying power of consumers) the aim has to be to take bigger share of that pie. Marketing activities have to go on and they do include purchasing of BizGifts.

Big corporations are cutting marketing budgets

This may sound like bad news and it well may be but not always. The BizGift industry is massive but cost of the promotional products that accompagny marketing campaigns is usually only a fraction of the total campaign cost. Imagine what you can get when you decide to spend USD100,000 on promotional products and then go and try to see how much advertising time on TV or ad space in media you can get for the same money. Cutting only a fraction from spending on media advertising probably saves more than cutting the BizGifts out altogether would. And BizGifts do work.

Look out for opportunities

And lastly – every crisis creates brand new opportunities. Taking them may require some courage as risks may be involved, but some time all that is needed is to approach the things differently in these new and changing conditions.

So aren’t there any dangers ?

Yes, they are, of course. Perhaps not for the entire industry but for individual companies.

Many BizGift companies rely of few major accounts to survive and prosper. The major account can be for a large company, for some other one or two local business. Some companies cut their spending but there are those that go under. Loosing one or more of the key clients may be devastating for BizGift company.

Many BizGift companies keep significant stock of merchandise in their warehouses. Without that it would be hard to provide superfast service people are used to these days. That stock has to be financed somehow, usually by banks. While business is steady or grows there is no problem. But drop in sales may result in inabality to meet the payments to banks and all sorts of troubles may follow rather quickly.

Many BizGift (as well as other) companies give favourable payment terms to their good clients. But even good clients may get in short term difficulties. Delays or defaults on payments may create serious cash-flow issues. Not a pleasant situation.

One of the difficulties of our business is that the products we are asked to make are often brainchildren of marketing, advertising and design people with limited knowledge of production process. The fact that they may not understand what it takes to actually produce their idea is perfectly understandable. But what I can’t understand is why they do not want to listen when we try to explain or give suggestions ? And it does not stop there. When things go wrong, exactly as we warned them they would, we get blamed …

I have a fresh example. We were asked to produce a special packaging for a product for children. Rather simple item but with a bit complicated artwork. The item had two parts – body and the lid – and the image was to be printed over the entire product. This would also be OK if not for one thing. There were few important details on the design that we split up – part of it was still on the body part already on the lid.

The moment we received the artwork we could tell that this simply will not work. There was no way that the lid and the body can match that well. We told the client right away that the part of the detail on the lid will shift to the side (left or right) and will not match the part that is on the body. We also explained why. We recommended adjusting the artwork and print those important details on the body of the package only. We were told off and told to do what we are asked to do.

So we did just that. But knowing the result in advance we went the extra mile and without bothering the customer we did some adjustments and prepared an alternative sample as well. We simply wanted them to see how it could look. As our client refused to even think about adjusting the design themselves we did it for them, at our cost as a favour just to speed the whole thing up. The time was running and no one would consider moving Christmas to February. We had no idea what parts of the design can’t be touched and what parts can, so we did as we though would be fine. Our alternative sample was never meant to be a pre-production sample, only an example how it could be done if the original idea does not work.

What happened ? Well, of course the sample made according to the original design was rejected as unacceptable. Client decided to go ahead according to the sample we made up for them but … Of course there was a “but”. It had to be redesigned because we did not do the adjustments correctly in line with their manual (that we have never seen) …. This of course took extra time and delayed the production. And it is all our fault …

Can’t complain our business is boring .

When I saw this first I thought this may be one of the April Fool’s day things. But well, looks real enough. You want to send your brand around, brand a train . I do not mean a model train to give away but a real train that goes places.

The railways is Slovakia recently sold the naming rights to several cross country express trains to different companies. Here is a video from the naming ceremony. This one has been named after one of the local beer brands. I like the idea of splashing beer over the train . You can stop the video after the beer is spilled (around 1 minute mark), only a talk (without subtitles) follows. This train service will bear the name of the beer, all the soft drinks and beers sold on the train will be from the company that owns the brand. And I expect some nice paint job on the train to follow.

Well, sounds better than branding plane to me. Not too many people can see the plane paint job when it flies at 39,000 feet .

These are not the easiest times to do business. The world economy is slowing down, some markets are even slipping into the recession. So the last thing one wants to do is to increase to prices to make life for customers even harder than it already is. Unfortunately Murphy’s Laws rule the business and so when we are in a global economic slowdown times we also face cost increases higher then ever. What to do ?

One factor is the relationship with the customer and nature of his business. If you have a very open relationship with your client based on mutual trust than you can talk openly with your customer and find the solution together and everybody is fine.

It gets more difficult if there is even a slight mistrust or caution between supplier and customer. Client may not believe all you say, even if you are completely honest. Or you may not be willing to disclose all the information to customer worrying client may take an advantage from the extra knowledge.

So how to handle it ?

There are surely many in-between solutions to these market conditions but to generalize there are 2 approaches:

1. To absorb all or as much as possible of the cost increase and keep prices unchanged for clients until the moment clients have chance to revise their price lists.
2. To always copy the cost increases and pass them all on to clients as they occur

What is the better way? Hard to tell. Perhaps considering the cons of these 2 approaches is the way to go.

• If you keep absorbing the cost increases or squeeze your suppliers down to absorb part of it, you are being nice to your client. You are however reducing your margins to unhealthy levels and client often does not even know about that and therefore can’t appreciate it. Then a point comes where the prices have to be brought to reality. When customer sees the new price list, he freaks out and you get all the yelling and shouting for being crazy. That is often the reward for being nice to your client for as long as you can afford it …

• The other option is not much better. You may be asking for less increase (but more often) but you are still bringing bad news. So all you can expect are bad reactions. However this time you bring the bad news more than once so you get that yelling and shouting more often. There is a light at the end of the tunnel here however. One day you get used to that yelling and shouting and one day your client gets used to the regular price increases. None of you gets to like it, but both will get used to it.

Make your pick, I made mine already.