Company description: Direct marketing of promotional products
4imprint’s business model is remarkably straightforward. It supplies customised, promotional products to customers across North America (97% of revenues) and the UK and Ireland (3% of revenues). Trading over the last six months has been atypical due to the coronavirus pandemic, which has had a significant impact on the way North American businesses function. 4imprint’s reaction has been to protect its people through moving to remote working wherever possible and to continue to market to and deliver to its existing and potential customers, subject to the necessary operating constraints. The marketing approach has been rapidly rescaled and reconfigured to reflect the circumstances and this flexibility will continue as and when the US economy reopens and recovers, which may not be on a smooth trajectory.
Despite the dramatic changes in the operating environment, 4imprint’s ethos is unchanged. Management is protective of the group’s reputation for ‘best-in-class’ customer service and of its partnership approach to dealing with its suppliers. In both aspects, the brand’s positioning has undoubtedly helped to give a degree (obviously unquantifiable) of resilience against the worst of the market impacts. The scale of the operation is large, running at around 1.3m orders a year, but all are individually customised and of great importance to the customer. The market is highly fragmented; there are an estimated 23,000 distributors in North America alone. It is, however, substantial, estimated by industry body ASI at $25.8bn in 2019. 4imprint’s growth has consistently outstripped the market, with a revenue CAGR of 14.0% for the period FY11–20e, compared to an estimated market growth of 4.8%. This premium growth is being delivered through the group’s sophisticated direct marketing operation, based on data and covering online and offline approaches to recruit new customers and to drive return visits. Marketing spend is managed with a view to driving the top line while broadly maintaining operating margin. How the spend has been tailored to suit the changed circumstances is described in more detail below.
Customised, promotional products
Exhibit 2: Sample 4imprint products
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Exhibit 3: Sample 4imprint apparel
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Exhibit 2: Sample 4imprint products
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Exhibit 3: Sample 4imprint apparel
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Promotional products are used by businesses to increase the profile of their services, products or events, and also to motivate staff within their own operations. The product range offered by 4imprint is extensive, from the basic, such as pens, bags and drinkware, through to higher priced items such as apparel, business gifts and full displays for trade shows. All are customised with the name and/or logo of the organisation doing the promotion. 4imprint has over 5,000 products that can be customised and shipped in less than 24 hours (order today, ship tomorrow) and over 600 exclusive lines. Overall, the group lists around 50,000 SKUs, taking into account different colourways, etc. The average order quantity is over 300 items.
The immediacy of the relationships with both customers and suppliers allows for trends to be quickly identified and addressed. 4imprint only carries a small amount of inventory, principally the own-branded Crossland apparel. The general method of working is on a ‘drop-ship’ basis, whereby the supplier holds the inventory, prints the product and ships it directly to the customer. This gives 4imprint the ability to offer a far higher number of product lines, without any of the associated stock risk. It does require a high degree of trust and co-operation between the group and its supplier base, which it cements through a collaborative/partnership-based approach and prompt payment. The closeness of these relationships has held the group in good stead with the onset and development of the COVID-19 pandemic. A supplier operating at lower than usual levels will prefer to work with those they know and trust, in the knowledge that they will be paid – and on time.
As at the end of December 2019, 4imprint was holding $11.5m of finished goods and goods for resale (which includes goods in transit), compared with FY19 revenues of $860.8m, and up on $9.8m from the prior year (versus $738m of sales in that year). At the half-year, this figure was $8.6m, which is greater as a proportion of sales than prior year (3.2% from 2.9%), but necessary to ensure smooth fulfilment of customer orders when logistics have been more challenging.
The top categories of product in 2019 were:
Exhibit 4: Top product categories 2019
Rank |
Category |
Rank |
Category |
1 |
Apparel |
6 |
Technology (power banks, Bluetooth speakers etc) |
2 |
Bags |
7 |
Outdoor & Leisure |
3 |
Drinkware |
8 |
Tradeshows & Signage |
4 |
Writing (pens etc) |
9 |
Auto, home & tools |
5 |
Stationery |
10 |
Wellness & Safety |
Some other distributors of promotional products have switched their product bias as the pandemic spread, with a move into unbranded PPE. While 4imprint has added some COVID-19 specific lines, these have been items such as hand sanitiser and branded face masks, so within the existing product sphere.
While it is easy to envisage a high degree of automation with an online business model, part of the strength of the business is the management of the combination of digital and analogue. This applies both to the marketing and the operational side, where day-to-day activities involve a far higher element of handholding for customers for whom this type of buying is not central to their normal working practices. Customer service personnel talk to customers over the phone to guide them through the process – albeit that much of this has been done remotely over recent weeks, rather than at the main office in Oshkosh, Wisconsin.
4imprint employs around 1,200 people. This is usually supplemented with temporary employees according to the demand cycle across the year, although the figure for FY20 may well be quite different, depending on how the remainder of the year develops. Around 650 (normally) work at the main office, with the balance employed at the distribution centre nearby, also in Oshkosh, Wisconsin. Over 300 are employed in a customer-facing capacity. During the pandemic, roles that can be fulfilled through home working have been and the majority of office-based staff remain working from home. The distribution centre was shut for several weeks, then reopened at reduced throughput and with social distancing in operation. The embroidery facility is also now back in action.
Within the main office, there are some specialist teams: a team focused on inbound enquiries from Canada, including French speakers; an Education team, focused on K-12, colleges and universities, and on licensing; Federal, state and local government; Spanish speakers; and a small team specifically dealing with claims and credits. Supplier faults/errors and delivery issues are dealt with by this team, and the overall rate of orders needing attention of this type runs at less than 2%.
The personal approach is a crucial element of the differentiation over an order from an online platform, such as Amazon. A team member taking an inbound call has access to that customer’s order history and digital artwork and can walk the customer through the options and process, or talk through those with an inbound enquiry from a new potential customer, building the level of trust needed to drive longer-term, repeat business.
Having been based in Oshkosh since the early 1990s, 4imprint is a well-established local employer and cultivates its reputation as a preferred employer through offering benefits such as training, onsite medical and dental provision (company-funded), holiday pay and pensions. Staff retention is very good, with turnover in low single digits.
Orders are processed, customised, then despatched, mostly direct from the supplier. The large distribution facility is located in an industrial zone on the outskirts of Oshkosh. An idea of the scale is shown in the video below.
The distribution centre has three key roles: ‘Blue Box’ marketing, sample pick & pack and embroidery to customise apparel and bags etc. 4imprint is well-known for these Blue Boxes, which are a core element of the marketing, designed to drive customer retention. The contents of the boxes are tailored according to the relevant data, with catalogues and relevant samples enclosed. This programme was suspended while much of the North American business community has been working remotely and has now resumed at a reduced level.
Embroidered apparel is the area where 4imprint’s proportion of revenue is lower than the distributor market and is therefore an area of focus in driving the top line. It has a particularly high perceived value and is often used as an element of staff motivation, in addition to the promotional benefit. It obviously sells through at higher price points and boosts basket size. The embroidery side of the 4imprint’s offering differs to its other products due to the degree of customisation that must be carried out before despatch. Management has evaluated the business and commercial dynamics of in-housing as opposed to external sourcing. The key issues swaying the argument to an internal solution principally surround scalability, product quality and speed. Unless these can all align, the risk to client satisfaction – and hence quality, repeat business – is too high. To give the capacity to increase apparel in the overall business mix, the embroidery facility was extended over the last year and direct to garment printing was added just before lockdown, at a cost of $2.3m. Bespoke digital printing is also carried out at the facility for display materials and where transfer printing is preferred or technically superior to embroidery for fabrics and bags.
Exhibit 5: Video of the distribution centre
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The UK and Ireland business broadly replicates that in North America, but on a far smaller scale and without the embroidery facility.
Reactive and adaptive marketing drives the top line
4imprint has many years of experience honing what does and does not work when it comes to encouraging existing customers to buy and how to recruit new business customers. Management monitors marketing effectiveness through KPIs such as the number of customers acquired and the percentage of those customers retained after 12 and after 24 months. Customer acquisition has historically been more heavily weighted to Q2 and Q3 on an increasing trend across the last decade, with between 32% and 38% ordering again within the subsequent 12 months and between 38% and 45% re-ordering before two years have passed. Obviously, the situation for the current year is far from normal circumstances and the steady growth that has been seen in previous years has been interrupted. What is interesting – and encouraging – is that customer recruitment, although diminished, has not completely dried up. This is testament to the efficacy of the management of the marketing activity and, in particular, of the TV campaign to boost brand awareness.
The group uses a wide range of marketing techniques (some of which have been less relevant in recent months where workplaces have been far emptier than normal). These include ‘traditional’ printed catalogues, SEM, email, quantitative analytics, Blue Box physical samples (used for customer retention) and, more recently, television and radio campaigns aimed at boosting brand awareness. The management of the marketing mix is sophisticated and is based on the data derived from each marketing exercise, which is fed back into the planning. This systemic management of the marketing effort is a vital part of the group’s IP and is key to how the group has been able to build its market share through understanding customers’ needs and buying patterns. It has also facilitated the flexibility needed in speedily adapting the mix as the pandemic has disrupted working patterns across North America.
Exhibit 6: Customer acquisition and retention
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The main changes in the mix as a result over the last six months have been a significant reduction in catalogues (little point in them sitting on desks of people who are not in their normal workplace) with direct mail halted between late March and June. The Blue Box scheme was suspended for the same reason between May and mid-June. More recently, the group has been trialling a limited resumption delivering these to the home offices of the relevant individuals, entirely on an ‘opt-in’ basis. Catalogues may look to be a 20th century technique, but they are proven and still very effective in a B2B context and suit the nature of the businesses that form the core customer constituency, likely sitting on the desk of the targeted individual. It is therefore likely that they will be resumed but may not in future form as large a part of the mix. Photographic work has been done in house in studios at the head office, with models all being from the workforce – again this has been temporarily curtailed but will resume as conditions ease. Sourcing this element in house has obvious cost benefits but also adds to the authenticity of the branding.
In FY18, 4imprint added linear TV to the marketing mix to promote the group’s brand awareness rather than to directly drive sales. The original experimentation and investment (an incremental $7m) proved even more effective than had been anticipated and now forms a core part of the marketing mix. It drives an increased proportion of direct traffic to the website, as opposed to traffic delivered via search/Google, and in inbound interest over the phone. Unprompted and prompted brand awareness also rose by a greater extent than originally anticipated, with a further double-digit improvement year-on-year in H120.
With the onset of the pandemic, the creative element of these ads was tweaked, with two new campaigns addressing potential and existing customers. Costs for TV campaigns dipped considerably initially and have now firmed up again, albeit lower now than a year ago.