Cost of Doing Business

For decades, success for salespeople in the promo industry boiled down to “sink or swim.” New reps were handed a catalog and a phone and were instructed to “start making calls.”

Times have changed of course. Onboarding for reps new to the industry is now far more robust. The wealth of available software solutions (both on the back-end in managing the customer relationship and on the front-end in communicating with clients) has redefined what it means to sell. Robust benefits, enticing amenities, necessary protections like cybersecurity – all of these have become non-negotiables for staying competitive as a business.

None of those things come for free. Because of that, distributors are moving away from the traditional 50/50 split to take a bigger slice of the pie. At the same time, long-term economic uncertainty and a competitive job market have created demand among reps for base pay for extra security and comprehensive onboarding. And distributors are happy to oblige since they can then take more commission percentage on each order.

“We want to scale and that comes with a higher cost,” says Brett Boake, general manager of SCORE Promotions (asi/321353). “So we need margin from the sales team.”

This latest edition of the ASI Sales Compensation Survey tracks the change in the industry’s compensation models, as well as major shifts in other areas such as benefits and job satisfaction. Here are five promotional products sales compensation trends to watch for in 2024 and beyond.

1. The Traditional 50/50 Split Is in Peril

It’s more expensive than ever to run a business – and that fact is pushing companies to take a bigger cut of what reps bring in. Because of that, distributors are re-examining the industry’s long-standing 50/50 commission split (where half goes to the rep, and the other half to the company).

When Sandy Gonzalez, CEO of MadeToOrder (MTO, asi/259540), started out in the industry in the 1980s, distributors didn’t provide marketing, didn’t have a website or email, and certainly didn’t purchase laptops for everyone. Now, not only are distributors expected to offer a slew of services for their reps and provide the latest in equipment and software, but they’re also held to strict cybersecurity standards by their customers, and reps require training in everything from sourcing to forever chemicals.

“We invest in software, plus we’ve added order production support, artwork creation, laptops and IT support,” says Gonzalez. “We’re also sprucing up our website. Expenses have continued to creep up, so the old 50/50 model just doesn’t cut it anymore.”

The cost of running a business has become “astronomical,” and it goes up every year, says Chris Faris, founder and CEO of BOOST Promotions (asi/142942). From paying for benefits, to samples, overhead, rent and utilities, everything hits management in the wallet. “So everyone has to take a look at the 50/50 split,” says Faris. “An employer can’t make 10% on a sale and survive. But you include some commission so the rep still takes responsibility to produce.”

In addition to the security it offers, base pay allows Whitestone (asi/359741) to offer high-end service to both its clients and team members. “We have very robust operations here, so reps are paying for the other half of the business, like designers, production, HR and finance,” says Dominique Volker, executive director of enterprise sales and a 2023 ASI Media Distributor Salesperson Finalist. “We offer white glove service and creative, so the 50/50 split doesn’t work. We could charge people for art hours, or we just change the commission split. But compensation is touchy because it’s people’s income.”

2. Benefits Are Taking Priority – With a Cost

To compete for talent in a tight job market, distributors have had to add more benefits to their menu of incentives. Indeed, among all the types of benefits asked about on the ASI Research survey, each one of them increased in frequency between 2021 and 2022.

Boake says this is another reason why the 50/50 split is no longer feasible – people expect their employers to offer perks, which cost money. SCORE’s team recently moved to a larger building in Toronto with a full gym equipped with Pelotons and an on-site yoga instructor (that saves employees from having to pay for a monthly gym membership), as well as a full-time mental health professional on staff. The company is also putting more money toward the employees’ healthcare plan. “We’ll take a little more commission,” says Boake, “but we give them these amenities.”

MTO offers a competitive benefits package that includes medical, dental and vision coverage, 401(k) plans and PTO. In addition to sales incentive programs, equipment, software and IT services, it’s critical that management provides training in diversity, equity and inclusion and responsible product sourcing, among other topics. “We have to keep pace with the times,” says Gonzalez.

Tonja Zander, bilingual merchandising specialist at TPS Promotions & Incentives (asi/341409), says that younger generations coming into the space are willing to give up some commission for more base pay and a richer corporate environment with competitive perks. At TPS, team members enjoy flexibility, work-from-home (WFH) days, extra time off, educational opportunities and team-building events. “For younger generations, money means less and culture means more,” she says. “They want to get up in the morning and feel good about where they’re going and believe in the place. People will stay because of the culture.”

At Whitestone, management offers resources and support for sales reps – like an operations team that takes care of POs and tracking. They also pay 100% of employees’ healthcare premiums, and offer maternity and paternity leave, mental health days, volunteer PTO days, a gym stipend, a WFH stipend and summer Fridays. And every five-year work anniversary, the team member celebrating the milestone receives an all-expenses-paid vacation. “New sales hires are surprised at the support they get,” says Volker. “But we also set high goals, so if the person just wants to get in and get out and it’s just a job, then it’s probably not for them.”

3. Straight Commission Continues to Fall

While ASI Research found that straight commission was still the most prevalent compensation plan among reps and managers, that number has fallen every year since 2013. (The survey wasn't published in 2020 and 2021 due to the pandemic.) And while 35% of survey respondents work off of straight commission, by comparison 23% of respondents say that it’s their most desired compensation plan.

There are many reasons why the rate of straight commission has decreased, distributors say. In a time of economic uncertainty, people want more guaranteed income – particularly the younger reps without an established book of business. Indeed, of those respondents with five years or fewer of industry experience, 44% desired a salary plus commission plus bonus plan, while only 10% desired straight commission. The numbers were almost exactly the reverse for reps with more than 20 years in the industry (7% and 47% respectively).

“The next generation wants security,” says Faris, whose company offers individualized plans according to reps’ wants and needs. “You can make more on a 100% commission basis, but mindsets have changed. And reps have options to go to other industries, so you have to get creative to attract talent.”

In Canada, the cost of living has skyrocketed. While overall inflation cooled in the fall following a series of interest rate hikes by the Bank of Canada, prices have been on the rise; the average sale price for a home in Toronto stood at nearly $1.13 million in October 2023. “People don’t want to be afraid that they can’t pay their bills,” says Zander, whose company is based in Markham, ON, close to Toronto. “With terms being extended to 90 days, sometimes 120 days, reps aren’t always willing to wait several months to get paid. Companies also want to keep talent, so with salary plus bonus, for example, there’s less panic. There’s less looking around and chasing the dollar elsewhere. Salary says, ‘We want you to stay.’”

4. Job Satisfaction Suffers Another Hit

The number of distributor sales reps who report being “very satisfied” with their jobs has dropped every year the survey has been published since 2018, two years before the start of the COVID pandemic. It stood at 41% in 2023, down from 49% in 2022.

That’s at odds with The Conference Board, which has been tracking U.S. worker job satisfaction since 1987. The 2023 survey found that 62.3% of American workers are satisfied with their job – the highest percentage ever in the survey’s history and the 12th consecutive year satisfaction has risen.

Volker theorizes that in promo at least, the drop in satisfaction is related to macro cultural shifts combined with managing clients’ expectations every day. “This is a fun industry, but we’re dealing with so many changes in the world and it wears on us,” she says. “Everyone’s on edge, and when clients come to us with a question, they’re usually frantic. You just have to smile and nod – there’s a lot of emotional labor in sales. It feels like we’re working hard for less money because of inflation. Budgets are tight, clients are dragging their feet. It’s like we’re working hard for smaller sales.”

Jo Gilley, CEO of Top 40 distributor Overture Promotions (asi/288473), echoed similar sentiments at the 2023 ASI Power Summit. “Our sales reps are working harder, even though sales are flat,” she said during a session featuring Top 40 leaders. “They’re quoting more things to get the order than in the past.”

On the daily, it’s also harder to get questions answered from suppliers. A lot of vendors have outsourced support in order to cut costs, but there’s often a language barrier plus a lack of knowledge about the ins and outs of the industry. “You usually can’t call them,” says Connor Mouty, senior account executive at Top 40 distributor Touchstone (asi/345631). “You can chat, but it takes a lot longer to get things accomplished. And when you’re dealing with custom products, it can be a headache.”

Clients also often jump jobs, more so than in years past, and reps have to constantly start over to build relationships. “There’s a lot of rotation among clients,” Mouty says. “People don’t stay at their jobs forever anymore. You develop a relationship, hit your groove, spend time with them, and then they pick up and leave. It could be an opportunity if you’re allowed to follow them, but that could ruffle some feathers at their new place.”

In the age of Amazon, distributors also find themselves justifying their prices and spending a significant amount of time to offer a high level of service. Clients can find information and products quickly online, says Gonzalez, so “we need to go beyond what can be found with a simple Google search in order to stand out and provide extra value, and that means putting in more time and effort.”

Zander says it’s not unusual to spend a full eight hours at work and then another two or three after dinner tying up loose ends at the end of the day. “Demands and expectations are so much higher than what they used to be,” she says. “End-buyers are used to everything being instantaneous. It really weighs on us. Old-school clients are like ‘it gets here when it gets here.’ Younger generations expect so much more from us and we’re still getting used to that shift. The hand-holding is very time-consuming.”

5. Compensation Keeps Increasing

Even as the possibility of a recession continues to loom, median compensation has been on the uptick since at least 2015, standing at $75,000. And more than half of reps expected their compensation to increase once 2023 concluded.

The increase can be traced to a number of factors, including the impact of ongoing inflation, companies offering more money to compete for talent, sales growth since the pandemic, and a smaller pool of reps after COVID challenges compelled many salespeople to seek greener pastures or retire.

Distributors continue to monitor economic conditions closely. Gonzalez says clients have yet to express concern outwardly, but a few made shifts in Q4 2023. “We had a tech client that recently canceled several orders and events, while others are hitting the gas,” she says. “I’m cautiously optimistic about 2024.”

Zander hopes that sales stay steady into the new year. While markets like consumer goods are doing well, others like automotive and insurance are struggling. “We’re fairly optimistic that we’ll hold our position and we’re also getting new accounts in,” she says. “It’s important to diversify your client base. Don’t put all your eggs in one basket.”

Mouty says one of his clients, a staffing agency in Cincinnati, did its biggest holiday gift ever in 2023. And yet, unease continues to linger. Some clients canceled or postponed their Q4 campaigns after looking at their budgets, while others did a smaller gift than in previous years. “It also depends on how the client views promo,” says Mouty. “For some, it’s vital and important. For others, it’s the first thing they cut in tough times.”

As the team at Whitestone began to field orders for Q1, it noted the job market seems to be more stable after several years of volatility, and budgets may open back up again in the new year. “In the tech industry, there were multiple rounds of layoffs last summer,” says Volker. “Still, they want to keep talent, so they do appreciation programs, off-sites and gifting. Sales do seem to be ramping up for 2024.”