Whether you're just starting out or are a seasoned entrepreneur, Inside Business provides you with advice and best practices to help you better manage your business. From tips on workplace gifting to financial guidance and everything in between, we provide solutions from top executives and business leaders that will help you find your organization's unique point of difference.
Business owners who have a firm grip on their companies recognize the value of a good corporate gifting strategy. Increasingly, the data -- and their customers -- are backing them up.
According to recent survey conducted by independent research firm, Justkil, 68% of individuals who have received a gift from a company said the gesture strengthened their relationship with the business. That’s good news for any business owner looking to leverage the power of good customer relationships.
However, a company can best optimize its corporate gifting experience by ensuring that experience fits within the confines of a carefully crafted corporate gifting budget.
"As a small business owner, one thing that we think sets us apart in our competitive market is the budget we earmark each year for a gift to customers who have booked our service over the past year," said Taylor Roberts, owner of moverschicago.com, a full-service moving company.
Roberts started sending gifts out to customers approximately four years ago, and has never regretted it. One reason why Movers Chicago has a quantifiably higher customer retention rate is that management has made sure that the company’s gifting strategy fits neatly within a predetermined budget.
"Given this data, we're seeing that it makes financial sense to budget for these annual gifts," Roberts said. "As a business owner you need to have a good understanding of your profit margins so you can allocate an amount that will work for your business model."
Five tips to build the perfect corporate gifting budget
Creating a corporate gifting budget is highly doable if you follow some effective guidelines. These five tips should be at the top of any gifting budget list.
Lay the foundation
Don't be extravagant with corporate gifting -- it could easily bust any gift budget.
"Your customers will appreciate your gift just because you remembered them,” said Michelle Devani, founder of lovedevani.com, an online relationship advice platform. “Remember in the giving process, it's the thought that counts."
Once you adopt that mindset, Devani recommends the following must-haves for a good gifting budget.
- List your regular gift recipients.
- Determine what you can afford to spend based on company revenues.
- Do your research before shopping for corporate gifts or assign a trusted associate to handle the job.
When you create the actual budget, set realistic goals like what gifts you have in mind and the projected amount of your allotted budget.
“From time to time, you may need to go over your allotted budget, so it’s good to have a backup fund just in case,” Devani said. “Better yet, stick to your budget, and look for gifts you can afford.”
Scale to your company’s unique needs
Company gifting budgets should prioritize its top customers, then craft different spending patterns to other recipients.
“Corporate gifting is essentially a form of marketing,” said Steve Orlowski, general manager of Review Home Warranties, Egg Harbor, N.J. “With that in mind, set aside 10% to 15% of your marketing budget for corporate gifts.”
Within that 10% to 15%, break down the budget by individual customer or customer demographics, usually based on bottom line value.
"Some customers are higher prospects than others, allocate a greater budget to the higher valued groups," Orlowski said. "For example, set aside 50% of the gifting budget for customers enrolled in your loyalty program. 40% for non-loyalty members that's been with the company for at least two years, and 10% for customers that made at least one purchase in the last six months."
Avoid setting unrealistic expectations
A common mistake companies make is expanding their corporate gifting beyond the scope of the original marketing budget.
"15% is the budget ceiling," Orlowski said. "When you exceed this figure, gifts tend to become more lavish than necessary. Sending a customer a lavish gift like a smartwatch or a gold money clip has a big temporary payoff. However, from there on, they will expect gifts of similar magnitude." He warned that the minute you stop or downgrade the gift, they will likely feel slighted.
Factor in shipping costs
One mistake Movers Chicago made early on with its budget was not factoring in shipping costs. "As a result, the costs of shipping our gifts ran higher than we anticipated," Taylor said.
Make sure to include your employees
Any corporate gifting budget should have room for staffers, too.
"Your employees deserve gifts as a thank you for their hard work and effort for growing your business," said Ian Sells, founder of RebateKey, a retail ecommerce platform based in San Diego, California. "Consequently, make sure part of the gifting budget goes to employee gifts."
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