URL: http://www.entrepreneur.com/magazine/entrepreneur/2000/november/33650.html

The power of "free" is undeniable. For proof, attend any trade show. Although you'll see traffic at booths exhibiting the latest products, there's even more traffic at booths giving away free stuff. The same can be said for businesses with well-thought-out incentive programs. You're sure to sense heightened morale and productivity in offices that reward employees for jobs well-done.

But while recipients of both promotional products and employee incentives view the items as free stuff, such freebies are distinct from each other. Promotional items are hot products used as giveaways to your customers or potential customers. Anything your logo will fit on is fair game-mousepads, coffee mugs, Frisbees, etc. No matter how practical or creative you are when choosing the item, all promotional products serve the same purpose: to generate name recognition and customer goodwill.

Employee incentives are used internally rather than externally. Instead of presenting gifts to your customers to encourage their business, you use incentives to reward your employees for working hard and achieving their goals. Employee incentives are usually more extravagant than promotional products and are meant to show appreciation for your employees' efforts. Can the two ever be the same? Sometimes. While you'd never hand your employees stress balls after the successful completion of a project, it's not that uncommon to give them sweatshirts boasting a company logo.

More technically known as promotional marketing products or ad specialty items, they're often referred to as tchotchkes (pronounced chotch-keys). And there are no rules to what you choose—just find something that will successfully get your company's name and mission into the heads of customers.

If you own a financial service, a good fit might be pocket-sized solar calculators. Or, if you have a car-repair shop, you could give away tire pressure gauges imprinted with your logo and phone number. A popular choice for Internet-related businesses is mousepads with a logo and URL. Seasonal tchotchkes include fleece vests and beach towels.

Incentives are designed to promote a positive message within your business. Managed properly, they boost morale and productivity by giving your employees tangible goals to aim for within the parameters of their jobs. The right incentive can motivate any department in your business, from accounting to customer service.

Your options are extensive, and creativity counts. Don't limit rewards to traditional recognition symbols like trophies or plaques. Consider merchandise, trips, gift certificates—even time off. You can also offer group incentives or a menu of choices to fit the differing tastes and interests of your employees.

Choosing the right incentive isn't as simple as flipping through a catalog. In fact, your first decision is more important: what type of program to set up and how it will be structured. Although it's easy to think of incentives in terms of an annual program, it's sometimes better to reward more frequently.

The incentive should match the effort exerted. Rewarding quarterly or based on targets (like hitting certain sales figures or meeting certain deadlines) makes just as much sense as an annual program and can be just as effective. Of course, quarterly rewards don't have to be as lavish as incentives awarded annually.

Keep in mind that incentives need to reflect your employees' tastes and interests as well as the effort put forth. Plus, you don't want to offer gifts that aren't available immediately. Don't make your marketing team work extra hours one week to make a deadline, only to offer rewards that they'll receive weeks down the road. That can be discouraging and can even affect their future efforts negatively. Most gifts, with a few exceptions (like trips), should be available in less than 72 hours. That way, it's easy to make the connection between the gift and what it's rewarding. Cash is often looked down on as an incentive. Employees might view cash rewards as part of salary rather than a reward. Or they may come to expect them, so use cash rewards judiciously. But avoid offering promotional products as incentives; doing so seems tacky. You have the chance to show your appreciation for your employees' dedication with an appropriate reward, so don't use incentives as a marketing tool. If it's obvious that you didn't put any thought into the incentives, your employees won't appreciate them, and your program will backfire.

When selecting a vendor, choose one who will collaborate with you and not just throw you a catalog of products to look through. Reputable and useful vendors will want to discuss the best product for your situation and should have creative suggestions.

Promotional product vendors will manage the production process for you. They generally act as brokers, receiving the merchandise from a third party. As you work with your chosen vendor, pay special attention to the visual appearance and quality of your promotional marketing item, including its look or your logo. Samples should be readily available for you to inspect firsthand before you finalize your decision. Some vendors offer a limited selection of gifts or an array of products from third-party vendors. If your vendor deals with third parties, make sure they aren't charging above retail for their products. You can also work with a service that will manage the program and supply the rewards.

Most companies that offer logo merchandise require a setup fee of at least $35 to prepare your artwork, as well as a minimum order (usually a few hundred of the smallest items, less of larger ones).

Pricing varies depending on quality and quantity; you could pay anywhere from $5 to $20 per T-shirt, for example, depending on whether you go with brand names and how many you order. As with any bulk order, your per-item price gets lower as your quantity rises. Whatever you decide, make sure you're getting the most for your dollar while not resorting to shoddy materials.

After all, the final product will be a tangible symbol of your company's message. And you want to make it one worth hanging onto. (Visit my Web site here to shop around for promotional products.)

With incentives, how you buy and how much you spend all depends on the type of program you're running. If you're outsourcing to an incentives service, you could pay a lump sum or on a point system that the company administers; and your employees can choose rewards from its online catalog. Use these figures for benchmarking: For a sales incentive, the value of the award should be between 3 and 5 percent of the participant's annual income; in a nonsales program, that number could well be as low as 1 percent. But remember that you know your employees—and your budget—best.

Promotional products and incentives have proved to be quite effective in promoting businesses both inside and outside company walls. The toughest part about incorporating them into your business is deciding on the products and ideas that best suit your company and your budget. But spend the time to make a smart decision on what to offer—you'll reap the benefits multifold.

Item categories	Most popular promotional item	Average price per item*
Apparel	100% cotton T-shirt in multiples of 12	$5-$8 (orders usually in multiples of 12)
Automotive accessories	16-ounce stainless steel travel mug	$10
Buttons/badges/ribbons	business-card-sized magnet stickers/magnets	$.20-$.30
Calendars	weekly desk planner	$25-$30
Computer products	standard-sized mousepad	$3-$5
Desk/office/business accessories	sticky notes, 25 sheets	$1-$2
Electronic devices and accessories	credit-card-sized pocket calculator	$2-$3
Food gifts	glass candy jar (11-16 ounces) filled with candy	$5-$6
Games/toys	stress balls, basic round, 3 inches, solid color	$1-$1.50
Glassware/ceramics	11-ounce ceramic coffee mug	$1-$2
Houseware tools	small plastic flashlight	$4-$5
Personal/pocket-purse products	small Swiss Army knife	$15-$18
Sporting goods/leisure products/travel accessories	Frisbee	$1
Textiles	all-purpose canvas tote bag	$3-$5
Writing instruments	basic ballpoint pen	$.50-$1

* Most vendors require a minimum order; we based our prices on a minimum order of 100. Pricing for products is figured before any printing. Expect to pay $35-$75 per order for setup charge. (The range reflects the different methods of logo printing.)

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Mie-Yun Lee is the founder and editorial director of BuyerZone.com, a premiere online marketplace for growing businesses. Diane O'Brien contributed to this article.