It’s not because we can’t or because we haven’t been asked. The reason is actually simple. It’s not a good business model for my company. It also would actually indirectly hurt our customers. Is that true for all business? I can’t say, but I know after long term experiences as a CEO that it’s not right for HairBoutique.com.
How does a gifting suite hurt a company’s customers? It’s actually quite simple. The cost of participating in the suite is extremely expensive and there’s not always a direct result of increased sales on the back end. When any company spends a very large sum on advertising promotions, the money has to come from somewhere.
That somewhere usually means increased prices to the end consumer/customer or cutting back somewhere else to make up the difference so the bottom line remains profitable. The participation costs have to be recovered and it will often come from future sales – translated to mean higher prices. Not always, but generally speaking this is true.
Many consumers don’t realize what goes into the famous gifting suites that pop up around the various award ceremony and similar celeb events. There are actually multiple things any company can do to participate with the goal being to attract celebrity patronage.
In the old days before the US and World economies started tanking it was probably worthwhile to seek celebrity approval for your products. One possible benefit of having a gifting suites is that when celebrities accept gifts they are usually required to pose for photos (no guarantee though) or allow the company providing the gifts to advertise that the celebrity selected their items (also no guarantees).
What is not widely publicized is the fact that many celebrities often re-gift some, if not all, of the goodies they receive at the shows. Celebrities, at least in the past, used to be bombarded with gifts from every imaginable manufacturer in hopes of the celebrity mentioning they used the products, or even better, the celeb would be photographed wearing the product or using it.
Gifting suites are big business for the companies that organize them (they make money as event organizes) and a great perk for the celebrities. But the companies supplying the goodies and their end customers often lose in the process.
One of the HairBoutique.com long time hair accessory designers (from the Northwest part of the US) was approached to do a gifting suite at the Academy Awards last year. Just to have the right to have a very small presence at one of the less opulent gifting suites it would have cost the designer approximately $50,000. That did not include what she was required to “give away” to the celebrities and other “guests” that attended. That was just the initial fee for rights to be there.
What guests you might ask? Celebrities will often bring members of their family, their celeb hairdresser, stylist or make-up artist or even their personal assistant. All frequently receive gifts along with the celebrity.
The hair accessory designer figured in the gifts she was expected to give (the suite participants are given minimum quotas of items to provide) the cost for hiring temporary help to make sure her area was constantly manned and all of her travel expenses. It would have cost her over six figures for the priviledge of flying to Hollywood to give away her accessories with the hope that one of more of the celebs would be seen wearing them.
She told me that she would have to raise all of her prices significantly to cover her gifting suite participation. Not a good thing to tell me since HairBoutique.com was one of her accessory distributors and that meant I would have to raise my Suggested Retail Pricing (SRP) to cover her increases.
After serious soul searching and talking to several other previous Gifting Suite Participants the hair accessory vendor in question chose not to participate and thus did not raise any of her pricing. She also recently told me she is so glad she did not invest in the Gifting Suite now that the economy is struggling.
For smaller companies not able to invest the initial $100K – $500K+ – depending on how many gifting suites (and their size and glamour) are involved, the size of the company’s presence, the number and cost of the gifts and other cost factors – there are the “gift bags”.
You have probably heard of the famous gift bags that are given to the various Award Presenters. The bags are stuffed full of “goodies” from a wide range of hair, beauty, fashion and accessory companies. Of course there are also certificates for shoes, vacations, airline flights, spa treatments and other related items.
A different accessory vendor who is located in Hollywood was asked to provide her gorgeous hair accessories for a huge awards ceremony. She was even asked to custom design the accessories put into the celebrity bags. She was so excited by the opportunity that she dedicated a large amount of her time to design a new piece and get many hundreds custom manufactured – all at her expense – for the event.
Because she donated to the gift bag with a custom accessory design, she received a complimentary ticked to the event and the dinner held after the award ceremony. She was surprised to see all of the female wait staff wearing her custom hair accessory in their tresses. Stopping of the female servers she inquired where she had gotten the hair accessory she was wearing.
The server, not realizing who the designer was, told her “in confidence” that the female wait staff had eye the accessory in the celeb gift bags and had “helped themselves” to the beautiful hair jewel. The LA accessory designer was shocked but wasn’t sure she wanted to make a scene at the dinner. She decided to keep quiet but vowed never again to provide anything to future gift bag requests.
I bring all of this inside Gifting Suite, Gift Bag, Goodie Bag info up because I read today about a Canadian company sending out press releases about the fact they have just been chosen to participate in Gifting Suites for the 2009 movie award shows. Of course I can’t call and warn them, but hopefully smaller companies that can’t afford the high fees and raising their prices for their end customers will read this and contemplate their options.
As you can imagine, I have also been burned by a similar scheme. Luckily my burn occurred in the very early days of HairBoutique.com when I was very naive about the ways of celebrity branding. I was asked several years ago to provide “gift bag” items for a huge New York gala honoring beauty editors from all the major publications.
We were asked to donate some of the smaller handbags we carry and fill them with travel sized brushes (from Conair) and samples (from Phyto and similar). We also included other cute items such as lip glosses from Burts Bees and similar. To make sure the editors knew the gifts were from HairBoutique.com, we hand attached notes and business cards inside each little handbag.
To my horror I later learned that the company compiling the gift bags removed all of the notes and cards from all of the Hairboutique.com donated items and actually scolded me for “branding my gifts”. HUH? I thought the purpose was to introduce the company and let the editors know what items we carried.
Wrong. As it was explained to me by the gift bag company, we were lucky to be invited just for the opportunity to give gifts to magazine editors. There was no benefit to us. Just the cost of a couple of thousand dollars. Sadly, none of the beauty editors attending the party ever knew that HairBoutique.com had provided the cute handbags full of goodies.
Are gifting suites a good business strategy? I guess it depends who you talk to. If a company feels they need celebrity endorsements to grow their brand it is the least expensive way to be able to link to a celebrity. Paying a celebrity for a commercial or print ads can be prohibitive. Is it more expensive to hire a celeb or to participate in a gifting suite? I guess you would have to be a bean counter and figure that out.
Are gift bags worth it? I guess if you can guarantee upfront that the items you donate won’t be given to maids, nannies and make-up artists. Or if you can be sure you can use the name of the celebrities you gave the bags to.
While some celebrities are very gracious and write thank you notes to the companies in the gifting suites or providing bags, the majority do not. Which means companies never even know if the celebrities that received the bags or attended the suites will ever use their products, recommend them to anyone or use them in public. In a way, its like throwing spagetthi at the wall and waiting to see if any of it sticks.
I do have to make one exception to this information. I have seen charity events where the gifting suites were used to raise money for good causes be a very good use of sponsor money. I have also seen gift bags being raffled off for charity. Those gifting suites and goody bags are certainly worthwhile and a good use of advertiser time and money.
One other downside to all the celebrity gifting suites and gift bags is the rise of non-celebrity groups feeling entitled to receive gifts from companies. HairBoutique.com receives a stead stream of emails and phone calls from people wanting gift bags for such events as baby showers, bridal parties and even a bachelor party. HUH? Of course they promise that the attendees will all become cusomters. Right.
Instead of participating in gifting suites, sending off goodies/goody bags or funding gifts for baby showers, HairBoutique.com gives back to our customers in the form of samples, surprise gifts and of course our secret coupons that are available in our newsletters. We also provide free shipping and other deals.
I would much rather reward our longterm customers than the nanny for a superstar. We also donate to worthwhile charity and not as a way to get publicity. I am a big believer in donating quietly and for no other reason that to do good works.
But that’s just me. I also believe everyone should do what’s best for their own business and their