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Costly Gifts Not Vital in Building Customer Ties

November 26, 2001

Executive Roundtable is a weekly column by TEC Worldwide, an international organization of more than 7,000 business owners, company presidents and chief executives. TEC members meet in small peer groups to share their business experiences and help one another solve problems in a round-table session. The following question and answer are a summary of a discussion at a recent TEC meeting in Southern California.

Question: With all of the events that have occurred since Sept. 11, there has been a huge downturn in my business. As a result, I am cutting expenses everywhere.

We usually do a lot of entertaining around the holiday season and give expensive gifts to customers. I would like to eliminate that expense this year, but I fear it will make a bad impression on customers who expect the gifts.

Is there any way I can cut out the gift-giving without hurting my marketing efforts?

Answer: Companies throughout the U.S. are having to reassess many activities as a result of the terrorist attacks. Sadly, holiday gift-giving appears to be one of them.

When it comes to evaluating marketing expenses, two issues come to mind: what you hope to accomplish with those marketing activities and whether you are actually getting a good return on your investment.

Ding Kalis, president of Magnus Industries in Santa Fe Springs, recommends starting with the first.

"Take a step back and look at the big picture," he advises. "Specifically, why does your company send out gifts--expensive or otherwise--at holiday time? Is it merely to thank your customers for doing business with you, or do you truly hope to make some kind of impact that will translate into improved customer relationships or more business for your firm? Also, do you voluntarily participate in the gift-giving process or do you feel obligated because everyone in your industry does it?"

If you hope to achieve some type of marketing outcome, what is your expected return on the investment and how do you measure it?

Can you quantify the return, or do you just throw the dollars out and hope it creates a certain amount of goodwill with your customers? If you can measure the results, do the dollars spent on holiday gifts yield more or less of a return than comparable dollars spent on other marketing efforts?

Your answers to these questions will guide your decisions as you address the gift-giving issue this holiday season.

Kathleen Ellison, president and chief executive of B&K Electric Wholesale in Industry, believes you can continue to give gifts while cutting costs and possibly having more of an impact on your customers at the same time.

How? By donating the money you normally spend on gifts to victims of the World Trade Center attacks.

"Send a letter to customers saying, 'In lieu of holiday gifts, we are sending a donation in your name to a fund for the victims,"' she suggests. "You don't have to tell anyone how much you are sending, and the person who receives the gift will still have a good feeling. If you feel it's absolutely necessary, you can always send a small personal gift in addition to the charitable contribution."

Even if you don't link the gift to the terrorist attacks, says Paul Villa, president of Great West Produce in Commerce, making a charitable donation still has a good feel to it.

"We have done that in the past without having anything like Sept. 11 as a reason," he says. "And it seems to have the same effect as giving gifts. Some customers never seem to like what you give them anyway, so this way our money goes to someone who can definitely use it and appreciate it. Personally speaking, I would much rather receive a card saying someone made a donation on my behalf than another fruit basket or box of candy."

If you still want to have an impact from a marketing standpoint, says Bill Knauf, president of Arroyo-Knauf Insurance in Los Angeles, try setting your sights a little lower.

"We not only send gifts to presidents of companies, we also send them to lower levels in the organization," he says. "People on the front lines don't seem to get much recognition during the holidays, and they really appreciate a nice gift. If you want to make a real impact inside client companies, try this approach."

Another option is to forgo holiday gift-giving and spend those dollars more effectively at different times of the year.

At Christmas, your gift may be just one of dozens or even hundreds. In contrast, how many companies recognize their customers at Thanksgiving or Valentine's Day? Or, find out when the company was founded and send the owner a congratulatory gift on the firm's birthday.

The key is to look for occasions and methods of recognizing your customers that will cause you to stand out from, rather than get lost in, the crowd.

Finally, if you really want to make an impression on your customers, try a personal phone call to the owner or CEO saying how much you appreciate their business.

In terms of cost savings and impact on the customer, nothing else comes close.


If there is a business issue you would like addressed in this column, contact TEC at (800) 274-2367, Ext. 3177. To learn more about TEC, visit

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