Hot Or Not?

Could Smart Pens Catch On In The Ad Specialty Market?

Could Smart Pens Catch On In The Ad Specialty Market?Smart pens that can track a variety of actions are becoming more widespread in the consumer sector. Could they catch on in the ad specialty market? Industry professionals are mostly skeptical.

You can’t blame Bob Herzog for being a little gun shy. Back in 2008 when the industry was abuzz about eco-friendly pens, he was eager to capitalize on what was sure to be a lucrative trend. But after stockpiling $250,000 worth of writing instruments made of corn, biodegradable components and other eco-friendly materials, he was dismayed to then watch them sit, unmoving, in his warehouse.

“We sold almost none of it,” says Herzog, president of Bullet (asi/42424). “I can remember being totally shocked that we couldn’t sell this stuff.”

What Bullet could actually move off of its shelves it sold at a loss, and Herzog and others at the company became increasingly wary of writing instrument fads. So it is with more than a little trepidation that he approaches the latest proposed trend: smart pens. Priced at $100 and above, the digital writing tools offer to revolutionize the workday by doing things like capturing and transforming handwritten notes into a digital record through the pen’s built-in camera.

The sleek pens can make audio recordings and transfer them to digital notes, which can be shared among devices. Or, they can capture images sketched on the fly. For the high-end sector of the promotional market, the items on their surface seem like ideal executive gift or sales incentive items. But for all their functionality and appeal for making transcription faster and easier, experts within the promotional products industry are hard-pressed to determine where this latest tech tool might fit in.

For starters, there are too many unanswered questions about how the pen might be a promotional tool, how to introduce it into the industry’s supply chain, and whether or not the $100+ price tag is palatable for even those clients seeking an unusual gift for high-end incentives and rewards. “I don’t see a place for it,” says Terry McGuire, senior vice president of marketing for Top 40 distributor HALO Branded Solutions (asi/356000). “We have 40,000 customers,” many with unique or high-tech product requests. To date, he says, the company “has not received one single request,” for a smart pen.

Multiple Hurdles
While skeptical of its widespread appeal, industry professionals interviewed for this article concede that the market could be ready for such devices. But the marketplace for a pricier tech gadget would be very small. And that poses additional problems for suppliers of whether or not the pens are worth the product investment.

One of the biggest hurdles is the price point. Looking at his company’s records, Dave Regan, vice president of sales and marketing for Top 40 distributor The Vernon Company (asi/351700), says its hefty price tag makes pitching digital pens a long shot.

“We do about $70 million a year” in product sales, Regan says. “How many individual items are over $100? Less than one percent.” Suddenly introducing an expensive pen, albeit with high functionality, will likely fall flat with current clients. Moreover, among Vernon’s 35 account executives, only one was familiar with the product itself, Regan adds. In general, “my pen sales are all under $5,” he says. And that makes the pitch for a single pen over $100 unlikely, if not impossible, since sellers tend to push what they know best.

More to the point, distributors may have a tough time convincing clients that the functionality is worth the price tag, experts say. And many, like Regan, feel as though account reps, even those who are entrenched in a high-tech and engineering client base, will opt for the easier pitch (read, low-tech/low-price pens) with clients.

“They see digital pens as a novelty,” not an item that has a daily application, says Regan, who remains unconvinced of the smart pen’s viability as a promotional tool. “If you gave it to 10 people, two of them are going to use it and eight of them aren’t.” Knowing that, “the salesperson will opt for something that is safer” and easier to sell, he says.

In fact, distributors who have sold smart pens say they’ve done so only once and to a very specific audience that has requested the pen, rather than having it brought to their attention by the distributor. Linda Neumann, president of Brilliant Marketing Ideas Inc. (asi/146083), says her one order for Livescribe digital pens was from a school where students with a learning disability needed assistance taking notes. The pens recorded assignment instructions so that students could listen to instructions repeatedly.

Neumann, though, points out that record functions already exist on cellphones. For many in the industry, the functionality the pens offer is already available on other devices, making them a hard pitch to clients. “The fact that a lot of people have smartphones that have the same features, and they always carry their phone,” means “people are more inclined to purchase cell-related items than a pen that would offer the same thing,” Neumann says.

Uncertain Future
That attitude and belief about the limited nature of the market for smart pens speaks to the digital pen’s biggest hurdle into the corporate arena: There are too many unknowns due to the public’s unfamiliarity with smart pens, says Jeff Lederer, president of Top 40 supplier Prime Line (asi/79530).

“The higher price of the item means it will be less ubiquitous in the industry, and the less traction it will have,” Lederer says. “There’s no way it’s going to take the industry by storm,” he adds, citing interface issues, as well as the need for accompanying paper and other product accessories, in addition to its higher price point.

Ultimately, the skepticism surrounding digital and smart pens – despite the increased awareness of them in the consumer sector – is due to their newness. There just aren’t any case studies of promotional success for smart pens yet, and distributors are wary as a result. When it comes to pen technology, clients are simply looking for items that have already proven promotional power in years past, rather than cutting-edge technology, says Tom Goos, president of Image Source Inc. (asi/ 230121). It’s not that clients don’t embrace technology, Goos says. They just want what they already know and items that they can attest to their proven ability to connect marketers to their target audiences.

“We’ve sold pens with USB drives built into them for years. That’s not difficult,” says Goos, whose company has only received one order for smart pens for a group of Microsoft developers. “But when you add more features like voice recording and Wi-Fi… the other devices are doing these things and generally doing them so much better” – making the sale of smart pens that much harder.

Besides its high price point and uncertain application, Goos and others also point out that smart pens are a retail item, which generally takes longer to cross over and take hold in the ad specialty market. “It has to have some type of legs on a retail or consumer level before the corporate markets pick it up,” Goos says, something he hasn’t seen evidence of yet for smart pens. Even the strongest retail items can flail in the corporate arena. “Quite frankly, it’s sometimes hard to make margins on those,” Goos says.

Strong margins, he adds, depend on “a good supply chain, and the client has to be comfortable that this has a functional, useful life to it, especially to spend that type of money. There are so many other great things in that price category. If it doesn’t seem like it has longevity,” it will quickly be abandoned, Goos says.

And then there’s the discomfort within the supply chain. For most suppliers, keeping inventory on an item that may or may not make it as a promotional tool is risky regardless of the price point. With an item that expensive per unit, it’s tough to keep hundreds in stock, let alone push clients to order 100 or more at a time – a commonly sought quantity when trying to maintain margins.

“There is a place for a good $100 item,” says Craig Nadel, CEO of Top 40 distributor Jack Nadel International (asi/279600), particularly a high-tech item. But the key, he says, is finding the right one. Nadel says his company once considered pitching 3-D printers as an incentive internally, and he says stylus pens are hot sellers. Both are high tech and can be higher priced, which suggests that there’s space for high-tech items within the promotional product marketplace. But after reviewing more than 100 of the company’s internal inquiries sent daily from one sales rep to another asking for product referrals and ideas within Jack Nadel International, he can’t recall one that requested information about a smart pen.

“As of now, I don’t think there’s much of a market for it,” Nadel says. “It doesn’t mean there won’t be later.”

Ignoring the Cool Factor
But most industry experts stop short of saying that smart pens will play a strong role in future ad specialty sales. That’s a strong statement when you consider the popularity of high-priced pens, such as Cross and Mont Blanc, that were the staple sales incentive and executive reward item in years past, says Greg Emmer, vice president and chief marketing officer of Top 40 distributor Kaeser & Blair Inc. (asi/238600). That, he says, is largely a problem of functionality, despite the leading-edge and, well, cool factor of smart pens.

“A smart pen is really a very strange device,” Emmer says, pointing out that special paper is needed for capturing notes. More to the point, handwriting a note in general is an antiquated practice in today’s texting and typing business world, Emmer adds. “The whole idea of a pen joining the high-tech community is a little bit out of sync with what I see happening in the marketplace,” Emmer says.

A stylus, which has gained popularity as a promotional item in recent years, is different because it enhances the use of devices that end-users already have, so its promotional power is greater. And, whereas newer electronics such as Fitbit allow users to change their lifestyle or enhance their daily activities, Emmer and others say smart pens are trying to co-opt or augment functionality that already exists on many handheld devices.

“From my standpoint, it’s still easy enough to take a phone out of your pocket,” rather than adding an entirely new product such as a digital pen to the daily mix of tech devices, Emmer says.

Still, some distributors believe that a new tech-product offering is a welcome idea in a marketplace that sees the same technology year over year. Belinda Gist, president of Red Truck Promos (asi/529185), says she hasn’t seen any requests yet for smart pens. Even so, she thinks they could be ideal for the pitches her sales reps will make as they start their bids for this year’s corporate holiday gift season.

“I think they would be a great thing to include because they’re a higher-end specialty item and they would make an especially nice gift for a sales reward,” Gist says.

In fact, she thinks that because they’re so obscure within the industry, smart pens might be an ideal incentive as the newest, most unusual tech award. Gist also suggests that the pens might be the perfect reward for hotel or airline loyalty programs, for those members on an elite level.

“It’s not such a high price point that it’s untouchable,” Gist says.