Business Owners' Holiday Giving Plans

Customers will get their holiday cheer this season, but employees and charitable organizations may find their stockings empty, a new survey suggests. The annual American Express OPEN Small Business Holiday Monitor tracks small business owners whose companies have fewer than 100 employees to gauge their plans for the holiday season. This year, 516 interviews were completed by Echo Research from Oct. 6 to Oct. 14, with questions about entrepreneurs' plans for holiday gifts, bonuses, parties, and raises, says Alice Bredin, founder and president of Cambridge (Mass.)-based marketing consultancy Bredin Business Information and an adviser to American Express OPEN (AXP). She spoke recently to Smart Answers columnist Karen E. Klein about the results of the survey. Edited excerpts of their conversation follow. Nearly half of small business owners in your survey say they plan to give gifts to customers this holiday season, similar to last year's survey results. And their total customer gift budgets remained steady vs. last year. Was that surprising, given how many small companies have suffered this year? It was not so surprising to me, because one of the things small business owners are really good at is prioritizing. They know where they can cut some corners and what they need to do to survive and thrive, and they're particularly good at that in tough times. What they've done of late is to cut expenses and renegotiate for better deals on their rent or leases. But when it comes to giving gifts to customers, business owners are savvy enough to know that that is not a place to cut corners. On the other hand, your survey shows that substantially fewer small business owners plan to give gifts (35% in 2009 vs. 46% in 2008), yearend bonuses (31% in 2009 vs. 44% in 2008), or raises (16% vs. 30%) to their employees this year. Given the increased workloads and stress that most employees have undertaken this year, that seems sad. It is tough, particularly for small business owners who work closely with their employees every day and know how important they are to their success. I think, though, that business owners see customer gifts as an essential part of customer service and marketing. And they know if they don't do that well, there might not be any jobs for employees next year. What alternatives can employers take if they don't provide holiday perks for their staff this year? Employees are going to be disappointed, because most of them want cash. I'm advising if they're not able to give out monetary rewards and gifts, the business owners should discuss it with employees frankly and level with them about the need to build up the company this year. Handwritten, personal, very specific thank-you notes can help; a direct verbal thank-you can help. Bringing in some holiday cookies and eggnog and knocking off early one day can help. Giving people time off or flextime is another way to thank employees. In fact, the survey shows that almost half of respondents say they'll give employees time off over the holidays, the same amount as last year. But only 19% of them will participate in volunteer activities with their employees this year, compared with 28% last year. Why do you think that is? I'm not sure how altruistic employees are feeling now, particularly as much as they're working. I think when you're telling employees that times are so tight you can't give them a gift, it might be hard for them to stomach the fact that you're mobilizing them to do a volunteer activity. Also, employers don't want to be unkind, but there's a cost associated with organizing a volunteer activity that a business is usually happy to do—when it is able. One thing to do is give people a chance to volunteer if they can, but scale back the emphasis on it this year. Some hotels and party venues are advertising shared holiday parties, where several companies hold their events together and pay a lower per-head price. Is that a viable alternative for companies that aren't planning Christmas parties this year? It certainly could be, or you could have an in-house party instead of a big blowout. There are always going to be some employees who will complain, but most of them will understand. The thing to do is emphasize reality to your employees in a matter-of-fact way and don't apologize too much. What you're doing is appropriate for the health of the business, and that's the priority. Getting back to customer gifts, the survey shows that 82% of business owners want to thank their customers with gifts, 38% give gifts to celebrate the season, and 25% say they give gifts to stand out from the competition. What gifts are popular and appropriate this year? The most popular way to recognize clients is sending cards and calendars, followed by gift cards for retail and restaurants, fruit and food baskets, and making a donation to a charity on a client's behalf. More expensive gifts are less popular this year, which is not surprising. I'm recommending that small business owners put time into choosing gifts that show they understand their customers and that demonstrate something about their company. So if you're a design firm, you'd want to send a gift that shows you have a great sense of style. The important thing is to show that you care about your customers. Make it a thank-you first and a marketing opportunity second.

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