Episode 277: PPAI 100, The Industry Leaders with Dale Denham

Welcome to Skucast, the podcast for entrepreneurs in the promotional products industry. Skucast shines a light on our industry's best work, features maverick personalities, and discusses what's really involved in running a modern promotional products business. SkewCast is the official podcast of Common Skew.

For the first time, PPAI, the Promotional Products Association International, unveiled its ranking of the top 100 leading distributors and suppliers in the profession. Now, if you're new to the business, PPAI is a nonprofit. It's the largest member-driven trade association in the industry. And to talk about this new list, We invited Dale Denham, President and CEO of PPAI, to join us. Dale Denham joined PPAI as President and CEO in 2021. He led the rebound of the industry's association following its 50% loss of revenue and staff due to COVID restrictions. He's guided the organization, now growing once again, through an explosion of industry initiatives driving digital transformation, corporate social responsibility, while also raising awareness of the power of promotional items. Before PPAI, Dale spent the previous 10 years as Senior Vice President of a top 10 promotional distributor, where he was responsible for significant growth, including internationally, and successfully led the organization's digital modernization. Previously, he was Senior Vice President at a large media and technology organization for 10 years, leading digital transformation and strategic alliances, among other responsibilities. Today we talk with Dale about why this list is important, why now, and we discuss qualifications, including the 8 categories of criteria that PPAI considered for each applicant, and most importantly, how lists like these continue to create specific benchmarking opportunities for you and your business, whether you're a supplier or distributor. Hi friends, I'm Bobby LeHew, Chief Content Officer at Commonsku, Hey, if you're heading to ASI Chicago, you won't want to miss all the CommonsQ energy happening there. On Tuesday, July 25th, from 12 to 3 PM, we're hosting CommonsQ University, where you can spend a few hours learning about the power features on CommonsQ, plus how to drive sales through shops and more. We also have a community happy hour happening on Tuesday, July 25th. And finally, one of the most powerful features on the platform, is the ability to seamlessly transmit orders from ideation through to completion in the hands of our trusted suppliers, thanks to a unique process and a powerfully connected supplier network. In fact, we even have a list of all the connected suppliers who are exhibiting at the ASI Show with their booth numbers in one convenient spot. You can find this list, plus all our ASI Show happenings and RSVP for the happy hour and an easy registration for Commonsku University at commonsku.com/asi-show. And just one more quick note, I'll be hosting a webinar on July 18th at 2 PM ET about unleashing the power of branded merch. Now, I delivered a similar webinar about a year ago, and many of you commented on how it was ideal for your new team members as well as inspirational for even the seasoned industry vet. So I've updated this topic and will share a glimpse into the power of branded merch and the cultural zeitgeist propelling its popularity today. You can register for this webinar and any of our upcoming gatherings, plus our weekly CommonsQ demo and more at commonsq.com/events-calendar. Now here's my chat with PPAI President and CEO Dale Denham. Dale Denham, thank you for being here.

It's my pleasure.

It's really an honor. It's been a while since we've been able to catch up, so I'm glad to do it.

Yeah, me too. But, uh, I have a lot of sunshine today. You have a lot of rain, so—

That's right, right. That's right. Um, well, we're going to jump right into this, uh, because this is pretty, pretty big project. Um, congrats to Josh Ellis and the team for, uh, commandeering a really important project for the industry. Other lists have existed in the industry, mostly dominated by revenue. So why did you feel this particular list warranted research and publication?

It's sort of— I almost would ask the question differently. Why didn't anybody do anything else before? But it started because when I started, the board undertook a new strategic plan and we have a new vision. And the vision is not about PPAI, it's about the industry. And the vision is that promotional products are universally valued and essential to every brand.. And if I recap that, it's to elevate promo. Well, you don't elevate promo or the industry by just talking about who the biggest players are. You elevate promo by driving things forward. And in our strategic plan, there's 5 pillars. I won't go through them all to bore everybody, but there's 2 that are really new and significant. One of those is corporate social responsibility with a heavy focus on sustainability, and the other is driving digital transformation. So when we looked at— it's great to know who the big players are. It's important. And most industries, that's what they do. So it's not that our industry was unusual, but we said, how do we drive the industry forward? And we looked at our strategic plan and went back to that. And that's why we have sustainability, digital transformation, but also business fundamentals, which is how's the industry believe in what you're doing? How fast are you growing? And of course, how your revenue is total.

Yeah. The reason the list is up, it's almost like a, like you said, it's obvious now, but there are 26,000 or something distributors in the world, right? So there's more than that 40, right? Or 50 or 60 or 100 or whatever it is, right?

It's one of those things since we started talking about this, it has almost been so well received. We're like, how did we not realize we should have been doing this? But I think it's right place, right time.

Yeah, it's a good time.

And I applaud our board and my colleagues for coming up with the strategic plan we did, which got us to this point.

The unique thing about the list is the product categories, or I'm sorry, the criteria. It fell into 8 different categories. So there was previous year revenue. There was growth, which was a 3-year trend growth.

Is that right?

That's correct.

Okay. Industry faith, which means for suppliers, supplier ratings, and for distributors, credit ratings via Experian, which is phenomenal. Phenomenal way to do that. Professional development, which is the total number of CAS, MAS, and MAS+ certified employees. You can do this better than me, though. I just have the notes in front of me. Responsibility, adherence to sustainable progress and practices, DEI initiatives, and product safety. Innovation based on results from the technology survey. Interesting how you use different surveys to feed that. Employee happiness, happiness culled from the greatest companies to work for. And finally, online presence as scored by SEMrush. There, there are some new categories here. Yeah. There's the tech factor. There is CSR and the employee happiness. It's a really interesting way that you've taken the data to blend into it.

Yeah. If you look at any company, we are much bigger than what our revenue says we are, right? Our impact on the world. Yeah. Are our employees happy? Are our customers happy? Are we progressive in the sense of we're moving our organization forward? Are we growing? And sometimes you shouldn't grow, right? I mean, there's times to trim growth and there's times to even trim revenue back. But it does typically indicate a healthier company if you're growing. So taking those 8 different criteria, the key is how do you mix the weighting? So they're not all weighted equally. And right now we weight revenue the absolute heaviest, but that growth in revenue is pretty heavy too. And then all those other factors are weighted differently and it's a really cool formula that brings it together. So the, the, the digital transformation and sustainability are pretty important pieces, but we're also going to evolve all of these scores just a little to keep the industry moving forward. Over time. So we're getting a lot of really good feedback on, we could do this, what about this, and that'll all— well, maybe it won't all be incorporated, but many of those things will be incorporated into it next year. But the 8 scoring factors will remain the same.

Okay. So to oversimplify it, maybe for someone like me, if I was a huge supplier, for example, but I didn't hit anything else on the list in terms of employee happiness or sustainability, The likelihood is pretty high I wouldn't be on the list at all.

You'd probably be on the list if you're a really large company, because by nature of having a high number of rep— high revenue volume, you're going to be respected. But the way we publish the list, you're not going to rank in any of the other criteria. So if you visit the website, we show this company ranked high in these areas.. And that then lets people know, oh, they're really just a high revenue company. So the foundation is you had to be a certain size to be considered. Now we have some plans to take these same benchmarking surveys and make them available to the rest of the industry because it drives the rest of the industry forward. But to be recognized in the PPA 100, there is a minimum revenue threshold.

Okay.

But you still have, I, what I really like seeing was you highlighted 6 suppliers under $20 million.

Yeah.

And so that's phenomenal. It's great to see too, because there's a lot of suppliers obviously that the industry loves.

There are definitely a few suppliers that prefer we would have rated them higher. The formula drives it. We don't make those decisions. And there are definitely a few who are really thrilled that something is honoring all the work they've been doing for many years. And they've been saying to people, look what we do here., but there's just no additional recognition and people are buying from them because of what they're doing.

But this helps give them just a little more recognition and credibility for what they're doing.

Yeah.

Yeah.

Do the qualifications for distributors and suppliers differ?

Essentially they're the same. The biggest difference is, and you mentioned this earlier, suppliers, we use their Sage rating and that is a very valuable metric that people are rating. 45,000 Sage users, they're rating literally every day. Very valuable metric shows how the supplier is treating their customer, the distributor. Well, on the flip side of that, the distributors pay the suppliers. How does the supplier pay their bill? Well, that's where the Experian credit rating comes in. So we looked at the credit rating of the distributor versus the stage rating supplier. Everything else, the scoring is the same, essentially.

You noted that growth was the most significant scoring factor. Was there any part of this list that was subjective?

And if so, kind of how did you handle it?

So to clarify, growth is the second most. It's the business total revenue is the most. Okay. All those, we call them the business fundamentals. They sort of all roll together, whether it's your credit rating, your SAGE rating, your growth, all of those sort of roll together. There is no subjectivity in this list. So if you go back to how we created it, we created a formula and then we put dummy data in there and we used, we looked at other industries, we looked at other lists. How do we do this? We came up with this one ourselves. So there's no, there's no, hey, this is the formula, right? And so we put in dummy data. We never looked at what the company name would be. We just said Company ABC. We then put in data specific about revenue, about companies that we knew from previous information, but we didn't put their name with it. And we scored everything. We said, does this make sense? And that is what we got to the point. And then when we did our surveys and we asked the questions and the data came in, The formula drove it. There's no subjectivity. Nobody came in there and said, ooh, it looks like this company should be higher. Let's change the formula.

We did not do that.

Yeah.

Might be the wrong analogy, but it's like a blind taste test. You know, you're, you're trying to let the data serve that up. Absolutely. You're driving your own personal preferences. I know just as a distributor, I really loved benchmarking, seeing what the industry was doing as a benchmark. And one fascinating snapshot is the average KPIs from leading distributors. And I'll just quote a few of them here. There's more than this, but there Um, the average KPIs from leading distributors on the list were 28% revenue growth. Uh, by the way, is that— that's over the 3-year period, right, Dale?

You know what, I'm gonna have to get back to you on that.

I don't know. Okay, no worries. So, but even if it's annual, 28% revenue growth, 20% new client revenue, that was— that's like a new number that I haven't seen. And it just— I can't tell you the relief I felt. I still have my distributor hat on every day, you know. I can't tell you the relief I felt when I'm like, Well, how much new business should I be landing?

And 20% is significant, especially if you're a, a distributor or supplier that's been around a while.

I do think one of the things that we're doing, as I mentioned, is we're coming back out with this data and asking other firms. We only ask essentially the largest firms. That 20% may be higher for the larger than it is for the smaller companies. And so as we go back and do this, we're going to be able to slice and dice that data so that As long as you're responding to this, you're getting a good analysis of what you're doing versus what others are doing.

Yeah. I, but I love the 20% number. At least I have some kind of metric to look at and go, okay, for our goals coming up for third or fourth quarter or for 2024, we should be aiming for something around for relevant to us, 15 to 20%. Anyways, there's a really helpful number. I'm glad to see it. And then finally, average gross profit margin of 34%, which hasn't really changed a whole lot over over the past several years, has it?

It really hasn't. And I do find that fascinating. And I think the more that we get into this with the other data, it'd be interesting to see if it goes up or down as we go to the broader industry. But to your point, these are the leaders in the industry. So knowing that they're at 34% or at 20% new client growth, that's something to aspire to. And that's the purpose behind this list is to inspire people to do more and to be better. And that benchmarking We're just getting started with it. So be on the lookout for some new stuff coming out later this year.

That's great because something I would love to see is operating costs because the margins might have stayed the same, but because everybody started getting into fulfillment and kitting and packaging and hiring more, it could be that we are seeing higher operating costs than maybe we saw 5 or 6 or 7 years ago. Great point. It looks like a lot of attention was either given to an outside analysis or something like it. Like, like, sorry, let me ask that again, Dale. It looks like a lot of attention was given to either an outside analysis or a scoring system already in place, like The Greatest Companies, to help feed the final results. You— I want to give a shout out to those that are responsible for this. Josh Ellis and his team.

Anyone else you want to mention while we're on it?

I would literally say the entire leadership team and, and Josh's team, but the amount of work that came up with the original idea to get from how do we recognize people to where we got to, there was multiple people providing input. I would also say, you know, the board supporting. So the board was not involved in any detail. They don't have access to the formula, but they did bless the idea of coming out with this list and they were very supportive of it. But it really was the leadership team and the people that worked on this specifically. And we've mentioned Rob, Josh, and Robert and their teams that did this.

So was there anything that surprised you the most about either the process of discovery or the process of creating this list? Or maybe not so the winners, but was there, was there anything you went into it and thought, well, this will be— maybe it was easy and then it turned out to be hard? What was, what was a discovery you had as you did this?

Getting that formula right was really hard. So coming up with the concept took a couple of months. So from start to finish to get to the, this is the concept, thought that was the hard part. Then when we started putting numbers in and there's so many factors to say, well, if you did it this way, that impacts this way. And the amount of data modeling that we had to go through was far more than I expected. Far more. And so then I thought, okay, now that's done. Well, then you had to go get the surveys constructed to drive the data and you had to identify what sources you were gonna use for data that wasn't survey-based. So that was big. Then the easy part was still hard. It was, it's a new list. So you had to call everybody. We had personal calls from myself and many others You need to fill this information out. You do not want to miss it. And thankfully that really worked. But then it was getting that data. And while it was easy to put the data in the formula and it spit it out, it's still a lot of responses to put out. And so I thought, okay, we're done. But we weren't, because what the team in the PPIM media has done is taken these scores and presented them so many different ways that are so helpful. Like you could read for hours what they've done and continue to be inspired. So I would say the big surprise is everything was harder and took more effort than I thought. But the piece that's not really a surprise is it's all been worth it. So even though it was much more effort than I think we realized, the response has been so positive, it's been worth every minute.

That's great.

So Dale, before we get into more questions about you, I want to ask, how do you think this will evolve over time?

We have such a good start. I'm happy about that. If we just stayed here, I don't know that I'd be happy 'cause I'm never happy when things stay the way they are. I believe in evolving and learning and moving forward. So there are pieces that we know we want to put more weight on. So when you first come out with the list, when everybody's used to revenue being the primary driver, that has to continue to be the primary driver. But in 10 years from now, it could be less, it could be number 2, number 3, number 4, I don't know. So we are going to use this list to recognize people based on where the industry needs to be. Now, I do think revenue is likely always going to be the primary, but the weighting for what you're doing with digital transformation could grow. Clearly, sustainability is going to grow. And social responsibility is going to grow. So the way it will evolve is that scoring will tweak. There won't be massive shifts, there won't be massive swings, and it'll be, you know, this is what we're doing this year. And a couple of other things we've had really good feedback, like on Best Places to Work. We've had some really good companies say, I don't put my employees through two different surveys, yours and our local one. Well, you know what? We should be taking the information from the local survey if they don't do the Best Places to Work. So there'll be some new sources that we'll accept for, for example, if you've been certified gold by EcoVadis or another firm, we can take that in place of a survey or make it add another point. So we're taking that kind of input right now and modifying the scoring for next year.

Yeah, that's great. Well, Dale, you are nearing 2 years coming up in July, if I got that right, into your tenure at PPAI. What was, now that you've had 2 years of looking back, Um, what was your perception coming into it now having served for 2 years? What's the reality?

Any big revelations over the past couple of years?

Having served on the board for 5 years, I'm not sure there's a big revelation. I think there would have been had I, um, not had that access, but there is a very different level at the board versus operational. And I'm very thankful now that I'm in this role. That the board stays out of the operations because you need to be able to run the business. They guide, they help set strategy. I keep them very informed, but I would not want them digging into everyday details like I do or like my team does. So there are things that I go, "Oh, I didn't know that," and some bigger than others. But I think the thing that is probably the most I didn't realize how much time and energy it takes to put on the PPAI Expo. I knew it took a lot. I mean, we're literally talking about dozens and dozens and dozens of events happening at the same time, and we're coordinating all of that, and hundreds and hundreds and thousands of companies coming there and having to do all that and to do it in a really meaningful and elegant way. Yeah, it's, it's amazing. So when I see the, the site visits we go on and I see, oh, we're changing this, it takes so much energy to do it and to do it well. And yes, we still make mistakes, we're still getting better at it, but in the end, to put on a show of that size for frankly the size team we have doing that. I underestimated the amount of effort and energy, uh, and I— it's a great testament to my colleagues who have been doing it for so long, um, that they have done it so well.

Yeah, it took me years to sort of look at PPAI through the lens of, oh, this is a business, right? I mean, it's, it's, it's in a different category, but how many employees do you have there now?

We have 55 right now. We had 80 before the pandemic. Right.

I knew it was a really tough time for PPAI. Well, what, what would you say over the past 12 months that you're most proud to have helped accomplish?

I'm going to say an interesting way to get to that answer for you. I'm really proud of what the team is accomplishing together. The, the way we are working together, and we're not done finishing building the team. But let's take a look at the PPAI 100. While Josh, um, was the primary driver and owner, there's so many hands in that pot that brought that to fruition. Um, if you go back to the PPA Expo and we did the pitch this year, that was not a single person's idea. That was multiple ideas and tremendous amount of work. And so I know from the organization, I can easily say today, this PPAI 100, I am extremely proud of it. I think it's significant. I think it's one of the most one of the most significant things we'll ever do outside of Expo. But if I talk about what I'm really proud of, it's the team we're building and the way we're accomplishing things together and how that's impacting everything that we do.

Yeah, Dale, you have a really interesting perspective. Not only have you been in the industry, you have been as a distributor, you have seen so many different angles on the business, but you're always really good at spotting micro or macro trends in the industry. Are there a few that stand out right now that you're seeing emerge ahead?

So I'm going to look back more than ahead, but one of those I think is going to continue, maybe both of them. One of the ones that I talk about a lot right now and I validate in the conversations, but also we have had a little data, anecdotal data, back it up, but we don't have the level of research we do with PPA100. And that is we had a really nice growth in what I call the $5 and over, so $5 and up. That was selling really big since the pandemic. And we saw 5 and under not doing as well. It was still doing well, but not anywhere near what it was. Well, what we have seen in the last 8 to 12 months is that it's starting to shift back to that 5 and under. Still seeing, and I think we'll continue to see that 5 and over. I think the fact that trade shows and events are back, whether you give away more items $5 and under or $10 and under, pick whatever number. It's not the $5, it's the lower end item. We're seeing that really grow again, where the growth is slowing down from what we're hearing in that upper category and shifting back down here. Actually, I would say that's not a trend I want to continue. I think that upper end growth is better for our industry. I'm glad it's growing, but we want to make sure whatever people are giving away is what people are keeping. And a dollar pin can be kept a long time if it's going to the right person. But if you're giving away a dollar item to the wrong person, it may not be kept. So as much as I want sales to grow, I want the right sales to grow. So that's one trend. The other, and I think you know this because you were on the forefront of this before it was popular, and that's the company stores, but not in the way you were passionate about in the day. But these micro stores, the pop-ups, or what is common to call them, the pop-up shops, pop-up shops, that the growth in that over the last several years, and I don't see that slowing down. It's a really valuable tool for the buyer, the distributor, even the supplier. I think that's one of the best digital trends we have, and I think that will keep going, and anybody who's not leveraging those is missing a huge opportunity.

I totally agree. I'm biased, of course, as you know, with my background, but also the fact that we have now seen every— it seems like we keep hitting quarters where this is the most used, most successful pop-up shop experience every quarter. So it's a fantastic tool. I also I think it's a tremendous response to the B2B desire to be involved in digital purchasing without it necessarily creating a shopping cart transaction, you know, in terms of— right, for imprints and have their place in the business. But this is a great way for you to introduce digital purchasing to your clients in a very boutique way. Anyways, I agree with you.

It's been a phenomenal transition.

Absolutely. And I just— on the— what the marketers love is they can have some level of control. And it really, I think, solidifies that distributor relationship. And I think they want to work with the distributor. Those pop-up shops are a great opportunity for people, and that trend I think will continue.

Yeah, a few things I like to ask folks, we'll wrap up with this, is I like to ask this because it gives us an idea of your day-to-day.

What's the biggest thing on your desk right now?

So I wouldn't call it my day-to-day, I would call it the biggest issue I'm facing, and that is addressing sustainability in the industry. And the reason why it's the biggest thing on my desk is we don't have, I would say, the clear long-term strategy. So we've got suppliers doing different things, different ways. We've got distributors doing different things, different ways. We need to find a way as the association to create a clear path for people who want to move down this path to move forward and it be meaningful so that a supplier's not being asked 5 different ways to validate their sustainability practice. And the distributor may be asked by different buyers, but they can say, this is what our association is recommending. We do not want to be the accrediting body. That is not our strength, but we can work to find the right resources. So there is no doubt of the big initiatives that we have to work on. And that is top of mind for me all the time right now is our sustainability path. And I'm confident by the time we get to Expo this year, we'll have a very clear path. There's a lot of things I could tell you we're working on. One that I'm excited about is the business services providers, of which CommsCue is one of them. For so long, we haven't really promoted them the same way we have with suppliers and distributors. They've been important, but not as important enough. So we are going to be putting a little more emphasis this year. We already have started, but even more so in making sure that when people have a problem, in our industry, they know that they should be looking to PTI for solutions. And so all of our business service providers solve different problems, whether it's product research or order management or whatever. And we have freight and, you know, insurance and all that. We should be helping our members. And so we'll be promoting that. So but there's so many other things going on that take up my day. But the big one is sustainability and driving that in a meaningful way to the industry.

That's good to hear. Okay. Last question, Dale. The community always likes me to ask this question. What have you read, listened to, or watched recently that really made an impact? It doesn't have to even be businessy, so to speak.

It can be something personal.

Can I give two?

Yeah.

Give as many as you want.

All right. Well, I love this question because I love taking this down and I, I love to look at the books people are listening. So one is very personal, probably not going to relate to most people in the audience, but my mom started a podcast. So I have to listen to that. I love it. And she's not going to listen to your podcast, Bobby, even though I'm on it. So I'm not even going to get the credit for mentioning, but it's called Old Testament with My Mom. I'm a preacher's kid. My mom's an Old Testament scholar. My sister and her started this podcast. I had a little bit to do with the naming, but it's just— it's fun to see what my sister and my mom are doing. And it is— if anybody's interested in the Old Testament, it's fun. I, on the other hand, I heard too many of these stories. I'm not listening to the lessons. I'm listening to hear how my mom's doing.

Hear your mom, right? That's fantastic. I love that. Dale, I don't know if you know this, 3 of my brothers, my 3 brothers are all preachers. So, there's a connection there. Yeah, yeah. There's a little bit of a connection there.

All right.

Well, on the more serious side, the book that I keep going back to probably once a year, it's not a new one, but it's Mindset by Carol Dweck. And it just really sometimes when we get to where we're thinking, okay, this is all we can do. And I'm a big believer, as I said, in evolving things and really talks about people who get locked in a mindset and easy to summarize it that just says, sort of realize you can do more. But the way she goes about laying things out in the story, great book, worth revisiting at least once a year for me and probably worth a read at least once for your listeners. Awesome.

Thanks for the recommendation, Dale. Thanks for joining us again.

It's so good to catch up with you, my friend.

Likewise.

Thanks so much for tuning in to this episode of SKUcast. Be sure to keep up with our latest content by subscribing to SKUcast on iTunes or to our blog at community.commsku.com. Until next time, friends, thanks so much Thanks for listening.