How Promotional Items And Gifts Act As Tax Deductibles
Consumer interest is money charged on consumer accounts like credit card balance, auto loans, and personal loans. Unlike mortgage’s interest and any interest paid on personal loans, credit cards, student loans, and other unsecured debt are a non-deductible tax liability. Consumer interest is generated from the portion of an item’s purchase price that is not covered by a product guarantee or warranty. Most financial marketing strategies – including many that fall under marketing research – refer to this as “profit” or the “cost of doing business”. The benefits of promotional products and gifts, therefore, are rooted in the consumer’s interest in purchasing those items.
Many studies show that consumers who purchase certain types of merchandise
are more likely to remain with that vendor for a longer period. Consumer interest in particular types of products and services is much higher than consumers’ interest in other items, services, and commodities. Examples of products that consistently top the list of most preferred purchases by consumers include computers, cell phones, televisions, fridges, flat-screen TVs, iPods, and digital camera systems. Other examples of consumer debt that is almost always higher than the interest on that debt include home and auto loans (both secured and unsecured), credit card debt, prescription drugs, department store cards, airline tickets, and amusement park tickets.
One of the major benefits of promotional products and gifts is their ability to create consumer awareness.
The more consumers become aware of a product – or a company – the more likely they are to buy that product or pass along the information about it. This creates a win-win scenario for all parties involved: consumers get to purchase more of a product or service at a reduced cost, companies get to increase their brand recognition and customer loyalty and the advertising community gets to make more money. In today’s economy, all of these outcomes are possible.
A second example
of how promotional items and gifts work to create more consumer interest takes into account how consumers can use them to reduce their spending. For example, a high interest rate or excessive credit card debt can be easily combated by a low-interest personal loan with a longer repayment term. The increased spending will then be used to pay off the consumer loans with higher rates so that the consumer interest does not spike. In this example, interest on consumer loans is not a driver of increased spending, but rather a means to an end. Consumers who have high amounts of consumer credit card debt, on the other hand, may use a lower interest rate loan to pay off their loans quicker thereby reducing their financial debt to lenders and having lower payments overall.
A third example
is how promotional items and gifts act as a tax-deductible investment. High-end consumer goods and services such as computers, televisions, and flat-screen TVs can be bought with tax deductions. These tax-deductible purchases are not only made for the consumer but are also made for the business, the consumer patronizes. As is always the case, these purchases are made to use over a long period to build a larger wealth deposit.
Promotional items can be used to provide the means to overcome consumer debt
by acting as tax-deductible investment vehicles. They can also be used to create more consumer debt by increasing the amounts of consumer credit card debt in a consumer’s portfolio. With all three of these actions, a stronger financial position and lower interest rates are possible. The increased disposable income, higher investment income, and lower interest charges are just some of the benefits of using promotional items and gifts to increase consumer debt.