Pen seller taps big data to dominate market niche

Dave Thompson runs National Pen, which on the surface sells pens with custom logos and other promotional products.

But underneath, there’s more going on.

Thompson says the company has figured out how to tap big data to succeed in the notoriously competitive, low-margin promotional products business. Data mining has allowed National Pen to dominate a market niche that competitors find too small to chase.

“Yes, we do make pens, and yes we sell promotional products, but it is really not an accurate description” of the company, says Thompson. “We are a global marketing solutions company built on our ability to leverage this data and the information it provides.”

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Pens and trinkets made by National Pen, which rules the low-margin promotional products industry with $250 million in sales.Nancee E. Lewis

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Pens and trinkets made by National Pen, which rules the low-margin promotional products industry with $250 million in sales.

Headquartered in San Diego since 1976, National Pen will do $250 million in sales this year. It has 1.2 million customers in 22 countries. Thompson expects earnings of $25 million this year.

Thompson joined National Pen in 2008. The company has 1,200 full-time employees globally, including 130 workers at its San Diego headquarters. For the past two years, it has been owned by Lincolnshire Management, a New York private equity firm. Before that, it was owned by a family investment fund based in Philadelphia.

Thompson spoke with U-T San Diego about the company and how it uses big data. Here are some excerpts.

Q: Who are your customers?

A: Our customer is your plumber, your electrician, your independent coffee shop. The average profile of our customer is they have fewer than 10 employees, and they are spread out all over the world.

The industry as a whole — I will put it in San Diego terms — they want to go into Qualcomm and make a sale because that sale could be $1,000 or $10,000 and so on.

We are built on the ability to do small orders. We will do over 1 million orders this year, with an average order size of about $200.

Frankly, we have built a business completely focused on this niche in the market. It is a segment that the industry as a whole is not interested in because they can’t make any money on a $200 order and we can.

Q: How are you able to do that?

A: Most promotional products are made in China, and we currently source about 75 percent of our products from China as well. But we produce 25 percent of our products in Tennessee. And we do it at an advantageous cost position to China by leveraging the ingenuity of our engineers in Tennessee to fully automate the process.

So we are one of the few American-based and American-owned pen manufacturers.

We have developed some proprietary capability so we can produce a four-color image wrapped around the pen, completely personalized.

Q: So you can create personalized pens that get the attention of potential customers?

A: The simple fact is the more relevant the content, the more likely the recipient is to react. So there are a couple of things that make us special. First of all, we will produce at a manufacturing facility in Tijuana nearly 50 million pieces of sample mail. We will typically put a pen or a promotional product in there. We personalize the promotion, the price point and so forth, and we will mail it to our existing customers as well as prospective new customers.