THE MERCHANDISE INDUSTRY is undergoing a shift as more companies realize what an effective motivator the right gift can be. Not only are more companies using merchandise for employee incentives and consumer promotions, but the program design, the awards, and the delivery are all growing more sophisticated.

CMI's annual incentive trends survey, published in January, found 25 percent of our readers using merchandise for dealer/distributor incentives, 11 percent for sales incentives, and 24 percent for nonsales employees. In its annual survey of readers, Promo magazine, CMI's sister publication, found that U.S. marketers are planning a significant increase in new premium and incentive programs between now and the third quarter.

Among the trends that we're seeing on this side of the business:

• PEER-TO-PEER PROGRAMS ARE ON THE RISE — In these programs, employees have online accounts through which they can award co-workers points and receive points from their peers. Points can be redeemed for TVs, VCRs, mountain bikes, and other popular merchandise.

• ONLINE DELIVERY IS MORE LIKE AMAZON — Distributors are developing customized online stores that rival any retail site on the Web. Brand Fuel Promotions (www.brand fuel.com) in Norfolk, Va., builds slick online stores for its large customers, handling every detail, from site development to secure hosting to customer service. For the winners, it's like shopping at their favorite Web site — for free.

• CUSTOM GIFTS ARE TAKING IT TO THE NEXT LEVEL — Artist-commissioned pieces, gourmet baskets with products not seen elsewhere, custom graphics — Originality Inc. (www.originalityinc.com) in Oviedo, Fla., creates fresh, imaginative corporate gifts for customers or incentive winners. Recipients know that they're receiving something made just for them, rather than a stock item from a catalog.

• PROFESSIONALISM IS GROWING — The Incentive Marketing Association, the premium and merchandise industry's major association, recently awarded its first certifications to 10 members through its Certified Professional of Incentive Management program. As it did with meeting and incentive travel planning, this certification will raise awareness of the P&I side of the industry. It's also certain to have an effect on the professionalism of suppliers.