With exhibitor budgets leaner, and competition keener, show managersare looking at more than simple expense figures to determine the best spacerate. Traditional annual increases are yielding to a more concessionaryapproach. Holding the line on prices, and even absorbing cost-of-livingincreases is seen as a more realistic approach in an uncertain economicclimate. "You have to understand and be responsive to the marketplace,or it will adversely affect space sales," says Gene Bacon, Presidentof Marvin Park & Associates, a show management firm in suburban Chicago.
Shows serving recession-hit industries are seeing space demands softenas clients struggle to simply keep businesses operating. It's a matter ofmacro economics according to Bacon. "We know consumers have less disposableincome, and are not spending as much on home improvements, for example.Stores are not getting the high ticket sales, and that means the manufacturerswho exhibit at our Home Center show are not selling as much. So we as showproducers worry whether people will be able to participate, both as attendeesand exhibitors."
Pricing policies that are sensitive to these economic problems pay offin the long-run. Exposition managers have found that raising prices in adepressed marketplace does little good if exhibitors reject the new fees."Some show managers will tell you they raise their price $50 everyyear, but I think those days are gone," says Richard Chamberlain, Presidentof the Norfolk Group. "Our interior design show hasn't had a priceincrease in three years because I didn't think the exhibitors would acceptit. I was willing to do that in order to help them get through these toughtimes." Likewise, World of Concrete show management decided to foregoa price hike this year out of concern for construction industry suppliershit hard by the recession.
Naturally, there comes a point when increases in show expenses requireprice hikes. Whereas in the past, standard inflation rate increases wouldbe passed along to exhibitors, now some show managers are willing to temporarilyabsorb these added business costs. "I'm not in business to lose money,but I will look at the exhibitor's ability to pay," says Chamberlain.
There is a philosophical division among show managers debating the meritsof small annual price hikes versus larger less frequent increases. Holdingprices level unless dramatic increases occur in major expense categoriescould be a good public relations policy. "If the building doubles itsrate, and that's 20 percent of your budget, you would have to raise prices,"says Bob O'Loughlin of O'Loughlin Trade Shows in Portland. "But exhibitorsare aware of these kind of expense increases and they're more willing topay."
On the other hand, smaller but regular increases may be more budget friendly."We prefer to raise prices very slightly on an annual basis so peopledon't get these big price jumps they can't budget for or explain to theirmanagement," says Executive Director of the National Housewares ManufacturingAssociation, Tom Conley. Insight into the market conditions of a particularindustry guides decision-making on this issue. Show managers in touch withexhibitor perceptions know what the market will or won't bear. There isan accepted rationale that inflation affects the pricing of all sorts ofproducts -- including the exhibitors' own products. So for many, a smallerannual increase makes more sense than large periodic jumps.
Competitive pricing
While the economic health of an industry typically has a great impact onmarket demand -- and therefore booth pricing -- other market conditionsalso affect the price setting decision. Chief among these factors is competition.Competitive pricing becomes even more critical during low market demandbrought about by economic difficulties.
More often than not, a show producer sets booth prices comparable orslightly below the competition. At World of Concrete, a comparison chartis created which illustrates historical and current prices for all competitors."I use this chart to justify my pricing recommendations," explainsBecky Auten, WOC Show Manager at The Aberdeen Group.
The scope of competition for show dollars can vary significantly fromshow to show. Events with exhibitors from diverse industries must competewith a far wider range of shows. "We serve industries from pulp andpaper, to oil and pharmaceutical, so we need to look at booth pricing forvertical shows in those industries as well," explains Brian Duckett,Director of Conferences and Exhibit Services at the Instrument Society ofAmerica.
Other industry shows may be only a minor portion of the competition.All marketing media competes for portions of the corporate budget. Ratecomparisons against these other marketing tools provide a good indicationof fair market value. "When we look at competition we also look atthe print ad prices of the publications in the industry," says JasonChudnofsky, President and CEO of The Interface Group. "Just as youpay for circulation in a magazine, you pay for the size and quality of theaudience the show producer brings in."
Audited demographic information is the price legitimizer for Chudnofsky'sshows. "Others may have a rule of thumb for price setting that takesin other factors, but with us it's based strictly on audience quality."Show audience growth, or lack of it, therefore justifies booth prices.
As industries struggle through hard times, show managers may find itnecessary to invest more to secure the same audience. This in turn has toimpact space rates. Many maintain that there is a clear tie between spacerates and the investment the sponsoring organization is making to keep theaudience trend going in the right direction. Shows positioning themselvesas the quality leader can reasonably expect to get higher prices. "Wedon't want to be priced below the competition because we're offering morevalue for our show," says O'Loughlin. "We give them a loaded houseand they sell a ton of product."
Most show managers agree that there is a law of diminishing returns whenit comes to recouping up-front promotion costs. 'If I spend $100,000 anddraw 50,000 people, I know doubling it to $200,000 will not bring in 100,000people. After 54 years in this business, we know at what point the bellcurve starts downward," says O'Loughlin.
Show managers who look at audience quality as the key rate setter maintainthat competitive pricing is akin to comparing apples and oranges. It's marketdemand, pure and simple, that determines price. "I've never pricedmy shows based on my competition," says Chamberlain. "My demographicsfar outstrip anything anybody else does. So you get what you pay for."
Market demand
Beyond demographics, demand for show space will also wax and wane accordingto show dates and locations. Show managers may adjust their annual ratesaccordingly. Auten says they tend to hold off on their typical five to sevenpercent cost-of-living price hike during years when lower demand is projected."This is the year our major competitor runs its show, so we didn'twant to raise prices because we have quite a few common exhibitors."Auten also rejects price increases when their show rotation schedule takesthem to cities which historically have less exhibitor participation. "Ifwe were trying out a new city, we'd also tend to be more conservative inour pricing," Auten adds.
Location also impacts price setting in terms of expense variables. "Thereis a huge disparity in prices from one city to the next," says O'Loughlin."For example, a 10' x 10' space at our Tacoma boat show is $450. Butthe same booth in a California boat show could be as high as $800 becauselabor and building expenses are much higher."
Premiums and extras
Demand also plays a role in pricing special premiums and booth packages.Shows that charge a premium for corner booths -- typically an extra $100to $200 -- feel the increased selling opportunity warrants the fee. "Thecorner booth exhibitor has double exposure, and people will pay for that,"says Chamberlain.
Similarly, shows that offer booth packages tend to do so because of exhibitordemand. Bacon's Home Center show offers booth packages that can includesignage, drayage and electricity as a means to help exhibitors control costs.He claims that smaller exhibitors can save 25 percent or more with thisturnkey package. "It's a sales tool we intend to use more and morefor the customer who thinks he can't afford the show," explains Bacon.
Package rates seem best suited to shows with many small or start-up exhibitorswho have more limited budgets. The NHMA show offers a special package ratefor exhibitors in the lower level of McCormick Place East. "Those exhibitorstended to be such low budget operations that it looked like a flea marketuntil we went in there with a basic hardwall and carpeting package,"says Conley. Yet Conley also admits that package pricing works best onlywhen exhibitors have similar needs.
Shows with extremely diverse exhibitor needs find it difficult to createpackage plans that are fair to all exhibitors. A package which includesan average drayage rate, for example, can be unacceptable to many exhibitors.Such packages are often a great deal for those with heavy equipment, butan unnecessary expense for those with little freight.
Incentives
Although show managers are looking for creative ways to keep exhibitor loyaltythrough hard times, it's a credit to their inventiveness that few have feltthe need to "cut deals" on booth space. For most shows, the potentialbacklash of exhibitor outrage outweighs the benefits. "When you startgetting into discounts you can run into some major problems with your show'sreputation for fairness," warns Auten.
There is a perception that most of the "deal-making" that doesgo on happens when struggling shows become desperate to get the market driversin. Unfortunately, such under-the-table deals usually indicate fiscal ormanagement problems that escalate with time. Also, with lower revenues comingin, budget cutbacks are required -- often in the area of attendance promotion.This can lead to poor attendance, which again affects booth sales next year.
More commonly, the discounting that does take place in the industry tendsto be within fairness parameters that dictate special pricing which is equallyapplied to all. For example, exhibitors at the ISA show can get a breakon booth space by sending in their application early and locking into currentprices. "Exhibitors who send in their contract and deposit early, receivethe 1992 rate for the 1993 show," says Duckett. Most show managersuse this kind of discount option because it benefits all, not just a few.Although there are arguments to be made for discounts that apply to specialexhibitors. Firsttime exhibitor discounts are accepted as a means of openingnew exhibitor markets that will draw bigger audiences and therefore benefitall. Show managers may also reduce space rates in exchange for exhibitorpartnerships in running special pre-show promotions that lure larger audiences."There are always ways to be creative and give special compensationfor special participation that benefits the whole show," says Chamberlain.
An alternative often used instead of price discounts are "extras"such as free conference registrations, boothmanship training and trafficbuilding promotion kits. These perks add value to the booth price, and increaseexhibitor effectiveness. Bacon's Home Center event put on a pre-show "meetthe merchants" day as an added benefit for exhibitors. The programfeatured 16 different forums where key home center attendees talked abouttheir buying needs and plans -- valuable market knowledge for Home Showexhibitors. It's this type of help that will ultimately foster exhibitorloyalty without the need to discount booth prices.
These "added value" programs also serve the dual purpose ofimproving the event for all concerned. And success, more than price, willaffect an exhibitor's decision to return next year. As Chamberlain explains,"Exhibitors don't come back to unsuccessful shows."
