CloserStill Media and Nineteen Group chairman Phil Soar returns to a favourite pricing model topic following research that suggests 94% of exhibitors aren’t influenced by the price of a stand

I am returning to one of my favourite themes because (a) it drives me crazy and (b) in the last week I have spoken with senior staff at two of the UK’s biggest trade show companies and (c) very recent research has indicated that no more than 6% of exhibitors say that the cost of a stand influences their buying decision.

Speaking to colleagues, I asked, very simply, in all your discussions over many years about what price to charge for shows (square metres, sponsorship, delegates etc) how often does the obvious question: “What will the market bear?” ever come up.

And the answer was plain and simple: NEVER.

So how do our larger companies set their prices? Seemingly via deeply mysterious methods with, for instance, central pricing units, or by imposing an edict such as: “Inflation plus 2-3%,” irrespective of the strength of the event or its location.

Are the teams asked to contribute to the debate? “Very rarely.”

I will come back to why this might be the case later.

Only 6% of exhibitors think the cost of stand space influences their decision to exhibit – so 94% don’t

That headline may surprise you. Mike Fletcher, our editor here, reported this finding just last month. Comprehensive research by a display company (with a large sample) found that 94% of exhibiting companies did not consider the cost of booking stand space crucial. They did regard audience profile and reputation important, but not cost. So, 94% presumably do not consider what an exhibition organiser charges them as a crucial factor.

There is no reason to suppose these companies are cavalier in what they spend. If they are renewing an insurance policy, or appointing a facilities manager, then they will look very closely at the cost. But they don’t when they buy space from us.

This doesn’t shock me – it just confirms decades of experience.

The reasons why?

  1. Exhibitors make their decisions on their perception of the value of the event – spending £5,000 rather than £6,000 for a stand won’t make an iota of difference.
  2. For large and medium sized companies, the cost of space at a show is a very small sum of money indeed. It isn’t something they need to debate. At some of our larger shows big companies even ask us not to bother with three-stage invoices – it is much simpler to pay the whole lot up front because the sums are just not that material.
  3. They are buying intangibles (PR etc) as much as tangibles, and intangibles are difficult to price when the company might happily spend £100,000 on a hotel reception without any ability to justify that spend.

How does the rest of the world behave?

I have plenty of experience outside the trade show industry, and so presumably do many of you reading this. If you have a product you want to sell there are two questions to ask:

  1. Is there a market for it?
  2. What can we charge for it?

Let’s pick three different situations.

Take Coca-Cola. It has a large division devoted to pricing in its various outlets. Obviously, the price in a supermarket is different from in a bar. But what is critical is what the competition is doing. Over the years it has developed a very precise understanding of how much over Pepsi it can charge as the Coca-Cola premium. But competitive pricing is a driver. Hence: “What will this particular market bear?” And this is where we are completely different.

I estimate that for some 75% – 80% of trade show turnover the slot system means that there are no directly competitive events. Head to heads – like IFSEC versus the Safety and Security Show – are vanishingly rare (and draw exceptional attention for that very reason).

Or take Ford or Tesla. Do you think some internal body picks prices at random? Of course not. From the moment a new model is conceived, the target markets and price points are fundamental to its development.

Competition, the likely cost base, the world economic condition, inflation and interest rates, where to manufacture and so much more goes into deciding what to price the car at eventually. Above all else, they need to judge “What will the market bear?”

And do you think they ask the salesmen in the dealerships? Of course not, because those salesmen will want the lowest price possible to (hopefully in their minds) help them sell the car and make their commission. The easiest line a failing sales person ever makes is “Didn’t sell because it was overpriced.” This is classic “management by anecdote”, and should be resisted in any business – particularly ours.

Starting high and low and moving the needle

And then we have permissive and encouraging pricing. Some products are launched at a very high aspirational price with the intention of establishing a “premium” perception and then bringing the price down to attract a wider clientele which still believes it is buying into a “quality” profile.

A lot of branded goods do this – most obviously fashion or luggage brands which try to create an “exclusive” image and then sell a wider (though often of the same quality) range at lower prices to a middle market which still thinks displaying a “brand” enhances their personal appeal.

Conversely are products which are promoted at a relatively low price to suck in buyers and which then gradually generate add-ons to push up the total. Budget airlines or hotel groups which advertise their lowest possible prices, but know the buyer will pay more, are obvious examples.

So why don’t trade show companies ever think of asking ‘what will the market bear?’ and why do we price the way we do?

Let’s put forward a few theories:

  1. They don’t have competitors to match prices against. Because of the slot system most of our large events do not have serious direct competitors. Even when they do, as for instance, Spring Fair and Top Drawer, they will charge roughly the same prices even though one might have 5 times as many “buyers” as the other.
  2. They think “overall revenue” rather than price when they budget and it is easier to type in “more square metres” next year than increase prices – but it is a budget and the last 5% of the sqms don’t come in until the end whereas a price increase should stick from day one. This appears to be how one of our largest companies still operates.
  3. There is a superficial (childlike?) belief that if something costs more you will sell less of it. Sometimes this is obvious – if you double the price of holidays you will likely sell less. But there are numerous examples of the opposite being true – that a higher price implies a different quality. And it depends on whom you are selling to. There are many items (First Class seats on Emirates for instance) where the buying market is essentially indifferent to price. And our market is the opposite to a consumer comparing brands in a supermarket – it is (or should be) an exhibitor who has enjoyed a good show and who is very happy to book for next year – and almost certainly could not quote you last year’s price anyway.
  4. Turn it on its head – if someone really believes in the intense sensitivity of price and doesn’t want to increase it beyond 2 or 3%, then surely reducing the price would bring in lots more exhibitors? But anyone who has sold exhibition space or delegate tickets know this isn’t true. If someone is reluctant to book an event, knocking 10% off the price doesn’t make any difference. And on top of that, to do so implies a lack of confidence in what you are selling.
  5. Why do we have some UK shows charging £900 a sqm(often IT events) and some charging £300? What is the logic – other than: “Well last year it was X and we have increased it by inflation?”
  6. COMPLACENCY: the tyranny of the margins: because our large companies all make profit margins of 25% and above, there isn’t any Darwinian pressure to ask: “What might we charge? Can we get another £10 or £20” – which there would be if our profit margins were as low as 4% or 5%. To a significant extent, we are asleep at the wheel.
  7. Above all else, they don’t have a clue what their product is actually worth to their buyers.
  8. And the last and trickiest theory: We are just not very good at interrogating crucially important truths.

What it’s worth is not what it will bear

What something is “worth” has little to do with what price it will bear.

So often when I have these discussions I hear: “Well, it is worth xxx”. Wrong.

The concept of “worth” is a very tricky one. The cliché is: “Something is worth what someone will pay for it,” and as a useless rhetorical aphorism that has some value.

But is a First-Class BA return to New York really “worth” £10,000? Is a Starbucks latte really worth £4.20? And is a West End show really worth £200 in the stalls?

What each of these prices reflects is not “worth”, but what the market will bear.

If you examine the prices of most things which you buy, you will find that very few can be categorized as “What they are worth.” Most of time, what you pay is production cost added (i.e. it costs 20 and we always mark up 3 x so we sell at 60 – restaurants are particularly guilty of this). But the reality is that surprisingly few people are numerate and this adds to the lack of any understanding of pricing.

And it is the same for us. Is a sqm of concrete at your show really “worth” £500? Why not £600? Or £400?

The truth is that we don’t know and have hardly ever asked. In most cases of large events there is no comparison to be made with another event – no way of calibrating against a “market price”.

Why shouldn’t all your prices be 5% higher, or 10% higher, or maybe 15% lower – what difference would it make? It would certainly make a massive difference to your profitability.

So, if your betters allow, why not ask: “What will the market bear?” and think about how you can research that simple question.