The Pricing Debate

8 May, 2014

The last four years have seen an escalation both in the profile of exhibitions pricing and in the level of controversy surrounding the topic.

While some organisers recognise price optimisation as an area of best practice that can substantially drive performance, there are an equal number of doubters, as well as those who have tried to introduce it only to be disappointed with the results.

This article will attempt to explain how price optimisation can work for exhibitions and the impact it can have, while examining some of the concerns organisers have around pricing, the pitfalls that can arise, and how to avoid them.

What price optimisation is not
One valid reason for concern arises from a tendency to treat price optimisation merely as price maximisation. Organisers are justified in viewing such an approach with suspicion if its only aim is short-term margin growth, irrespective of value.  Exhibitions history provides us with enough examples of leading events that have overplayed a strong market position only to be surprised by a sudden irreversible exhibitor exodus.

The real aim of price optimisation is to align price with value, maximising customers’ value for money, while at the same time ensuring that nothing of value is being given away or under-monetised. This produces one of two outcomes

  1. Deliver maximum margins, with the minimum negative impact on value for money; or
  2. Maximise value for money, with minimum negative impact on margins.

As these outcomes are sustainable rather than short term, this approach is also known as strategic pricing.

Sounds nice in theory
The concept is simple and commercially attractive, so why the debate? One reason is that, in practice, there can be substantial challenges.

The first of these is defining value. Unlike some media sectors where the value proposition is self-evident and consistent, in exhibitions value is difficult to objectively measure and subject to change from event to event. Linking price to value is therefore not always straightforward.

The second challenge is implementation. The most common reason for disappointment among those who have attempted a new pricing approach is a lack of implementation strategy. A price structure that looks compelling on paper can be entirely unworkable if it does not come with an accompanying plan for implementation that is baked in from the start.

Defining value
When we purchase a laptop, there may be a number of factors that drive our value perceptions, such as the laptop’s brand, appearance, lightness, screen size, memory and disk size, all of which can affect the price we are willing to pay. One buyer may attach most importance to brand, while another buyer is focused primarily on disk size. These factors will carry most weight in determining what price each respective buyer is willing to pay. If both buyers also view memory as an important but secondary factor, then memory will also have some influence on the price they are willing to pay, but less influence than brand and disk size.

The same basic principles apply in price optimisation for trade shows. Exhibitors’ value perceptions may be driven by a whole variety of factors, such as sales, visitor relevance, stand design, stand positioning, number of leads, quality of interaction, cost of alternatives, level of brand exposure, and visitor footfall, as well as a host of other factors relating to digital offerings and additional services.

Giving these factors their due weight, according to the impact they have on exhibitors, is at the heart of strategic price setting. It is important therefore to highlight two facts: firstly, while some factors are objective and measurable, others rely entirely on the exhibitor viewpoint. Secondly, they are not universal or consistent: their importance can vary not only from one event to another, but also between different exhibitor segments at the same event. Additionally, an event’s value proposition can change over time as it matures from being, say, a transactional to a more branding-led event.

As a result, a “one size fits all” pricing approach across a portfolio of events often fails to account for different exhibitor segments, or to respond to evolution in an event’s core value proposition. Equally, attempts to set pricing against purely objective measures are also likely to miss the mark.

The key is to discover from exhibitors what drives their value at an event, and price according to this. If exhibitors say their stand position is most important, organisers need to discover which positions carry most value, and price accordingly. If exhibitors are primarily looking for a manageable number of quality interactions with senior buyers, or to promote their brand, then again these should be the key factors in determining price. In most cases, there will be a basket of factors to consider, and in each case the same principles should apply, in understanding the relative impact of these on exhibitor value, and setting price accordingly.

Implementation
A move to strategic pricing can involve significant changes and an implementation plan is essential to address these head on. By definition the plan must be tailored to both the organisation and event in question, however we see some recurring themes in exhibitions.

The first of these is sales team resistance. The simple truth is that a pricing strategy will fail if the sales team does not buy into it. If for example a new pricing strategy involves major changes, such as an overhaul of a long-established discounting practice, it may be viewed initially with suspicion. It therefore requires a “champion” who can bring doubters on board, through coaching or mentoring, and above all transparency: if an event is moving from, say, one-to-one price negotiations to a structure that aligns price with value, the principles of price-value alignment must be explained and understood. A sales team cannot be expected to buy into something that is opaque – after all their job will require them to communicate the pricing structure to exhibitors.

This raises the next implementation issue often encountered by organisers: exhibitor resistance. Here, half the battle is won if the sales team has been brought onside, as they can then become ambassadors for change. Additionally, the timing for introducing a new price structure is a major consideration, and should take account of competitor timing as well as overall financial impact on exhibitors (remembering that square metres usually account for the minority of exhibitors’ total costs).

Who needs a pricing strategy?
As we saw at the outset, price optimisation aims to provide organisers with the best sustainable trade-off between margins and exhibitors’ value for money. In events this can be a powerful tool in a number of situations, for example

  • Finding the optimum price structure for launching or defending against a competitor
  • Replacing legacy or discretionary discounts with an optimised discount structure
  • Pricing a wall-bound event
  • Reducing exhibitor churn with minimal price impact
  • Pricing different halls or segments at the same event

In some cases price optimisation delivers dramatic margin improvements, in others it may defend margins while seeing off a competitor. In every case it involves understanding the true value drivers for an event and aligning price accordingly, giving organisers a fundamental building block of an event’s long term success.

Originally published in Exhibition World magazine