Trade Show Tuesday: Are Trade Shows Worth It? - AMA Phoenix

Trade Show Tuesday: Are Trade Shows Worth It?

16-07-18 Zander Buel 0 comment

Whether trade shows are worth the money is a common question asked of the marketing team by the C-Suite, and specifically, the CFO.

John Coe, President and Co-Founder of B2BMarketing.com, makes the case for trade shows and illustrates how they can be worth the marketing investment. There is value in areas of the whole trade show experience that are separate from the actual trade show itself.

For example, the marketing efforts around pre- and post-show can prove to be more valuable than the conversations you have (or don’t have) at your booth. If you make the sale, it is likely the result of your pre-show reach-out efforts or your post-show follow-up efforts. This is often where a sale is lost. Ineffective marketing efforts during this time can turn your investment in events into a losing proposition.

Check out John Coe’s whitepaper on the subject and apply his methodology to your business, and you will likely get your answer to the question.  

Trade shows have been around for decades, and so has the debate: Are they worth it?

This debate is embedded in the question CFOs and/or senior executives ask: “So what did we get for all that money we spent at the XYZ show?”

A fair question for two reasons:

  1. Trade show expenses are the largest single line item in a B2B company’s marketing, representing between 20-40%* of the total budget. In part, this high percentage is a result of larger B2B firms averaging 10 shows per year* (*data from CEIR – Center for Exhibition Industry Research).
  2. Trade shows are one of, if not the hardest marketing expenditure to measure. Very few short-term result measurements are possible, as 80% of the justification to exhibit is to find new leads. With long and complex sales cycles for most B2B firms, by the time the next show is up for renewal, few sales have actually resulted from the prior show, and a measurable return is not yet known. The other 20% is for branding and customer relationship building–another immeasurable activity.

 

trade show
The four justifications that make trade shows worth It

Trade show statistics are interesting, but they’re focused on activities, not results.

Each firm needs to assess and justify their participation in every show, and this white paper lays out a framework for this assessment. Not all shows are created equal, and the trend today is for B2B firms to eliminate the underperforming shows.

The average will likely drop from 10 shows to 8 or 9 in the near future. Organizers beware!

1. Flying the flag of “We’re not going out of business!”

All too often, the justification for exhibiting at an important industry trade show is, “If we don’t exhibit, our competitors will say we’re having financial trouble,” which then implies that you’re going out of business.

While this is not a measurable justification, it is a valid concern from the sales staff, as they’re the ones who will have to answer the question “why didn’t you exhibit at XYZ show?”

No matter the answer, a dark shadow is cast on the company, particularly if they had previously exhibited annually at the show. Competitors will use anything to gain an advantage, and this concern from sales should be considered.

2. Brand awareness

If the booth exhibit is relative large and attractively designed, advertising agencies will talk of “brand impressions” as a measure.

Each person who attend the show is assumed to have received a brand impression, even though they may not have stopped by the booth. Booth size, design and graphics have a lot to do with this, as the attendees do walk the show floor and will see your booth, even though they don’t stop by for a visit.

This brand impression is therefore much like a trade magazine ad.

Select the trade magazine that aligns closest to the show, and determine the cost of a full-page, four-color, one-time insertion ad.

Since this white paper is about trade shows, I’ll pick Exhibitor Magazine and their Exhibitor Live trade show as the example. I’ll also assume for this example that the firm exhibiting sells booth design services.

The show draws 6,000 attendees who represent the cream of the business, and certainly the audience to reach if you are selling booth design services. Exhibitor Magazine’s full-page ad cost is $7,146 (2018 rates) and could be equated to an advertising value the show delivers.

Magazine advertising is not really read, but rather just looked at, much like a trade show booth. Obviously, the specific ad cost for your industry magazines will be different. I’m not including value from listings in the show program, websites or other promotions, even though they all support brand awareness gained from the show.

3. Customer and prospect relationship building

The cost of a B2B face-to-face sales call (CEIR estimates it at $600/call with a range of $250-$1,600/call), combined with the difficulty these days to actually see key customers and prospects, provides another valid justification to exhibit at trade shows.

Let’s use the $600/call cost as a reasonable benchmark and multiply it by the number of meaningful customer/prospects meetings made at the show. Let’s assume that 5 of your sales people are at the show and they also know which of their customers and prospects are attending.

Prior to the show, they arrange meetings to see 5 good customer or prospects–not an unreasonable number, and in fact it could be higher. The field sales call cost of these calls is $15,000 (5 sales people x 5 calls x $600).

Yes, the sales people are spending extra money to attend the show and entertain customers, but it’s nowhere near the cost of making these calls one-by-one in their territory.

To be fair, let’s estimate each of the 5 sales people spends $915 for a three-day show (Las Vegas per diem is $305 from Business Travel News) and $300 more for entertaining for a $1,215 per sales person extra cost, or $6,075 for all five.

So, the sales cost savings of seeing 5 customers or prospects is $8,925 ($15,000 – $6,075), and is a measureble value to use in justification. Obviously, the sales call cost needs to be calculated for your company, and unfortunately, most companies do not know it, as it can be scary.

4. Lead generation

As referenced, 80% of the justification to exhibit at trade shows is to find and engage new sales leads. Trade shows are industry or association gatherings, and those individuals attending are doing so for a variety of reasons:

  • Educational seminars
  • Seeing current suppliers
  • Meeting with industry peers
  • Keeping up on industry trends
  • Finding new suppliers or products they need to purchase

It also can be assumed that their company is healthy and has money to spend, since companies on the ropes don’t send employees to trade shows.

Your mission is to find, attract and engage individuals who might need your product and/or service, or in other words, are targeted prospects.

Obviously, not all attendees or even booth visitors fit the targeted audience profile. The actual achievement of this lead generation mission tracks three traditional steps of trade show marketing and needs to be combined with a lead generation plan.

business meeting
Let’s go over the three phases with recommendations and justifications you might not have thought of.

A. Pre-show marketing

Identification and communication to those individuals who fit your targeted customer profile is the core for any pre-show marketing efforts.

At this stage, it becomes important to profile your target audience by a 4-digit SIC or 6-digit NAICS code. Pre-show registration lists are most useful for communications but should also be combined with other marketing efforts that will include internal and external prospects lists.

Getting the right people to the booth is a critical step in generating enough leads to justify the show.

B. Show floor exhibiting

This is when the action takes place. Books have been written about this, and one of the best is The Event Marketing Handbook, written by Allison Saget and published by Kaplan Publishing.

Since the action on the show floor is primarily focused on prospect identification and lead generation (qualification comes later), the way to view any meaningful metrics is to calculate the value of the activity that occurred at the show.

Companies spend considerable amounts of monies to create the time, place and media of lead generation contact, and trade shows are in this category. The two overall marketing cost benchmarks are:

  • Completed B2B telemarketing call $50
  • Sales call – as referenced $600

What is the average value of a trade show conversation as compared to these two benchmarks? It’s certainly more than a telephone call, since the conversation is face-to-face, but clearly less than an in-person on-site sales call that may last for an hour or more.

Splitting the difference for a $275/contact value might be an approach, but it’s probably too high to be accepted by that ever-skeptical CFO.

It’s better to be conservative. I’ll use $200 as the value of a trade show conversation. Notice I’m not referring to stopping by a booth, but an actual conversation with some exchange of information. Pick another value if you’d like it to fit your cost structure and/or situation.

C. Post-show lead qualification

While it is true some lead qualification takes place in the booth, the reality is that only about 10-15% of booth visitors who might eventually buy your product or service don’t spend enough time and/or divulge enough information in conversation to be effectively qualified.

If you have ever manned a booth, you know this to be true because of:

  • High traffic times such as opening day, lunch time or when seminars adjourn
  • Reluctance of booth staff to ask the right qualifying questions
  • Impatience of the visitor to move along and cutting the conversation short
  • Incomplete capture of answers to qualifying questions, either electronically or manually

Therefore, most lead qualification takes place after the show is over. Poor post-show lead qualification is where much of the value from trade shows is lost.

What’s measureable is the number of potential leads that meet your target profile and how to place a value on them for justification to exhibit at each show. The most active ingredient in identifying potential leads is the industry of the attendee’s company (another use of the SIC/NAICS profile).

While this is only one data descriptor of a potential lead, it is a good link to potential revenue. Therefore, the booth staff need only ask one question to classify the visitor as a potential lead or a looky-loo: “What does your company do?”

Just how rich is the target environment? Equipped with your target profile, the question is just how many of the attendees meet the single data point profile.

Unfortunately, very few organizers are able to provide this information, though that may be changing. Until they do, however, you are responsible to gather this data.

The only way to determine this is to ask both visitors the industry question. Clearly, not all attendees will be interested in visiting your booth, and those drawn to it will have a reason for stopping by.

Depending on your booth promotion (stay away from Booth Babes) the quantity vs. quality percentage will vary.

Here’s a template for calculation:

  • Number of show hours: 3 days x 8 hours, or 24 hours in total
  • Number of salespeople: 5
  • Number of visitor interactions per hour per salesperson: Average of 4
  • Interaction capacity: 480 (24 hours x 5 salespeople x 4 interactions/hour)
  • Percentage of visitors fitting profile: 30% (will vary, but 30% is average)
  • Number of potential leads: 144 (480 interactions x 30%)

Now you have 144 potential leads that serve as the first answer to the “what did we get for our money?” question. But don’t stop here.

An industry rule of thumb is that for every staffer, the booth is 50 square feet.

In our example, we have 5 salespeople for a booth size of 250 square feet. Both cost averages around $30/square feet, or $7,500 for floor space.

A factor of 4 times the booth cost is the industry average for all other expenses, or in this case, example another $30,000.

The total cost to exhibit at the show is $37,500. The cost per potential lead is $260 ($37,500 divided by 144).

Is $260 good or bad? The answer lies, in part, in what the cost per inquiry is from all your other marketing efforts.

It could be lower, but in many B2B clients I have worked with, it is higher because of so few leads being generated. Don’t forget that an inquiry is not a lead.

Another measure of acceptable value is to assess the cost per lead vs. the revenue and margin of a sale. In most B2B situations, the product and/or service sales revenue is in the multi-thousands of dollars. So almost no matter how high the lead cost, it’s profitable.

Another benefit of trade show leads is that they have been generated in a short period of time vs. other lead generation campaigns that may only generate a few each week. This feeds marketing a fresh and accurate list of potential leads to qualify, assuming they have the resources to do so.

This burst of fresh leads can be a boost to any sales efforts if they’re followed up.

D. A positive return on expense (ROE)

Sales results are the final measure, and at the time of the show’s end, no sales will have occurred.

So how do you calculate an estimated break-even and ROE that the CFO will buy before sales are actually made?

Here is a method that is based on both B2B benchmarks and my experiences. These numbers continue the case above (I rounded off the numbers):

  • 10% of inquiries will meet the qualification criteria now.
  • 20-40% of the inquiries will be leads if properly nurtured over time. Let’s use 30% to generate another 43 qualified leads.
  • Over time, this trade show will produce 57 qualified leads from the 144 inquiries generated at the show.
  • The next step is to estimate the number of sales from these leads. Ask the sales manager what conversion percentage they would forecast if given a qualified lead. Typically, the number is optimistic and will be in the range of 50% or more. Let’s be conservative and say only 25%, or 1 in 4, of the qualified leads will convert to a sale.
  • Given 57 qualified leads, the number of sales will be 14.

What is the average revenue of a sale? This question has three possible answers:

  • First sale
  • Yearly revenue
  • Lifetime revenue

Pick the answer that is most acceptable or calculated in your company.

For this example, let’s assume the following revenue from the sale of trade show booth design, construction and service is:

  • First sale: $10,000 (one trade show booth)
  • Yearly revenue: $50,000 (5 sales per year)
  • Lifetime revenue: $150,000 (3-year life span of a customer)

Also, a 50% gross margin is assumed, which is standard.

return on expense
Break-even calculation

This is a classic direct marketing calculation and is defined as how many sales at gross margin we have to make to pay for the campaign, or in this case, the trade show. Let’s apply this to trade shows and this case example.

  • The total cost of the show was $37,500.
  • The average gross margin for the first sale is $5,000.

Is it reasonable to assume the show will produce 7.5 sales to break even? Based on this case example, the answer is yes ,as 14 sales are forecast.

Only the margin for the first sales was used in this case, not only to be conservative, but to also show the CFO a realistic analysis, as they will shoot down overly optimistic ones.

Return on Expense, or ROE

Why didn’t I use ROI? While ROI is universally used term by marketers, it is almost never a real ROI calculation. Just ask the CFO how the company’s financial ROI calculation is constructed to see the error in using this term.

As an example, it includes the calculation of discounted cash flow–something that marketers never use. Therefore, a more realistic measure is ROE, and is expressed as a ratio of $1 expense to $X of the margin returned.

By calculating an ROE, a comparison of all marketing efforts can also be evaluated, and that goes for comparing multiple trade shows against each other.

Let’s finish off this case by calculating the ROE:

  • Total cost of the show: $37,500
  • 14 customers with $50,000 yearly revenue each, or $700,000 total revenue and a gross margin of $350,000

ROE is 1 to 9.3 ($37,500 divided into the $350,000 margin).

Not bad by any standard.

Now how do you answer the question, “So what did we get for all than money we spent?” Based on this case here are the answers:

  • We saved $8,950 in selling costs and strengthened customer and prospect relationships (assuming the meetings and entertainment went well).
  • We received $7,146 in advertising value.
  • We generated 144 new inquiries that produced 57 qualified leads for conversion.
  • With these 57 qualified leads, we are confidently forecasting 14 new customers over time with a yearly revenue of $700,000 and a gross margin of $350,000.
  • We achieved an ROE of 9.3 to 1.

Let’s total it:

  • Sales cost savings: $ 8,950
  • Advertising value: $ 7,146
  • Margin from expected sales: $350,000
  • Total: $366,096 vs. cost of $37,500

Are trade shows worth it? In this case, yes.

Obviously, this case example is fictitious, and your actual expense and revenue numbers need to be used to assess the participation in or evaluation of a trade show.

All too frequently, when asked the question of worth, the answers are not satisfactory to executives, and frankly, don’t reflect well on your professional capabilities.

Meg Whitman, while CEO of eBay, was once quoted as saying, “If we can’t measure it, we don’t do it”. This is increasingly true for trade shows, as for far too long they have escaped the harsh light of measurement and justification.

Hopefully, this approach to measure the value of trade shows provides you with a valid way to decrease the intensity of the light, or better yet, make exhibiting at shows a bright light for you.

Comments and thoughts are welcome by emailing me at John.Coe@B2BMarketing.com

Want to mingle with fellow marketers and talk tips and tricks with great food and drinks? Register for our Free Happy Hour this Thursday at Zion & Zion.

John is President and Co-Founder of B2BMarketing.com. He has been on both sides of the trade show equation as an exhibitor and attendee. As an exhibitor John was engaged in show strategy and lead qualification at numerous shows such as Graph Expo, Comdex, and Business Marketing Association Annual. As an attendee and speaker John has attended too many shows to mention. He also has lectured on trade show marketing to Graph Expo and ConAg/ConExpo exhibitors, and has also written articles and blogs on trade show marketing.

He recently has partnered with Direct Hit Marketing, a trade show data analytics firm in Longmont CO to bring metrics and lead generation programs to the trade show industry. John’s other background includes experience in both sales and marketing. On the sales side, John was a field salesman, national sales manager and executive in charge of both sales and marketing for three major B2B firms. On the marketing side, he was president of a B2B direct marketing agency for 10 years, National Campaign Manager at IBM, Sr. VP of B2B at Rapp Collins Worldwide and President of Protocol B2B. John is also the author of The Fundamentals of Business-to-Business Sales & Marketing, published by McGraw-Hill. He can be reached at john.coe@b2bmarketing.com or by phone at 602-402-6588.

Blog post compiled 06.26.18 by Zander Buel, Director of Communications, American Marketing Association, Phoenix Chapter | https://www.linkedin.com/in/zanderbuel/



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