Trade Shows, Part 2: A Value Model

Trade Shows are costly marketing efforts. They take sales people out of the field and restrict them to an 8X10 piece of carpet for a couple of days. What justifies the cost of trade shows?

Trade shows are a marketing function hence they better perform a marketing task. In this case, they perform the task of nurturing positive market relationships. For a relationship building function, we should be able to form a model that enables both prediction and measurement of the dollar value of the activity. The model should rely upon segmenting the activities and quantifying the number and depth of each type of relationship building activity.

General Advertising?

One of the purposes of booths is general advertising. Booths can be used as static advertising reaching a target market to create positive firm-customer awareness and branding. For trade shows, the simplest metric to quantify event benefits is to determine how many Relevant Attendees will see your booth. The count of Relevant Attendees is a function of overall attendance and the relevance of the audience. The audience relevance is an estimated percentage of attendees within your target market and has a role in influencing or making purchase decisions within your product category. This can either be quantified through surveys or estimated based upon the topics presented. Taking the product of overall attendance and the relevance to your product market yields the count of Relevant Attendees. As a form of general advertising reaching our target market audience, the value of a trade show could be related to the value of a direct mailer. For ballpark figures, I will assign a value of $2 per Relevant Attendee. Hence, for a hypothetical trade show with an expected 1000 attendees and 30% relevance, the Relevant Attendee count is 300 and the advertising awareness expected value is $600. Clearly, booths as general advertising will not justify their own cost and hence are inefficient.

Booth Visitors?

A second measure that is sometimes used to justify trade shows is measuring overall booth visitors. Booth visitations are more meaningful than general advertising. People examining the booth often will take the time to interact with your firm and ask about the product or service on offer. Firms can collect cards or scan badges to get the count of booth visitors. However, not all booth visitors will be relevant. Many people visiting a booth will be window shopping, job seeking, or entering booth drawings. Hence, again, marketers should estimate the number of booth attendees that are relevant. Next, as a form of market communication, personal communication is far more valuable than simple letters or advertising, hence the dollar value associated with direct market contact with booth visitors should be higher than that associated with general advertising. For booth visitation, I will assign a ballpark figure of $8 per booth visitor. Hence, for our hypothetical trade show, if we expect 175 of the 1000 attendees to visit the booth and only 75% of them are relevant, booth visitation has an expected value of $1050. While higher in value than booths as general advertising, getting booth visitation still falls short of the total cost of renting exhibit space.

Talking to Prospects?

While improving our firm’s name recognition is a nice activity, it is always nicer to move prospects into and through our sales funnel. As a quantitative measure of the function of moving people into and through our sales funnel, we have to move beyond general advertising and booth visitors and move toward counting the number of deep interactions with our prospects. While it is difficult to hold lengthy discussions at trade shows, it is possible. I have personally spent 2 hours with one prospect at a trade show that desired a prearranged, in-depth product demonstration during a lull on the exhibit floor. Quantitatively, we should separate interactions with the new prospects expressing genuine purchase intent from interactions with existing prospects moving through the sales funnel. For talking to prospects, the value of contacting them through a trade show could be related to the value of making a sales call to their office. If your sales people are making around $90K, each day of work is worth $320. Visiting a qualified lead is worth a day’s work for a sales person selling products valued above $100K. Hence, each new qualified lead would be worth $320. Visiting with an existing prospect could be worth twice this amount considering that often two people will make second visits to clients one for sales and the other for technical or market information. I will ballpark the value of interacting with existing prospects at $640. In our hypothetical trade show with 1000 attendees, if we expect to get 15 new prospects and talk with 10 existing prospects, then we could estimate the value of creating qualified leads at $5,400 and talking with existing prospects at $7,200. Now here is the real value of trade shows. This also indicates why trade shows are a function facilitated by marketing but accomplished through the direct sales force. The members of the direct sales force must be at the meeting to capture the value of talking to prospects.

Talking to Customers?

Marketing of some products requires separating customer acquisition costs (prospecting) from customer retention costs (account management). Trade shows are both. At trade shows, firms have the ability to talk with existing customers thereby reinforcing the currently beneficial relationship. We can set the expectation that out of the 1000 attendees, 12 existing customers will visit the booth. Also, we can associating the value with interacting with existing customers at half of a day’s work for a salesperson or $180. Thus, the expected value associated with maintaining positive relationships could be placed at $2,160. Again, to capture this value, we must have our account executives on the floor.

Other Activities?

Partnerships, Competitive Awareness, Press, and other activities can be fostered through trade shows. While the value of these activities is lower than that associated with moving customers through the funnel, it is still an important function in making a firm more competitive. Measuring and quantifying the value of these activities is also difficult. If forced, we could again count the number, measure the depth, and associate a dollar value with each market contact fostered or developed. Some firms use trade shows as the primary means to create awareness with business partners, yet for most firms, the value of these activities is indirect and can only be ballparked. For our hypothetical trade show, I will place an expected value of $500 for these activities.

So, should you attend the trade show or not? For my hypothetical trade show, the expected value of exhibiting is $16,910. Note that most of this value is associated with direct interaction between the direct sales force and the target market, hence it wouldn’t be attainable if only marketing people and hired entertainers were at the trade show. For your company and its trade show calendar, the actual numbers will differ. Yet, the model of valuing trade shows can be used to justify the cost of a trade show and estimate its anticipated value. Moreover, by counting the actual number of interactions and segmenting their type, the value of the tradeshow can be quantifiably measured.

The value of this exercise is twofold: (1) it highlights the value of direct exhibit floor interaction between your direct sales force and the market and (2) creates a model for estimating and measuring the value of the trade show to your company.

Now that we can model the value of trade shows for both estimation and measurement purposes, how do we maximize it? This will be the focus of the third article exploring trade shows.

The May Report, TECH BUSINESS BRIEFS, April 18, 2002