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February 2008
Surviving a Down Economy
Take steps now to ready your show for what lies ahead
By Francis J. Friedman
Gravity and economics dictate that what goes up must come down. The past four years have seen a rise in overall economic activity. Now, however, with the effects of the subprime mortgage crisis and the tightening of financial liquidity and credit availability, exacerbated by increased costs for such items as energy, raw materials and health care, we’re sitting on the edge of an economic downturn. Consumer out-of-pocket expenses for energy, mortgages and food are increasing faster than wages, and as consumer spending slows, business sales and profits are also expected to slow. This can lead to reduced employment, reduced capital investment, and reduced marketing and promotion expenditures.
We can soon expect chief financial officers (CFOs) to transform into aggressive cash guardians. Budgets could be tightened significantly to meet the fundamental needs of the business and deliver the earnings per share (EPS) targets promised to Wall Street. In effect, the CFO now becomes the new customer spokesperson for both exhibitors and attendees.
How can you protect your show? A thorough analysis of your industry, as well as your show’s exhibitors and attendees, will provide insight on how to plan for a potential downturn.
History is our teacher
Black Monday (Oct. 19, 1987) saw the stock market lose 22.6 percent of its value in a single day. The ripple effect collapsed markets around the world. It wasn’t until 1992 that business got back on its feet. What we learned from that downturn:
1. Cut fixed costs. Outsource everything that can be outsourced.
2. Reduce payroll; hire temporary workers.
3. Cash is king. Wall Street values companies with positive cash flow.
4. Increase financial controls and improve financial control systems.
5. Invest in technology to lower costs and increase efficiency.
These new business practices fostered the concepts of the lean, agile, learning company, one that can quickly respond to changing competition, convert market opportunities and learn how to invent its future.
The 2000-2003 bear market
The 2000-2003 downturn saw businesses react much faster and more aggressively than in the 1987-1993 declines. The increased investments in technology and that lean, agile organization, came to the forefront. Business responses included:
1. Quickly cut outsource contracts; reduce personnel, inventories and expenses.
2. Implement even tighter spending and operational controls.
3. Use new Internet technology to reduce travel expenses.
The two biggest changes to affect the exhibition industry were the increase in justifying return on investment for exhibiting and a new wave of exhibitor companies holding their own private events. including full-blown trade shows.
The recent economic surge
The 2003-2007 period has seen the uniting of customer relationship management (CRM) and multimedia marketing, including all forms of the Internet. Today’s marketing strategy:
1. Intense customer-centric focus.
2. Building brand awareness and brand loyalty using multimedia tools.
3. Integrating Internet tools and personal interaction to reach and influence more potential customers, more frequently, in many different modes and at lower costs.
4. Cash is still king. ROI, ROI, ROI.
5. Engagement is the key to customer development and brand loyalty.
Understanding your show’s economic fundamentals
The first step in protecting your show is to comprehensively understand the financial underpinnings of the economic sector your show serves.
As the different sectors of your industry feel the economic pinch, where will money dry up first? Will attendees feel the pinch first, or will exhibitors? How deeply will cut-backs be felt by each sector of your industry? What impact will each sector’s cut-back have on the potential exhibitors and attendees for your show?
Knowing the deeper segmented economic structure of the industry provides advanced warning as to what’s ahead in an economic slowdown. This advanced warning allows you to develop specific strategies and programs to meet the needs of each industry segment as it faces a slowing economy.
Shifting exhibitor and attendee patterns
Exhibitor and attendee patterns diverge as the economy changes. Exhibitors make financial commitments for booth space well in advance of the show. As most show organizers can attest, more and more attendees make financial commitment to attend a show at the last minute. This difference in financial commitment timing creates different participation patterns between exhibitors and attendees.
In an economy just starting to turn down, a show organizer typically sees a continuing up trend in booth sales, as exhibitors continue to reserve booth space based upon the current up economy and their associated available marketing budgets.
By show time however, the anticipated number of attendees might fall considerably behind last year’s experience because of last-minute cuts in company travel budgets. As we learned after the dot-com bust and 9/11, cash budget categories, like travel and education, are usually among the first to be reduced in an economic downturn.
In a slowing economy, show organizers shouldn’t assume their shows are doing well just because exhibit space sales are continuing on track or upward. In a down economy, show organizers have to assume attendees are already under CFO cash flow attack and facing internal budget cuts. Show organizers must develop their attendee promotion plan based upon the assumption that the CFO has already said “no” to attendee travel budget requests.
Understanding trade show audience loyalty
Show organizers are in the attendee business. Exhibitors expect shows to deliver a qualified audience or they won’t participate. To deliver this audience, especially in a down economy, show organizers must understand the composition and loyalty of their attendees, which can be compared to an archery target with concentric rings. At the center of the target is the core audience, its most loyal group of attendees at the show. Typically, they attend every show. They’re the heart of the show and the ones who are most invested in the industry or the show.
Moving outward from the core are successive rings of attendees with decreasing loyalty and commitment to the show or the industry. Typically, the core group and the next two emerging rings of attendees comprise the essential audience for a show. The size of these successive two attendee rings varies by show and what they contribute in total attendance at a show.
Successive audience rings outward from the core include people who are progressively less loyal to the show. These groups include people who want to be where the action is in the industry, have additional available budget to attend trade shows or attend as part of an expanded presence by a company that’s already attending. These expanded outer attendee rings contribute to growing attendance numbers in an expanding economy, but they’re the first ones to leave a show in a downturn.
An analysis of historical attendance records can help you determine the composition of your attendee loyalty groups. For example, attendees who have participated for each of the last five years can be considered core attendees. Those who have attended four of the last five years can be considered part of the next most loyal attendee group, and those who have attended for three of the past five years can be considered as part of the next most loyal ring of attendees.
There are other methods for analyzing attendee loyalty based upon the industry and the show. Another approach is to analyze how many years a given company has sent representatives to attend the show. It may be that there’s a high turnover of specific individuals year to year, but a given company may always be represented with attendees at the show. In this analysis format, companies with five consecutive years of attendance at the show would go into the core attendee group and so on.
Another alternative would be to analyze past attendees by job title or job function. What’s the most popular job title at the event over the past five years? What’s the least popular or transitional job title or job function at the event over the past five years? This analysis would lead to a sorting of job titles or job functions into the appropriate loyalty rings for the show.
Once you’ve evaluated your audience composition, you can determine what each segment wants and needs from your show through market research.
Engagement by segment
Today’s marketer is focused on engagement — the ability to emotionally involve the customer in your product or service to the exclusion of competitive offerings. The higher the level of emotional engagement in your product or service the greater the brand loyalty.
Engagement is driving new types of research, strategic planning and tactical implementation for show offerings. No longer can show organizers assume an audience is engaged in a show just because they show up. The question today is: How engaged is the audience, and will they show up again and again at future shows?”
Assessing the engagement of each audience segment is an important step in helping to determine how loyal that segment will be, or remain, to the show. Look at how much time attendees spend on the trade show floor. How many seminars do they attend? How many days do they stay on show site? How much networking do they engage in? What more is each audience segment wanting from the organizer to increase their satisfaction and engagement? How well do they like the show?
By segmenting each audience target and assessing the engagement level of each segment in your show, you can begin to determine where the show has existing strengths and where the show needs to implement remedial actions. You need to determine if there’s enough existing research to answer these questions or whether it’s time to implement a research and information-gathering program to increase customer retention.
Segment analysis will also help you determine where the show is most vulnerable from an exhibitor perspective. Traditionally, trade shows are vulnerable to the loss of the 10-by-10 exhibitor population that’s new to a show on an annual basis. The exhibitor vulnerability question can also be assessed by product segment in the show, as well as by booth size.
Analyze your programming
What programming needs to be developed for each segment of the show’s audience to hold them in the show? What does each segment want, and what are they willing to pay for? The program includes the exhibit floor, educational sessions, networking, special events and physical space management. Unless the programming for each segment is compelling, they’ll find reasons to stay home, especially when cash is tight.
In an up economy, the trend is to look at opportunity and business expansion programming. Downturn economy programming should focus on helping attendees solve problems that immediately confront them. These problems generally tend to be related to cost control and cost cutting, doing more with less, maintaining sales and sales volume with reduced resources, finding new business, working with current customers, etc.
Problem-solving programming formats include expert speakers, case examples, industry leader panels, technical paper presentations, exhibitor showcases and facilitated roundtable networking sessions. Programming focused on problem solving makes it easier for prospective attendees to justify attending the show.
The last-minute decision to attend a trade show is typically based on the prospective attendee’s perceived price/value relationship for the time and money invested to attend the show. To increase the attendee’s determination to attend, add more value to the show. The tricky part is determining what value is for each segment.
In addition to problem-solving programming, added value may include more networking sessions, a cocktail party for key attendee executives to bring this high-value segment together, a charity event for all participants related to a highly valued charity for that group, CD/MP3 recordings of key seminars, a surprise guest speaker or a unique spouse program. The specific added value should be determined by the segment analysis and the positioning of the show in its market.
Be empathetic
The lack of empathy by a trade show for its industry in a downturn ensures that the show will not fare well. Generally, this is most apparent in pre-show brochures that don’t match the current tone of the industry’s economic state. Mismatched brochure copy includes an overly optimistic tone or too much emphasis on new equipment and new technology.
The problem is that in a down economy as people are laid off and as cash management becomes a major priority, businesses cut back on their new purchases. They extend the life of current equipment, look for used equipment or defer purchases entirely.
Empathy in pre-show brochure copy is a subtle art. The copy can’t be gloom and doom either. “New” has to be framed as part of problem solving, reducing costs or improving performance. The closer the pre-show brochure copy can capture the mood and pain of its industry and offer solutions and hope in its tone, the more compelling the show will be perceived by its intended audiences.
The goal is for the industry to know that the organizer understands who they are and what challenges they’re facing. And, that the organizer will produce an event that addresses the audience and meets their needs.
Increase customer service
For exhibitors in a downturn economy, a show organizer needs to increase its customer service efforts to help exhibitors be more successful. Pre-show customer service includes such activities as making personal pre-show contact with each exhibitor, helping an exhibitor to manage his space commitment level to stay in the show, counseling an exhibitor on how to exhibit with lower drayage expenses, helping exhibitors prepare their pre-show marketing programs, and a post-show phone call to encourage exhibitors to convert their show contacts into follow-up sales calls.
Many times in a down economy there’s turnover in exhibit management. The new person may not know your show or may have never managed an exhibition effort. Good customer service will help that person create a successful exhibit program and justify the expense of exhibiting.
In addition, on-site amenities for exhibitors and attendees to help ease travel difficulties may include concierge services, pre-flight baggage check-in, direct transportation service to the airport, flight updates, weather alerts, etc.
Lower costs
Managing in a down economy means squeezing costs out of the trade show equation for both exhibitors and attendees. Show managers must look at all costs they incur, and that are incurred by both attendees and exhibitors, to see where reductions can be made.
Can the average hotel block room rate be negotiated down? Can less-expensive hotels be included in the room block? Can an official airline offer lower airfares? Can set-up rules be changed to allow more time for hand-carry of exhibit materials or for plugging in pre-approved booth lights? Can a different ground operator provide lower-cost airport transportation?
Anything a show organizer can do to lower the out-of-pocket costs for both exhibitors and attendees will place the show in a more advantageous position.
Building in-person participation
A down economy will lead exhibitors to focus on their own private events, and both exhibitor and attendee companies will rely more on technology for information and communications. New Internet capability upgrades, advanced video technologies and lowered costs will all contribute to encourage people to stay home and conserve budgets.
To overcome these reasons to stay home, a show organizer has to build community — which is the other side of engagement. You may have to spend more of your pre-show marketing effort on community building to increase actual on-site participation. Pre-show community building can include Webinars, video streaming of interviews or other content, blogs and viral marketing campaigns. The amount and type of this pre-show community-building effort will depend upon the show and its key audience segments.
As much as businesses use digital technology, people still want and need to be with each other in person. The payoff of the pre-show community-building campaign is that people will want to be together in person at the show.
The view ahead
The depth and length of the coming downturn are unknown at this time. What is known is that the slowdown is already having its effects on a number of different industries. By taking the time now to analyze your show and pre-plan for a potential downturn, you can avoid nasty surprises later.
Francis J. Friedman is President of Time & Place Strategies Inc., a full-service consulting company to the trade show, event and association communities. He has extensive senior management experience assisting clients to build successful, branded, trade shows and events in both down and up economies. He has also received the prestigious Chairman’s Award from IAEE.
Sidebar: 4 tips for promoting your show in a down economy
1. Write for the CFO
Many attendees need permission to attend a trade show. Your pre-show brochures need to be the sales tool that enables an attendee to visit your show. Pre-show promotions need to be written as if you are speaking directly to the CFO asking for travel money. Be specific and benefit oriented. Answer the question: What will I take home and put to work if I attend your show?
2. Showcase new as problem solving
People attend trade shows to see what’s new. In a down economy, new has to be re-cast as problem solving in pre-show brochure copy. By presenting new in the context of helping to solve problems, a trade show becomes more relevant to its industry and better able to justify CFO travel approval.
3. Engage exhibitors to promote the show
Most shows already encourage pre-show exhibitor promotion. In a down economy, however, this activity needs increased attention by show management. Exhibitor customer service reps should tout free pre-show promotion tools. Continuing exhibitor pre-show follow-up will be necessary to ensure these tools are actually implemented.
4. Engage the facility and the city
A fall-off in economic impact from a show hurts a city and a facility. Many facilities and cities can provide in-kind services to help organizers promote their show. These services can include attendee telemarketing, e-mail blasts, blogs, links from their Web sites to your show and CVB newsletters. Ask what they can do to help market your show.
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