Posts Tagged ‘Increasing event participation’

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Let’s Restructure Material Handling Rates at Trade Shows


2010
05.24

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Posted in Consulting, Tradeshow Management | 4 Comments »

While we all struggle to increase participation in meetings, tradeshow and special events, the issue of making exhibitor participation in trade shows more affordable has been making headlines…particularly here in Chicago.

   The biggest complaint I generally hear from exhibitors is the cost of material handling, also known as drayage.  It’s difficult for exhibitors to understand why it sometimes costs more to have their crates unloaded from a truck and moved to their booth, than it does to ship them across the country.  There is more to material handling service charges than simply unloading the freight from a truck and moving it into an exhibitors booth (also included are removing the empty crates from the booth once they are unpacked, storing them, returning them at the close of the show, and then loading them out onto trucks). However, I believe the current trade show material handling cost model is broken and outdated.

Presently, the material handling cost to exhibitors from general service contractors (GSC) is based on a dollar amount charged per hundred pounds, or per CWT (which stands for cart weight).  A CWT is a unit of weight measurement equal to exactly 100 pounds (a hundred weight), created and used by U.S. merchants since the late 1800s. Traditionally, this measurement is used by large common carriers in rating charges for freight.  It is also used by GSCs in the trade show industry.

I suppose it’s easy to understand why the GSC community initially adopted from the trucking business the CWT measurement for exhibit freight.  It was established and already in place, so GSCs (who came along long after trucking) found an easy unit of measure based on freight weight that they could bill from.  But is trucking freight across the country, and GSC material handling for trade shows an apples-to-apples comparison of services? 

I would argue they’re not.  However, GSCs have been using this billing model since exhibitions began, and exhibitor revenue from material handling constitutes approximately 75% of the GSCs profit on a trade show.  Knowing this, what can we do to restructure the costs and billing metric for material handling to make exhibitor participation more affordable?  I suggest that event producers and general service contractors give serious consideration to the following.

  • Change the general service contractor’s current metric of charging per hundred pounds (CWT.) for material handling to either a “per square foot”, or “time and materials” charge.
  • Change the general service contractor’s current business model so as not to rely on material handling for up to 75% of their profit margin. This would require industry acceptance by event producers and all GSCs, because if we ask general service contractors to lower material handling pricing, they will then need to charge the event producer for other items which have not traditionally been billed to event producers (or perhaps billed at a deeply discounted rate), such as show management decorating, furnishings, graphics, carpeting, custom booths, shipping, etc., and also bill for GSC employee planning time, travel expenses and/or charge the event producer a “management fee.”

While I realize that charging for material handling based on square footage or time and materials (as opposed to weight) are not new ideas, I thought it might be interesting to outline a couple of examples to stimulate some ideas and input. 

As you read on, please keep in mind that every show is different and there are a myriad of variables that can affect the general service contractor’s pricing, i.e., size of show, dates and location of show, type of show, etc.   As I was putting the following examples together, I was imagining a tradeshow of approx. (400) booths held in Washington, DC.  Let’s assume the show has approximately 250,000 lbs. of exhibitor freight, and if material handling rates were based on the traditional model of per CWT, the rate would be a flat (both warehouse and show site) $75 per hundred pounds.  The examples aren’t perfect, but hopefully they will help us all think about possible options for lowering the cost to exhibitors. 

Material handling pricing model based on square feet

A few footnotes regarding this model:

a)       The cost per square foot would be negotiable between the general service contractor and the event producer, i.e., lower or higher depending upon labor costs in a particular city, size of show, dates and location, length of contract between event producer and GSC, etc.

b)      To encourage exhibitors to purchase more exhibit space, the square footage pricing could be “tiered”, i.e., exhibitors with more space might receive a lower  per square foot material handling price

c)      The material handling costs can either be packaged into the event producer’s booth fee cost…or billed directly from the GSC to the exhibitor

Exhibitors with 100 square feet (10’x 10’ booth) – 300 square feet

  • Crated or palletized freight = base rate of $2.25 per square foot… (or $225 per 10’x10’ booth)
  • Loose boxes or cartons which need to be palletized for fork lift or brought in on flat carts = Add $1.00 per square foot to base rate
  • Load in or load out on overtime = Add $1.00 per square foot to base rate for each occurrence

 Exhibitors with 301 square feet – 600 square feet

  • Crated or palletized freight = base rate of $2.00 per square foot
  • Loose boxes or cartons which need to be palletized for fork lift or brought in on flat carts = Add $1.00 per square foot to base rate
  • Load in or load out on overtime = Add $1.00 per square foot to base rate for each occurrence

 Exhibitors with 600 square feet or more

  • Crated or palletized freight = base rate of $1.75 per square foot
  • Loose boxes or cartons which need to be palletized for fork lift or brought in on flat carts = Add $1.00 per square foot to base rate
  • Load in or load out on overtime = Add $1.00 per square foot to base rate for each occurrence

 Another model might be to have material handling costs billed to exhibitors on a “time and materials” basis. 

Material handling pricing model based on “time and materials”

a)      Time—assume the total cost of a worker to handle exhibitor freight is $85/hour.  This includes the cost the general service contractor must pay the worker per hour, including vacation and benefits.  Also included is the general contractor’s employee time to supervise the labor, payroll costs, and profit.  Assume for each 10’ x 10’ booth, it requires (1.5) workers for (1.5) hours to unload the exhibitor freight from a truck and move it into the exhibitors booth, removing the empty crates/boxes from the booth once they are unpacked and store them, and finally return the empty crates/boxes at the close of the show, and once they are packed, load them out onto a truck.  This example also includes costs for special handling, i.e., loose boxes, and miscellaneous non-forklift driving freight personnel, i.e., checker, etc.

The straight “time” cost per 10’ x 10’ booth would be $191.25

If on overtime, add 25% ($47.81) or…$239.06 per 10’ x 10’ booth

b)      Materials—assume that the general service contractor rents (some GSCs own this equipment, but let’s assume they are rented) three (3) forklifts per (100) booths. (400) booths = (9) forklifts.

Cost of forklift per week…approx. $500 x 9 = $4,500

Cost of delivery/pick-up…approx. $400

Cost of fuel/surcharge…approx. $75 x 9 = $675

       Sub total = $5,575

Plus…standard 30% contractor mark-up of materials  =$1,672.50

Total materials cost for (9) forklifts = $7,247.50 divided by 400 booths = $18.12 per 10’ x 10’ booth

Total cost for 10’ x 10’ booth on straight time based on “time and materials” :  $191.25 + $18.12 = $209.37

c)      The cost per hour would be negotiable between the general service contractor and the event producer, i.e., lower or higher depending upon labor costs in a particular city, size of show, dates and location, length of contract between event producer and GSC, etc.

d)     Because this model is based on actual time and materials utilized, I would not provide a discount to exhibitors who rent larger space.

e)      I do not see this model being packaged into the event producer’s booth fee cost, but rather billed directly from the GSC to the exhibitor

In order to make either one of these models more affordable for the exhibitor, the general service contractor base rate, e.g., cost per square foot, or cost per hour, must be structured low enough so that the total material handling cost to the exhibitor would be at least 50% lower than the anticipated material handling cost to exhibitors utilizing the existing CWT pricing model.  Otherwise we would just be swapping out “units of measure.”  And, as I previously outlined, in order for the base rate to come down, it must be accepted and encouraged industry wide.   Event producers have to be open to a model where GSCs charge for what have typically been complimentary show management items and for GSC personnel time and travel.

These are just my initial ideas to spark thoughts and conversation.  I realize that material handling is just one facet in the current trade show business model that needs to be addressed in order to make exhibitor participation in trade shows more affordable.  I hope that many of you out there feel the same way.  The current tradeshow model is outdated, overpriced and desperately needs to be revamped in order to attract customers (exhibitors) and flourish. 

Thanks for reading and I welcome your thoughts and comments.

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Revitalizing participation in events by reducing pricing and eliminating cost-shifting


2010
02.01

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Posted in Consulting, Meeting Planning, Special Events, Tradeshow Management | 4 Comments »

By Jack Thompson, CMP, CEM, EXPOexpert, inc.

Until the middle class gets back to work and has money to spend…regardless of whether economic soothsayers tell us the recession is ending…business is still sucking wind.  This situation has brought further various problems into the spotlight, problems which have been issues in the meeting, tradeshow, and special event industry for some time.   However, as my friend, Bob Dallmeyer, recently stated during a presentation at the Midwestern Chapter of IAEE, the resurfacing of these issues is good because it gives us an opportunity to see if something beneficial can come from healthy dialogue.

Help with pricing!

We have seen the retail market respond to the economy by implementing dramatic discounts and price reductions.  This is really smart.  After all, if they didn’t cut costs, very few people would be able to afford their goods and they could price themselves out of business. 

  With the exception of the hotel community, which seems to be lowering room rates, it seems to me that many event producers and suppliers do not fully understand the gravity of the current economic situation and its effect on attendee and exhibitor participation in their events.  Some event producers and suppliers are holding pricing at current levels (perhaps at the previous years’ pricing), but it seems that few are actually reducing prices, and many are actually increasing customer costs.  

I’m sure that some of you will disagree with me, because you think discounting or reducing customer pricing leads to a perception of decreasing the value of the product.  However, in the current business climate I don’t think we have a choice but to reduce pricing (without sacrificing service) to encourage attendee and exhibitor participation and business growth.  Specifically;

  • Facilities should reduce rental fees to event producers, as well as other costs governed/managed by the facilities, such as electrical, plumbing, telecommunications, etc.
  • Other event related suppliers, i.e., general service contractors, audio visual, catering, etc., should reduce pricing to event producers, attendees and exhibitors
  • Event producers should reduce attendee registration fees, exhibit space fees, and sponsorship costs

This might seem like taking a few steps back to move forward, but I believe that’s exactly what we must do at this point to stimulate participation.  Event budgets must be adjusted accordingly.  This means not only reducing expenses, but adjusting revenue expectations in order to revitalize attendee and exhibitor participation in the most direct way possible, i.e., make it more affordable for people to take part.

Bodies in the beds

Here’s a quick story to convey the importance of obtaining increased event participation versus revenue.  Several careers ago I was working in sales for the Hyatt Regency Chicago (HRC).  The director of sales and marketing was an older gentleman named, Tony d’Eca.  Tony was a super nice guy (as well as quite a character) who had many successful years in hotel sales and marketing before coming to HRC, including opening several of the mega hotels for Hyatt, Hilton and Sheraton around the country.  Tony was a great teacher and one of the most profound things he taught me was in terms of the “critical mass” needed for business to grow. 

  HRC was already a mega hotel (2,000+rooms), and had just added a new tower of guest rooms with lots of additional meeting space.  Although the Hyatt corporate office was clamoring for the sales teams across the country to increase the average group sleeping room rates, Tony’s philosophy was, “bodies in the beds make up for a multitude of sins.”  What he meant was that if the sales team worked first to increase the occupancy of hotel (as opposed to trying to get the highest possible group sleeping room rate), the hotel would became more popular and full of activity.  Then, once the “buzz” about HRC was in place, the sales team could gradually work to increase the group sleeping room rates with fewer objections from prospective customers.

The philosophy and approach were beneficial to everyone involved.  First, event producers were able to get great deals for placing their groups at the hotel.  Secondly, the hotel was busy and all the employees were working.  And finally, by increasing occupancy first…and then gradually increasing the average group room rates, the sales team was able to meet the corporate office revenue projections. 

This story is a perfect example of the basic marketing concept of supply and demand.  When demand is high (when the event or hotel is perceived as the place to be), and supply is low (once the hotel is busy, or the event is well attended) then pricing can be increased…but not before this basic marketing principle is met.   Hopefully we can learn a lesson from this story to apply in today’s marketplace.  If we don’t put the “bodies in the beds”, or people in the aisles, it will be extremely detrimental to the face-to-face marketing/event industry in both the short term and the long run.

Stop the freebies aka cost-shifting

  “Cost-shifting” is one of those dirty little terms that many don’t understand, and those that do understand it, don’t want to discuss it.  The term means the transferring of costs from one place, or person, to another.  Cost-shifting is a major culprit contributing to rising costs in the face-to-face event marketing business.  The two simplest analogies are; a) there’s no such thing as a free lunch, and b) every time someone else gets involved in a negotiation or a production process, the price goes up.

As most of you know, event producers typically negotiate two sets of pricing with suppliers.  First is the event producer’s pricing, commonly called “show management” items, such as staff hotel rooms, space rental, signage, etc.  Secondly, but as importantly, event producers negotiate pricing with suppliers on behalf of their attendees and/or exhibitors for items such as hotel room rates, furnishings, material handling, etc.  Every time hotel sleeping rooms, signage, tradeshow furnishings, and numerous other items are “negotiated” as “complimentary”, there is a real cost to them that somebody has to pay.  Unfortunately, many times the costs get shifted to the wrong party.  So where exactly are the costs shifting from, and to whom?  

Costs are shifting from event producers as they “negotiate” these items, and I’ve done this too.  Although it may appear that the costs are shifting to and being “absorbed” by suppliers, don’t fool yourself.  The vast majority of the time this is not happening.  The costs are actually shifting through the suppliers on to… you got it…the ultimate customer, the attendees and exhibitors.  And a super no-no occurs when an event producer negotiates “complimentary” or discounted items for themselves, and to obtain them, knowingly accepts higher pricing for their attendees and/or exhibitors.  Although it should be said that many times this travesty happens unknowingly due to the event producer’s lack of experience.

Specific examples of cost-shifting (under the guise of negotiating) in the meeting, tradeshow and event industry are;

  • Event producers and suppliers agreeing to and making use of commissionable sleeping rates versus net, non-commissionable rates to pay for supplier services, or other concessions such as complimentary sleeping room allotments, i.e., 1 per 50, complimentary meeting space, etc.
  • Event producers and suppliers agreeing to and making use of “complimentary “ show management items at their tradeshows such as, entrance units, furnishings, signage, shipping, material handling, etc.
  • Event producers and suppliers agreeing to and making use of the sharing of the revenues obtained by suppliers from exhibitors at the event producer’s tradeshows. This type of arrangement is usually contingent upon the supplier(s) hired to work on the show or at a facility, and may involve the event producer, the general service contractor, the catering company, the audio visual provider, etc. 
  • Facilities retaining exclusive in-house suppliers wherein an agreement calls for supplier to share revenue with the facility, leading to higher pricing for attendees and exhibitors.

These are just a few of the most common examples of “cost-shifting.”  I’m sure there are others that are more clever and less transparent.   It seems to me that an obvious one way to reduce attendee and exhibitor pricing, and increase their participation in our events, is to stop the practice of cost-shifting. 

Would this mean the end of negotiation as we know it?  Of course it wouldn’t.  Event producers will need to talk with several suppliers to determine what the best deal is for both themselves and their attendees and exhibitors.  However, it would be good to take the “freebies” or “comps” out of the negotiation process, because they’re not really freebies.   Putting an end to cost-shifting would help put the costs back to where they should be, or maybe get them away from where they shouldn’t be… with our attendees and exhibitors.

  In order to stop the practice of cost-shifting, event producers, suppliers and facilities need to openly address this problem.  As stated earlier, like a dirty little secret, or a dysfunctional family member, it is ignored and accepted for what it is. And, like the corruption we see today in all levels of government, perhaps cost-shifting within the meeting, tradeshow and event industry is too ingrained a practice to reverse without some type of legislative or legal action.  However, if it is allowed to go on “business as usual”, it’s hard to imagine that reduced prices to encourage participation of attendees and exhibitors will occur anytime soon.

It seems that the task of increasing participation in meetings, tradeshows, and special events is dependent on three things.  While we don’t seem to have much control over getting the middle class back to work, as meeting, tradeshow and special event industry professionals, we absolutely do have control over lowering pricing and stopping cost-shifting. 

Here’s a little video, that although does not specially address cost-shifting per say, adds a humerous perspective to the customer/supplier relationship.  You’ll need to decide if any of the character’s portrayed remind you of any of the parties identified in this blog, e.g., event producers, suppliers, or facilities.

I hope these thoughts will stimulate some discussion and action to help encourage participation in meetings, tradeshows and special events.  What do you think?  Your comments, ideas and suggestions are extremely welcome, so thanks for reading and please comment.