2. AGENDA
• What drives our profit?
• What pricing methods do other industries
What pricing methods do other industries
apply?
•HHow can such methods be conveyed to the
h h d b d h
Trade Fair Industry?
• Practical Examples
•LLessons learned for the Trade Fair Industry
l d f th T d F i I d t
• Conclusions
2 www.jwc.eu.com
6. What measures are most efficient?
Example for the influence of different levers
Variable Number
Base
B Fix costs
Fi t Price
Pi
Costs of shows
Case ‐ 5% + 5%
‐5% +5%
Assumptions
A ti
No. of shows 40 40
Mio $
Mio $ Mio $
Mio $
Turnover 100 100
Fixed costs 40 38
Variable costs
Variable costs 50 50
Profit 10 12
6 www.jwc.eu.com
7. What measures are most efficient?
Example for the influence of different levers
Variable Number
Base
B Fix costs
Fi t Price
Pi
Costs of shows
Case ‐ 5% + 5%
‐5% +5%
Assumptions
A ti
No. of shows 40 40 40
Mio $
Mio $ Mio $
Mio $ Mio $
Mio $
Turnover 100 100 100
Fixed costs 40 38 40
Variable costs
Variable costs 50 50 47,5
47 5
Profit 10 12 12,5
7 www.jwc.eu.com
8. What measures are most efficient?
Example for the influence of different levers
Variable Number
Base
B Fix costs
Fi t Price
Pi
Costs of shows
Case ‐ 5% + 5%
‐5% +5%
Assumptions
A ti
No. of shows 40 40 40 42
Mio $
Mio $ Mio $
Mio $ Mio $
Mio $ Mio $
Mio $
Turnover 100 100 100 105
Fixed costs 40 38 40 40
Variable costs
Variable costs 50 50 47,5
47 5 52,5
52 5
Profit 10 12 12,5 12,5
8 www.jwc.eu.com
9. What measures are most efficient?
Example for the influence of different levers
Variable Number
Base
B Fix costs
Fi t Price
Pi
Costs of shows
Case ‐ 5% + 5%
‐5% +5%
Assumptions
A ti
No. of shows 40 40 40 42 40
Mio $
Mio $ Mio $ Price is the Mio $
Mio $ P i Mio $
Mio $
i h Mio $ Mio $
Mio $
Turnover 100 100 100
most 105 105
important
important
Fixed costs 40 38 profit driver 40
40 40
Variable costs
Variable costs 50 50 47,5
47 5 52,5
52 5 50
Profit 10 12 12,5 12,5 15
Profit increase of 50%
P fit i f 50%
9 www.jwc.eu.com
10. Conclusion: Pricing is the most important profit driver
Price Quantity (Market‐Share)
Top‐Line
./. Cost
Bottom‐Line
• Price has a strong and simple relationship to the Bottom‐Line (Margins)
Price has a strong and simple relationship to the Bottom‐Line (Margins)
• Strategic: Price positions the company’s brands in the market.
• Pricing Decisions need to be taken at strategic and operational levels.
• Operational: Pricing policies must be put into practice: Training, structural changes in sales
organization, clear guidelines for personnel involved in pricing
• Having the right price consistently over time is not simple
Having the right price consistently over time is not simple
10 www.jwc.eu.com
11. Other Industries face challenges similar to the Trade Fair
Industry
Airlines Shopping Malls
Telecoms
T l Publishing
All these industries have two aspects in common:
ll h i d i h i
Prices are fine‐tuned such that they reflect the value that
customers place on a given product.
p g p
The starting point of their pricing strategies is a
deep understanding of current and future customer needs.
They consider both existing and potential customers
11 www.jwc.eu.com
12. Those four industries show parallels to the Trade Fair
Industry – so what can we learn from them?
Industry Parallels to Trade Fair Industry Key Pricing Tool
• Perishable goods (a seat going
Airlines unsold is lost forever) • Yield Management
• High fixed cost
• Broad spectrum of goods and
Telecoms services • Bundling
• V i
Varying margins
i
• Locations with different visitor • Pricing by quality of
Shopping
Shopping
frequency and infrastructure infrastructure
Malls
quality
• Quality and number of contacts • Pricing based on
determine the attractiveness of • Reaching target
Publishing
the medium for advertisers groups
• Location of the ad i
• Location
12 www.jwc.eu.com
13. Price is determined by competition, cost and
customer’s perceived value
Pricing Tools
• Yi ld M
Yield Management
t
Competition
• Bundling
g yq y
• Pricing by quality of
Cost infrastructure
Price
• Pricing based on
Customer perceived
Customer perceived • R hi t
Reaching target groups
t
value
• Location
13 www.jwc.eu.com
15. The Airline Industry
Parallels to Trade Fair Industry
• Perishable goods
Perishable goods
(a seat going unsold is
lost forever)
• High fixed cost
Key Pricing Tool
• Yield
g
Management
15 www.jwc.eu.com
16. Airlines Industry: Prices for the same good vary
widely over time....
Prices for the same route with the same airline on the same day of the week vary widely
Germanwings price for single flight Cologne→Berlin on a Monday
€140
€120
€100
€80
€60
€40
€20
€0 Time of
Next Next In 3 booking
week month months
The goal: Sell each seat to the right passenger at the right price at the right point of time.
16 www.jwc.eu.com
17. ....Yield Management massively boosts revenue
Result: Dramatic reduction of the number of unsold seats at American Airlines (First Mover)
% unsold seats at
American Airlines
Introduction of Yield
Management in late 70s
The reward:
$500m
additional
additional
revenue p.a.
17 www.jwc.eu.com
18. What could the trade fair industry learn from Airlines?
Status Quo
Q Some basic Yield Management is taking place: “Early bird” rebates
Why rebate at all?
Why rebate at all?
Questions raised When?
By how much?
Yield Management is a powerful lever to increase occupancy and
Finding boost revenues
Most organizers grant discounts without proper analysis of customers
g g p p y
perceptions
Yield Management can take arbitrarily complex forms – but simple
first steps can be taken fairly easily
18 www.jwc.eu.com
19. Yield Management for event organizers: Make prices
dependent on the time of booking
Exhibitors value different booking times differently*
• E hibit d
Exhibitors do not want to book too
t tt b kt
early (unnecessary restriction)...
ESSENTIAL • ...but also not too late (insufficient
time for preparation)
time for preparation)
• 12 months prior to the event offers
REQUIREMENT:
REQUIREMENT: LEARN optimal planning/risk mix
HOW MUCH THE CUSTOMER
Therefore Exhibitors can be charged according to the time of their booking
Begin by charging the same
as last year 24 months
ahead of the event
IS WILLING TO PAY AT WHICH Monitor capacity and
inflow constantly to decide
on development of price
over time
Customers much prefer
POINT OF TIME
booking only 12 months
ahead – charge them more
at that time
•Based on real data from a survey: The data shown was measured for a bi‐annual trade fair.
19 www.jwc.eu.com
20. The Telecoms
Parallels to Trade Fair Industry
• Broad spectrum of
goods and services
• Varying margins
Varying margins
Key Pricing Tool
• Bundling
20 www.jwc.eu.com
21. Telecoms case study: Bundling is used to cross‐sell high‐
and low‐margin products
Telecom products are almost always offered as complex bundles
„Online package
Online“ package „Music package
Music“ package „Entertain package
Entertain“ package
Unlimited calls to landlines
100 SMS/month
50 MMS/month
5 Ringtones/month
5 Ringtones/month
20 Songs/month
Mobile TV
5 Games/month
250 minutes Internet access/month
i t I t t / th
By rearranging the bundle definitions the rationale becomes clear:
Cross‐sell high‐ and low‐margin products
„Online“ package „Music“ package „Entertain“ package
High‐margin products
• Landline calls
• SMS, MMS
• Ringtones
Medium‐ and Low‐margin products
• Game downloads
• Mobile Internet, Music, TV
21 www.jwc.eu.com
22. What could the trade fair industry learn from Telecoms
operators?
Event organizers are offering bundles – but often haphazardly,
Status Quo
Q
without deep analysis of bundle composition
ith t d l i f b dl iti
Is current bundling practice based on customers value perception?
Questions raised
Questions raised Does the mix of products return optimal value?
p p
What drives the bundle composition?
Make packages mandatory for certain customer groups?
Bundling is a way out of the price trap: Some products simply are
Finding inherently low‐margin – Bundling can help cross‐sell them with higher
margin offerings
22 www.jwc.eu.com
23. Like Telecoms, Event Organizers offer products with widely
varying margins – why not offer those in bundles?
Margin for m² rental grows with size Services offer different margins
ESSENTIAL • Utilities
• Hotel booking
• Booth construction
• Furniture/Equipment
REQUIREMENT:
REQUIREMENT: LEARN HOW Low margin
rental
High margin
MUCH THE CUSTOMER IS WILLING
Telecoms equivalent Telecoms equivalent
TO PAY FOR EACH SINGLE
• Internet access • Calls
PRODUCT • Online Gaming • SMS
Low margin
Low margin High margin
High margin
iPhone High‐end Low‐end
Nokia Nokia
* Simplified dependency
Force certain groups of exhibitors to purchase bundles
23 www.jwc.eu.com
24. Shopping Malls
Parallels to Trade Fair Industry
•L
Locations with different
i i h diff
visitor frequency and
infrastructure quality
infrastructure quality
Key Pricing Tool
• Pricing by quality of
infrastructure
24 www.jwc.eu.com
26. Fairground owners can use similar criteria to evaluate each
exhibition hall and price them accordingly
Ease of access from a
Ease of access from a
main entrance
main entrance
Height of hall
Height of hall
Possibilities of
Possibilities of
managing visitor flow
managing visitor flow
managing visitor flow
Ease of access from a
main entrance
Height of hall
Possibilities of
managing visitor flow
Must understand customers’ (i.e., event organizers’) preferences: How
relevant is each of these criteria to them?
relevant is each of these criteria to them?
Only then can their willingness to pay be determined
26 www.jwc.eu.com
27. Publishing
Parallels to Trade Fair Industry
• Quality and number of
contacts determine the
attractiveness of the
medium for advertisers
• Location of the ad
Key Pricing Tool
• Pricing based on
• Reaching target groups
• L ti
Location
27 www.jwc.eu.com
29. Publishing case study II: Even within one magazine,
“eyeball traffic” determines location‐based pricing
Price of a full‐page ad varies by location
Price for a full page colour ad (€ 000)
Price for a full‐page colour ad (€’000)
140
126,9
120
100
80
66,9
60
37,0
40
24,7 25,5 26,5 27,0
20
0
Standard First Page next Page next Back cover Opening Cover
page inside page to editorial to table of spread Gatefolder
contents (pages 2+3) (around
cover page)
Again, the number of contacts determines the price for an advertisement
g , p
Accordingly, event organizers should make prices/sqm dependent
on the attractiveness of the location of each exhibition stall
29 www.jwc.eu.com
30. Business engagement related pricing with optimized hall
planning improves revenue and margins even more
Offer attractive prices to
exhibitors that will act as
“magnets”, making their
ESSENTIAL surrounding more valuable
REQUIREMENT:
REQUIREMENT: LEARN
HOW MUCH THE CUSTOMER IS
WILLING TO PAY FOR VISITOR
Price Structure
Premium segment: €171
FREQUENCY € 1.91m
Revenue
Cost € 1.53m
Comfort segment: € 138 Profit € 380,000
Standard segment: € 107 Organizer profit € 260,000 (+53%)
“Visitor magnets”: € 107 Average price / m² 132€
30 www.jwc.eu.com
33. SUMMARY: Future Pricing
Survey customer needs and
customers willingness to pay
customers willingness to pay
Value measurement
Grant choices to customers
Increase customer satisfaction
I t ti f ti
Revenue and profit increase
There will be a steep learning curve – but a
substantial advantage for the first mover!
33 www.jwc.eu.com