Feature | Exhibition World12| September 2010| As any economist will tell you, there are threethings that drive profit: cost, volume and price.But which matters most and to what extent?According to Jochen Witt, the former CEO andpresident of Messe Cologne, past president ofinternational trade fair association UFI and founder of amanagement consultancy firm specialising in exhibitions(JWC), price is the most important profit driver, a fact wetend to forget in this industry. Here, in an account taken at the recent UFI EuropeanOpen Seminar in Budapest, Witt discusses alternativepricing structures, and how to boost your show's revenueand profit through intelligent pricing.Giving your exhibitors choice is the key tosuccess. Based on that choice you will beable to increase value for the exhibitor andas a consequence increase both your revenue and yourprofit. There are three methods by which prices are normallydetermined: competition, costs, and customerperceived value. The most important is customerperceived value, a method which is frequently notapplied in our industry.So, let's take a look at how other industries do pricingand what our industry can learn from them: airlines,shopping malls, telecoms and publishing. All thesehave one thing in common. They base their prices onthe value they are delivering to customers. That's whythese industries have a deep understanding of currentand future customer needs, which means theyconsider both existing and future customers.They have a lot in parallel with our industry. The airlineindustry operates in perishable goods. A seat not sold islost forever. In ours, a stand not sold is lost forever.The parallel between telecoms and our industry isthat both have a wide range of products and services. Shopping malls have various qualities in terms oflocation as we have in the exhibition industry. We tryalways to deny there is different quality in locations, buteverybody in the industry including exhibitors knowsthere is different quality depending on the location of abooth. Lastly, publishers basically base their pricing on theextent they are reaching their target group or on thenumber of readers.Let's take a look into these industries in more detail.AirlinesAirlines employ yield management. If you book a seatthree months in advance the price range is likely lowerthan if you book the seat one month in advance. But evenif you book a seat for next month, the lowest price maystill be below the highest price for three months ahead.What does the airline industry base this pricingscheme on? It is supply and demand. Irrespective ofbooking time: A flight at 12 o'clock noon is likely lesscostly than a flight at seven or eight o'clock in themorning or evening when everybody wants to fly. In the Seventies, when American Airlines introducedyield management, they came down from 41 to 45 percent of unsold seats to 35 to 36 percent, creating anincrease in annual revenue of US$500m. We already do a little bit of yield management in theexhibition industry, for example early bird bookings. Thequestion is: why do we grant early birds at all, when, andto what extent? Normally we don't get a proper answer tothese questions, as these kinds of rebates are grantedwithout proper analysis of customer perceptions. Evenmore: When we give the exhibitor an early bird, we in factgive two rebates. Firstly they get the discount in terms ofmoney. But secondly we allow them to choose a location.Of course they want the best location, so the bestlocations are gone at the lowest price.What does this mean for our industry? Depending onthe preferred time of booking, prices can be adjusted.However, any change in the pricing methods requires indepth knowledge of your customer's willingness to pay.Before applying any new pricing scheme you need toknow what your customers are willing to pay at whatpoint of time. In other words: Never employ any of thesemethods without an in-depth survey and analysis ofcustomers perceived value and price elasticities. TelecomsThe telecom industry has something different in commonwith our industry; it offers a wide range of differentproducts. What they frequently do is bundle theseproducts in a way that combines high margin and lowmargin products.Let me give you an example: You will rarely find atelecom company offering the iPhone without a contract,since the iPhone as such doesn't render them theappropriate profit. As a consequence, they will always tryto sell the phone in a bundle with certain services whichTHE MAGAZINE FOR THE GLOBAL EXHIBITION COMMUNITY WWW.EXHIBITION-WORLD.NETThe price is rightEWwas at UFI's European Open Seminar in Budapest for Jochen Witt'sdiscussion on alternative pricing strategies."