Pricing at Events
The Pragmatic Institute box of the month for August is Event Support. How does this tie to pricing?
It really doesn’t for companies who sell high end equipment with multiple steps in the buyer’s journey. Buyers need to move from being Aware to making a Purchase, which takes time. Also, the main purpose of trades show for these type companies is to build awareness, not close deals. Offering discounts at a trade show may be a motivator to purchase, but only for buyers who are at that stage in their journey. Price discounts at events for complex sales processes is the wrong tool at the wrong time.
However, Discounts at events can have a big impact for companies who sell items that people tend to decide on quickly. Typically these products are purchased with cash or credit cards. Sometimes purchase orders are placed at trade shows, especially when manufacturers are exhibiting and resellers are the attendees.
Surely you’ve been to a trade show or an event where some exhibitors offer special limited time only prices. These can be very effective. I’ve had the good fortune of attending Interbike, a fun trade show targeted at bicycle retailers. I recall one booth was selling replicas of old fashioned bicycles. You know, the ones with the really large front wheel. I was intrigued enough to consider purchasing one and spent quite a bit of time in his booth. The vendor was offering a pretty steep discount, but only if you purchase at the show. Let’s use this as an example to look at the pro’s and con’s.
Pro’s: The biggest reason to offer a discount at a show like that is the vendor is exposed to lots of new potential buyers who he may not be exposed to again. He needs to take advantage of the opportunity. I was one of those “opportunities”. I had never heard of that company before. Probably would never hear of them if not at the event. Let’s presume he didn’t offer a discount at the show. I would have spent just as much time at the booth, learning as much as I could, but I would have waited to make the final decision. I’d go home and think about it. Of course I, and most buyers like me, would never have revisited the decision. Life just gets in the way. Buyers have so much of their “normal” life to catch up on after being away that we rarely go back and revisit that decision. That is almost certainly a lost sale.
However, he offered a limited time discount. That practically forced me to make the decision on the spot. Buy or not. I couldn’t wait until later unless I was willing to pay a higher price. If I’m going to buy it, I should buy it at the trade show so I can get the discount.
Limited time discounts incentivize buyers to make a decision quickly.
The good news for the vendor. If I buy, it is incremental business. It is a sale he would not have ever gotten if he hadn’t offered the trade show discount.
Con’s: The description above demonstrates how price discounts can win incremental business at events. The downside is the vendor risks giving away margin to people who would have paid full price. For example, if I had a long term interest in replica bicycles, I might have found them on the Internet, realized they were going to be at the trade show, and sought them out. I could physically touch the product. Decide if I want it or not. None of this is driven by price. But … when I show up at the booth I find they are on sale. WIN for me! I pay less that I would have. Of course, the vendor gave up margin he didn’t have to.
The problem with deep discounts at events is vendors sell to buyers at a low price even though the buyers would have purchased at a higher price.
Back to the companies with long buyers’ journeys. Anybody who is ready to take advantage of a discount at a trade show is almost certainly not incremental business. To have made it through the journey thus far they already know of the company, evaluated the product, considered alternatives and more. It is possible that a discount was required to win a specific piece of business, but how many unnecessary discounts do we give away to win that one.
If you are considering offering a deep discount at an event, you want to estimate this trade off. How much incremental business do you think you can capture vs how much money do you give away to people who would have purchased at full price? Not easy to answer, but that is what should be driving your decision.
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