Do the numbers support spending money on home shows?
By David B. Riley, MBA
I hear both extremes when I ask about the value of participating in home shows. Some dealers spend 80 percent of their marketing budget on them, while others write them off as a waste of time and money. For the majority, home shows are an important part of reaching the market. Let’s take a look at a few empirical results.
In general, a dealer will participate in four to five home shows a year, spending about 30 percent of its conventional advertising budget to participate in and promote these shows. This relationship holds for both small and large markets. For clarification, I make a distinction between amounts spent on conventional advertising (newspaper, direct mail, Yellow Pages, radio, TV, etc.) and Internet advertising. In real dollars, that 30 percent represents an expenditure in the neighborhood of $30,000. (If you compete in one of the top metropolitan markets, your costs for home shows could be three times or more that average, however.) That means each show costs $5,000 to $6,000.
That average includes the cost of sales commissions; advertising to announce your participation in the show; the cost of show specials; and the cost of water, electricity, labor for setup and takedown costs. Dealers responding to this survey did their best to isolate all costs associated with participating in a show. So, as best can be identified, that expenditure represents a fully loaded cost for the typical three-day show.
Payback on home shows, however, is more difficult to quantify and make definitive observations. I would not want a dealer to dismiss my larger point because these reported costs seem low. Every market is different, and our sample size is low. But there is enough information here to help make an informed decision about whether a home show is a viable marketing and sales opportunity.
The other side of the equation is the revenue. In the survey, I asked how many hot tubs were sold as a result of participating in all shows combined (after deducting contracts that canceled later). So, we’re looking at how much was spent to participate in all the shows over a year compared to how much gross spa revenue was generated from participating in all those shows. I also asked how many tubs were sold at the retail store either during or immediately after the show, in instances where the sale could be tied to the home show.
On average, dealers sold 33 spas while participating in four or five shows per year — somewhere in the neighborhood of seven spas per show. What does that mean in terms of return on investment? Again, on average, a dealer spent $30,000 to participate in home shows over the course of the year, generating about $260,000 in gross revenue. Roughly, that’s a return on investment (before associated costs) of over 800 percent! I don’t know about you, but I’d make that investment every time I got the chance. (I used an average sale of $7,000 per hot tub to come up with the number of $260,000. Substitute my $7,000 number for whatever your real number is to calculate your own ROI.)
A quick review of the accompanying chart will show that is not, of course, that simple. There are at least two companies on the chart that have extraordinary results (dealers H and J). What happens to the return on investment if we remove those dealers? The average number of shows comes down to four from five. The number of spas sold drops to 11 from 33. And the amount spent to participate in those shows drops to just under $19,000. Given these new results and using the same methodology to calculate ROI, the average return becomes only 560 percent. I’d still make the investment. Would you?
Lastly, thanks to the SpaRetailer TradeCertified dealers who responded to my home show survey. We have entered the beginning of the high season, and you’d think I would have learned by now not to bother dealers at this critical time! Nevertheless, a special thank you to those who took the time.