5 Key Event Metrics , and How to apply them

5 Key Event Metrics , And How To Apply Them

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5 Key Event Metrics, and How to apply them

Business events have an undeserved reputation for being hard to measure. In fact, business events are no less measurable than any other part of the marketing mix. All it takes is discipline and prior planning. Here are 5 key metrics that will allow you to assess the value of your investment in business events, and watch their performance year on year, and in comparison to one another and to other elements of the marketing toolkit.

Cost Per Lead

Cost per lead (CPL) is perhaps the most fundamental unit of trade show and event measurement. It is generated by dividing total program cost by the number of qualified leads generated. A few caveats are in order, however:

  • Use the fully loaded program investment number as the numerator.
  • Eliminate unqualified contacts from the denominator.
  • Add in to the denominator the percentage of contacts that are still in the qualification and nurturing process but are expected to convert to qualified leads-in effect, the pipeline revenue generated from the event.

The main benefit of tracking cost per lead is the ability to analyze costs on a consistent basis over time, and to compare the value of competing marketing investments. For example, ranking the annual trade show calendar by cost per lead results can serve as a benchmark for making future event-selection decisions.

Cost Per Contact

Another useful number is the cost per contact, which is generated by dividing the entire program investment by the gross number of contacts generated. Only a percentage of these contacts will convert to sales revenue, of course, but the others can be qualified, nurtured, and otherwise managed in the marketing database.

Cost per contact becomes an important benchmark for evaluating competing marketing investments. However, cost per contact can be dangerous if used on its own to evaluate the relative value of the business event. Better to combine it with a metric that emerges later in the selling process, like cost per qualified lead or ROI. If left to stand on its own, the cost per contact metric can encourage such questionable trade show marketing practices as fish bowls and contests, where marketers have mistakenly focused on contact quantity instead of quality.

Some exhibitors use cost per visitor reached, meaning the program cost divided by the number of potential prospects who visited your booth. According the Exhibit Surveys, Inc., the national industry average for cost per visitor attracted is $116 and the cost per visitor reached, based on having had a meaningful face-to-face interaction at the exhibit, is $208.

Expense to Revenue Ratio (E:R)

Dividing the total revenue associated with the business event by the total expense incurred is a standard marketing communications metric in business marketing. The benefit of using E:R is that it makes the relative cost of the marketing communications tactic easy to compare with other tactics of its sort. The company might impose an maximum E:R threshold-2.5%, or 6%-for example, to establish control of marketing communications expense.

The reason E:R has come into wide use in business marketing situations is that business-to-business revenues tend to be very high compared to a single marketing tactic, thus making ROI calculations faintly ridiculous. Furthermore, most business-to-business revenues result from multiple sales and marketing investments, so claiming an ROI on any one "touch" is risky and inaccurate. E:R makes no such claim.

Activity-Based Metrics

When sales results are too difficult to get, some marketers retreat to a set of metrics that are fully under their control, most of which can be characterized as based on marketing activity, rather than sales results. These include such indicators as:

  • Number of visitors to the booth, year on year.
  • Booth visitors by target (penetration of certain accounts, industry breakdown, etc.).
  • Number of qualified leads.
  • Number of sales appointments confirmed.
  • Number of credit applications or RFPs received.
  • Lead quality mix (percent of A, B, C, etc.).
  • Lead mix by geography, or by product interest.
  • Lead mix by day or hour of the show.
  • Cost per qualified lead.
  • Cost per contact added to the database.
  • Cost per demo given, or live presentation viewed.
  • Cost per visitor reached (people who passed the booth).
  • Cost per current customer met.
  • Qualification rate.
  • Actual costs versus budget.
  • Whether the exhibit arrived and was set up on time.

Activity-based metrics can be helpful in keeping marketing communications programs on track, year after year. Keep a record of the categories that interest you, and review the trends annually, trade show by trade show. Select the categories that are the most powerful indicators of a prospective sale for your company.

But don't track too many items-keep it to a maximum of three that you will benchmark. Some of these, like cost per lead, can also be helpful in comparing trade show activity to other marketing communications options. What is the cost of a demo at a trade show, versus the cost of giving a demo in the field, for example?

As to the pros and cons of activity-based metrics, some trade show experts believe that it is unreasonable for a business event marketer to be responsible for sales results. Marketing activity, they say, should be evaluated based on elements within the marketers' control. This is a compelling argument, and makes sense when it comes to the performance measures by which, say, an exhibit manager will be evaluated. However, a marketing manager who is clearly in a sales support role cannot survive for long without a clear connect to sales results. Marketing management must have the ability to report on a program ROI in order to select among competing investment options and serve the shareholders wisely.

Business Event ROI

Ultimately, business event marketers must demonstrate a return on their marketing investments. This means a financial return, either in sales revenue or cost savings. The return on the investment is calculated by subtracting the incremental expense from the incremental variable revenue that was driven by the marketing program, then that number is divided by the expense itself. The result is expressed as a percent. A zero indicates a program that broke even, and a negative number means a loss on the investment. If you spend $1 million to generate $1.2 million in new margin, you've achieved a 20% ROI.

ROI = Gross margin - Expense
Expense

Why use margin versus revenue: because margin represents the true contribution to overhead that was generated by the incremental marketing activity. Using gross sales overstates the benefit that the marketing activity generated, and also disguises any unprofitable sales transactions that may have resulted. Marketers should use the gross margins on the sales, that is, subtracting out the variable cost of goods sold and the direct cost of sales.

Is the gross margin the number that results from the initial transaction? No, it should reflect all the incremental margins generated from that investment. So, if as a result of your trade show marketing activity, you acquire a new account, then all margins accruing from that new account need to be added in. Margins that will accrue in the future must be discounted back to today's dollars, to recognize the time value of money. In other words, the term "gross margin" here represents the lifetime value of the new account to your firm.

Exhibit 1: Costs and Results Metrics from a Hypothetical Manufacturer's Trade Show Program


Metrics

Costs & Results

Event costs, fully loaded

$500,000

Qualified leads generated

200

Cost per lead ($500k / 200)

$2,500

Lead-to-sales conversion rate

40%

Leads converting to sales (200 x .40)

80

Average order size (or average incremental revenue)

$100,000

Cost per sale ($2,500 / .40, or $500,000 / 80)

$6,250

Sales revenue (80 x $100k)

$8 million

Gross margin rate

45%

Gross margin on the event revenue ($8 million x .45)

$3.6 million

E:R ($500k / $8 million)

6.25%

ROI ([$3.6 million - $500k] / $500k)

620%

A simpler approach to ROI metrics is often used in the world of trade shows. In this approach, the numerator is sales revenue resulting from the trade show, and the denominator is the total trade show expense, meaning all variable costs, including staff T&E, but not staff salaries. The resulting number is expressed in dollars, and represents the number of gross dollars returned for every incremental dollar invested. Essentially, this metric expresses E:R upside down. This approach to ROI is relatively simple to calculate, which is a benefit. However, it overstates the value of the revenue to the company, and fails to express profitability.

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Ruth P. Stevens consults on customer acquisition and retention marketing and teaches marketing to grad students at Columbia Business School. She is author of Trade Show and Event Marketing and The DMA Lead Generation Handbook Reach her at ruth@ruthstevens.com.

(Courtesy of JEM Promotional Products ©2007)


If you have any questions relating to promotional products, please don't hesitate in contacting us. JEM Promotional Products
Phone: (02) 8205 1334
E-mail: enquiries@jempp.com.au
Website: www.jempp.com.au

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