Buying business

I am embarrassed to admit that when I was asked to write about the subject of show specials, my first reaction was, “Huh? You mean people still give those?”

Just thinking about show specials makes me sentimental. It hearkens (yes, let's use a word like hearken) back to a time when payphones were an indispensable communication tool, eight-cylinder Cadillacs were the car of choice, fax machines were a cutting-edge technology, and customers actually placed orders at shows.

So, was this some kind of time warp or were people still offering and taking show specials? More importantly—are they still good business for manufacturers?

To find out, I interviewed a number of manufacturers and buyers and asked if they were a benefit, and if so, to whom and why.

What I discovered was that most manufacturers offered them, and all buyers expected them. And I found something else that intrigued me; manufacturers seemed to fall into two schools of thought on show specials, those who saw them as a cost of business and others who saw them as an investment.

Those manufacturers for whom show specials are purely a cost of business seemed to have no good reason for why they gave them. For example, one individual told me his company did it to be nice. I laughed a little nervously, murmured something about hearing someone calling my name and moved on. The rest of this group, though not as kind as this Good Samaritan, said they gave show specials because their companies always had. If a buyer came to the show they got the special, no strings attached. It was a tradition.

Those manufacturers that considered specials an investment, however, had definite reasons for why they offered them. They used them as an inducement to secure larger orders, to place displays, to move out old inventory, or to seek a strategic advantage over the competition. For this group, show specials were a strategic tool.

Most buyers I spoke with saw show specials as an entitlement they earned for going to the show, because it's expensive to attend shows, and the specials helped offset that cost. These buyers said that they would take the special discount off of their purchase orders whether they met the company's requirements or not, and that they would probably receive it anyway. (When I asked manufacturers about this, several shrugged their shoulders and said the buyers were essentially correct.)

Free freight was easily the most popular special among buyers. What was interesting to me, however, was that no matter how good a special, no buyers said they would purchase a product they did not like even if it was on special, and if they liked the product, they said they would buy it whether there was an incentive or not. They also said they would increase an order to meet a minimum only if the line offered enough good products to warrant it. Otherwise, they would forgo the product or the special.

After reviewing all of the information, it seems that too many manufacturers are giving away too much profit for too little gain. They are providing show specials out of habit, with little or no strings attached, and buyers are taking it because they can. In short, they are resigned to offering show specials as a cost of business rather than dynamically using them as an investment to achieve clear strategic and tactical goals.

Here are some ways that manufacturers can give buyers incentives for buying their products while adding to—rather than subtracting from—the bottom line:

• Ask yourself the following question before every show: What is my goal for this show and how will this show special help me achieve that goal?
• Use discounts as a way to secure the placement of permanent displays or committed shelf space. These displays will provide you with a source of future business at non-discounted prices when your customer (hopefully) reorders. The added real estate and visibility will also help you increase your brand awareness.
• Don't just give away a special; insist that your customer hit volume targets in return for the discount. Do your due diligence first, so you can determine what volume levels are needed in order to make that discount pay off in additional gross profit for you. Once you have done this, stick to your guns and don't allow the discount unless your conditions are met.
• Freight costs are higher than ever and they are still going up. Therefore, before giving away free freight, do your homework and determine what it's going to cost you. Based on this figure, determine the additional volume a customer needs to purchase in order for you to recover your freight costs and make a little additional profit to boot.
• Use show specials as a way of avoiding the dreaded close-out specialist. Give show attendees incentives to purchase your slow inventory at prices that are good for them and even better for you.
• Use a show special to gain a strategic advantage over a competitor who may not be at the show or may not be giving a special.
• Make sure that whatever performance you require from a customer to earn your special is appropriate. Don't ask for volume levels that are too big for them to hit or try to sell them displays that are so loaded with inventory that it will take years to sell through the product.

In the final analysis, show specials, like any inducement, work best when they provide a win-win for both seller and buyer. Make sure whatever special you offer serves a clear and distinctive strategic purpose for you, and a true value for your customer at the same time.