A Dynamic Model of Business Trade Show Effectiveness Srinath Gopalakrishna Gary L.

Lilien
Penn State University

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A DYNAMIC MODEL OF BUSINESS TRADE SHOW EFFECTIVENESS

Srinath Gopalakrishna Assistant Professor of Marketing The Pennsylvania State University University Park, PA 16802
(814) 863-0687

Gary L. Lilien Distinguished Research Professor of Management Science The Pennsylvania State University University Park, PA 16802 (814) 863-2782

January 1994

The authors wish to thank Exhibit Surveys Inc., and the Institute for the Study of Business Markets, Penn State for supporting this research.

A DYNAMIC MODEL OF BUSINESS TRADE SHOW EFFECTIVENESS

Abstract

The purchase process for business products and services often takes months or years from the time an organization identifies a need until it finally places an order. Trade shows play a key role in the business marketing communications mix, but the limited research on that role has generally ignored the dynamics of the process. We focus here on the dynamics of trade show effectiveness, proposing a model that relates investments in previous trade shows to the effects of a current show. Our theoretical results show how trade show investments by a far-sighted

organization differ from the optimal static investment level. Our empirical results, relying on data from 40 firms that participated in 142 shows from 1985 to 1991 show significant carryover effects that differ across industries. We indicate how these theoretical and empirical results can be used to help perform communications audits, to determine trade-offs in communications vehicles and to develop a long-term communications investment program for business products. We conclude with an agenda for future research.

A DYNAMIC MODEL OF BUSINESS TRADE SHOW EFFECTIVENESS Second only to expenditures on print advertising, trade shows are the largest component of the business marketing communications mix, accounting for nearly 18% of the advertising and promotion budget for industrial firms in the United States and about 25% in Europe (Business Marketing 1990a; Schafer 1987). In the United States alone, trade shows are a $24 billion industry with their overail economic impact exceeding $50 billion (Business Marketing 1991). The growing cost of personal contacts in the selling process suggest why business marketers seek alternative methods for communicating with current and prospective customers. Considering a specific example, CARR (1992) estimates that it takes an average of 3.7 sales call to close a sale at $292 per call, versus $185 to reach a prospect at a trade show followed by 0.8 sales calls to close thereafter. These figures yield cost-to-close numbers of 3.7 x $292 or $1080 for sales calls alone versus $185 plus 0.8 x $292 or $419 using trade shows (Trade Show Bureau 1992a). Over 50% of the attendees at trade shows have plans to buy one or more products exhibited, while over 75% influence the buying process for those products. Industry projections indicate that by 1997, the number of net square feet of exhibit space, the number of exhibiting
firms

and the total

attendance should all grow by over 50% compared to 1992 levels (Trade Show Bureau 1992b). Despite the large expenditures and the wide use of trade shows, the limited research on trade show effectiveness has focused on the show as an isolated event. In other words, typical research studies have evaluated each show individually, ignoring possible synergies, carryover effects and the effects of audience overlap between shows. However, fums exhibit at an average of about 6 shows a year with 68% of firms participating in at least 4 shows annually (Trade Show Bureau 1991). The presence of exhibiting tis at multiple shows raises the question of whether and how the effects of previous show-activity caf~y over into the effectiveness of the current show. Specifically, we question whether a longer term, programmatic view

of a sequence of trade

shows can lead to different trade show budgeting decisions--in terms of both the level of

expenditure and the right mix of expenditures on such show variables as booth space and preshow promotion--than the prevalent, single show view. Our focus on the dynamic, programmatic effects of trade shows is analogous to several of the dynamic effects of advertising. Advertising contributes to the stock of goodwill for a product or brand, which summarizes the effects of current and past advertising expenditures (Nerlove and Arrow 1962). A program of advertisements may have different effective levels of carryover for a number of different reasons. For example, the ads may be placed in different media, reaching different people, the ads may have different inter-exposure times pequency), SO that forgetting or decay takes place, or the ads may have different levels of intensity and/or copy-effectiveness, leading to different levels of response. Carryover effects from previous trade shows may exist for several similar reasons: (i) audiences at trade shows within a given industry can overlap significantly, (ii) multiple exposures by the same purchase influencers through booth contact at multiple shows may create learning effects similar to the repetition effect of advertising, and (iii) by exhibiting at several shows, a firm learns how to do the job better, fine tuning key trade show variables in ways that lead to better performance in subsequent shows. In this paper, we propose an approach to assess the impact of key trade show decision variables on performance within a dynamic framework. Previous research has suggested that a key element of trade show effectiveness is a firm s ability to attract the target audience to its booth (Gopalakrishna and Lilien 1992). We develop a model that relates investments in previous trade shows to effects at a current show. The model considers the impact of key decision variables such as attention-getting techniques, booth space and pre-show promotion moderated by type of show and size of the tirm on performance. We then examine the model s normative implications and discuss the differences in the total trade show budget and the optimal split between various elements when viewed in a dynamic rather than in a static framework. Next, we provide an empirical validation of the model and show how it can be used for a variety of strategic and tactical planning purposes. We conclude with an evaluation of our model and some suggestions for future research.
2 .

CONCEPTUAL FRAMEWORK Role of Trade Shows in the Industrial Communications Mix Personal selling is usually the largest component of the business marketing communications mix (Lilien and Weinstein 1984). Like advertising, trade shows are typically viewed as complementary to direct selling activities. Trade shows can uncover previously

unknown or inaccessible buying influences, project a favorable corporate image, provide product information, generate qualified leads for salespeople, handle customer complaints etc. (Hutt and Speh 1992, p. 481). In addition, trade shows can satisfy competitive objectives (e.g., gathering competitive intelligence) and serve to enhance employee morale. It is useful to examine the role of a trade show in the marketing communications mix, in terms of the stages involved in the buying and the selling processes (Figure 1). ___-________________--Figure 1 about here ____________________---Robinson, Faris and Wind (1967), and several other researchers have characterized the industrial buying process as a series of stages (see Wind and Thomas 1994). Buyers in these different stages (Column 1 of the figure) have different information needs (Column 2). This multi-stage process leads to different communications tasks for the seller (Column 3). Note that some of those tasks (like generating awareness) are performed more cost-effectively by impersonal marketing communications while others (like offering customization) by personal contact. Most suppliers, therefore, employ a mix of communication vehicles. In general, personal selling

becomes more cost effective than the impersonal communication vehicles as the buyer moves closer to the supplier selection phase. Trade shows are somewhat of a mix between direct selling (usually there are some sales personnel at the booth) and advertising (the booth is designed to generate awareness, explain/demonstrate the product and answer key questions, even without the personal involvement of booth personnel). Trade shows can play a cost-effective role in the

communications mix, especially in the early stages of the process -- need recognition,

development of product specifications and supplier search. The cost-effectiveness of trade shows diminishes as the buying process progresses toward evaluation and selection, but increases in terms of providing feedback on product/service performance. Similarly, using the seller s

vocabulary, trade shows can be cost-effective in prospecting, opening a relationship, qualifying prospects and even presenting the sales message (Churchill, Ford and Walker 1993, p. 42.) At any time, a selling-firm s universe of current and prospective customers will be distributed among the phases in the first column of Figure 1, ranging from being unaware to seeking purchase reassurance. A single trade show has varying effectiveness in helping this process flow; multiple shows can have cumulative, synergistic effects. We would expect that (a) the more the audience overlaps between two shows; (b) the more the product mix at the two shows by the same exhibitor remains constant and (c) the closer the two shows are in time, the greater the carryover effect of one show on the other. We will comment on these ideas further later in the paper. Trade Show Performance While researchers have acknowledged the importance of trade shows in the business marketing mix (Cavanaugh 1976; Moriarty and Spekman 1984); they have also acknowledged that little systematic research about trade shows exists (Rosson and Seringhaus 1990). Descriptive studies have found that firms with complex, less frequently purchased products, with high sales levels and high customer concentration were more likely to participate in trade shows (Lilien 1983), while better performing firms (as rated by the G.rms themselves) exhibited more products, had more customers, greater sales volume, had specified show objectives and had used fewer horizontal shows (Kerin and Cron 1987). Conceptual measures of performance like
.

audience activity and audience quality (Mlizzi and Lipps 1984; Cavanaugh 1976) have been suggested, as have operational measures such as (i) the proportion of target audience attracted to a firm s booth, (ii) the proportion of booth visitors contacted by the booth salesperson and (iii) the proportion of contacts converted into leads (Gopalakrishna and Lilien 1992).

Based on the above, we focus on one particular dependent measure of the effectiveness of a trade show and then relate it both to contemporaneous decision variables as well as to the carryover effect of past shows. Consider a single show. All attendees at the show are not in the relevant target audience for a given firm; rather they belong to one of two groups: those potentially interested in the products exhibited by the firm (~0) and those not interested (1 - ~0). For the firm, the attractiveness of participating in a show depends on E(S)*vo, the expected number of potentially interested attendees at the show (where E(S) is the expected show size, measured in terms of the total number of attendees). Though the target audience has a size given by (E(S)*Q, only a fraction of that audience actually visits the f%ms booth. This proportion represents the attraction efficiency ($ of the booth. The attraction efficiency indicates how effectively the booth is able to attract members of its target audience. We define this performance index as: number of attendees from target audience who visited the firms booth __________________u____________u________~~~~~~~~-~-~-~~~~~~~~~~~~~~ size of target audience

(1)

Attraction efficiency, 7 =

where target audience refers to the number of attendees at the show with an interest in the products exhibited by the firm. Note that v in the above framework provides a foundation for other objectives for trade show participation. For example, objectives like handling complaints from current

customers/dealers and generating quality sales leads from prospects both require the firm to first attract visitors to the booth and then make effective contact with them (handle complaints, turn visitors into leads, etc). These other objectives involve attention to issues like adequate booth stag, proper training of booth staff etc, but the first step--attracting the right booth visitors--is a necessary first step. We focus on v as the key dependent variable of interest in the model structure next.

MODEL STRUCTURE Following the discussion above, we conceptualize the share of a f%ms target audience that is attracted to the firm s booth at a given show as follows: (2) q = f (at-show variables, pre-show variables, carryover f?om other shows)

Previous research (Gopalakrishna and Lilien 1992) has suggested that, viewed in a static framework, booth attraction efficiency can largely be explained by what the firm does before the show (largely pre-show promotion) plus what the firm does af the show (booth location, booth size, use of attention getting techniques). The idea is that pre-show promotion predisposes

prospects to seek out the booth. At the show, the size, location and use of attention-getting techniques help separate the firm s booth from the clutter of the show environment. There is an extensive literature on modeling carryover effects (see Hanssens, Parsons and Schultz 1990 and Saunders 1987 for reviews). The most frequently used dynamic model form is the Koyck model, in which some constant proportion, say 0, of the past effect of a marketing variable (usually advertising) carries over into subsequent periods. When 8 is near 0, past marketing activities have little effect on current effectiveness; for 8 near 1, past activities can have dramatic current effects. Indeed, the term l/( l- 0) is referred to as the long-run marketing expenditure multiplier (Lilien, Kotler and Moor-thy 1992). To incorporate the Koyck form into our trade show effectiveness model, we use the following specification. We consider successive appearances by a specific firm at two shows (show i followed by show j) and model the carryover as follows:
qj =

OtTi + (1 - #vi) Cj + & ,

where qj = booth attraction efficiency for a firm for show j; Cj = (static) communication effect of show j, specified later 8 = carryover effect f?om show i to show j (0 5 8 I 1); t = duration (in months) between show i and show j;
6

E=

error term. From equation (3), we see the share of a firm s target audience at a given show that is

attracted to the firm s booth is composed of two components. The first represents the goodwill carryover effect, i.e., a fraction of the share of target audience from the previous show is retained in the current show. Note that the fraction retained is moderated by the inter-show duration (t) of successive trade show appearances. Since 8 5 1, longer time periods between shows result in less carryover. The second component represents the impact of current trade show expenditures. This impact is a fraction, Ci, of the total requirement adjusted for the carryover effect (1 - etqi).
J

Cj should range between 0 and 1 for the model to be logically consistent. In addition, the model should allow for diminishing returns to marketing communications spending (Hanssens, Parsons and Schultz 1990; Little 1979). Observe that the specification in (3) implies that the share of target audience qj, is a concave function of the communication effect Cj. Eastlack and Rao (1986) and Rao and Miller (1975) for advertising and Lodish et al (1988) for salesforce effects provide evidence that is consistent with S-shaped response while others (see Hanssens, Parsons and Schultz 1990) cite concave response functions as dominant forms. However, researchers seem to agree that all appropriate response functions show diminishing returns. In addition, data uncertainty and

methodological questions generally preclude finding the S-shape part of the curve econometrically (Broadbent 1984; Schultz and Block 1986). Even with an S-shaped response function, only the concave part is relevant in the sense that the optimum effort level must lie in this region, leading to our proposed model-form. Thus, we specifjl Cj as follows:

Cj = a 1
where

Aj azj (~3~ ( 1 - exp(-Pl Sj/Q$} { 1 - 6 exp(-PzPjlQj)} ; Sj > 0

Aj = use of attention getting techniques in show j (0 if used; 1 otherwise) Mj = type of show the firm participated in (0 if vertical; 1 if horizontal) F = firm size (0 iflarge; 1 if small) Sj = booth size measured in square feet at show j

Pj = pre-show promotion expenditure by the firm relative to show j

Qj = size of firms target audience at show j

cul, ~2, cy3, PI, /32, and 6 are parameters. Note that in the specification above, we have included only the variables we will be able to include in our empirical validation. In the discussion section, we review alternative specifications that would require other data. Equation (4) includes two variables--show type and firm size--that we have not discussed. These are situational variables rather than decision variables, but should be included in the model to tune the effect of the decision variables. Show type: Trade shows have been traditionally classified as vertical or horizontal based on market coverage. The nature of the show audience in terms of product interest, buying plans etc. can be quite different in each case and has an important bearing on performance (Bertrand 1989; Swandby 1984). Typically, a vertical show has a narrow focus and attracts specific types of visitors. For example, most attendees at the Association of Operating Room Nurses (AORN) show are operating room nurses and exhibitors display products that are almost exclusively used in the operating room. Horizontal shows attract a much wider audience and interest for any one product category is typically low. For example, The National Design Engineering Show features exhibitors displaying a wide range of mechanical components, electrical and electronic components, plastics, elastomers, CAD/CAM systems etc.
Firm size:
.

Large firms generally attend more trade shows than small firms (Business

Marketing 1986; Trade Show Bureau 1988). The higher level of trade show spending usually associated with larger fnms (Lilien 1983) creates a situation where the small exhibitor often feels swallowed up at the show (Wall Street Journal Jan 1989). There is some empirical evidence that in comparable situations, larger firms draw a larger share of the relevant target audience to the booth than do smaller f7irms (Williams et al 1993). Returning to our model, note that Cj has an upper bound of 1 and the model specification implies a non-linear relationship between Cj and the decision variables (S, P and A), with the 8

multiplicative form implicitly allowing for interactions. This specification is similar to that used by Hanssens and Weitz (1980) to model the effectiveness of print advertisements. Since crll 1, the effect of attention getting techniques is scaled relative to that value. Similar effects hold for show type and firm size. Note that a characteristic of this model is that a firm exhibiting at the show with no pre-show promotion (P=O) can expect to achieve a communication effect no greater than
(l-6),

where the fraction of the target audience attracted to the booth is [ 1 - s(l -@a~)]. Some of the variables in the data set we will be using are continuous (booth space, pre-

show promotion) while others are discrete (attention-getting techniques, type of show, firm size). Therefore, the modeling framework and the nature of the functional forms we employ are limited to constructs that can be calibrated with these data (Lilien, Kotler and Moorthy 1992). Finally, note that the linkage between (3) and (4) implies that q is concave in the same variables that give C its concave form. Appendix A gives some theoretical, normative implications of the model. We show that the optimal total level of spending decreases as 0 (the carryover effect), and the value of ~0 (from the previous show) increases. Following our earlier discussion, we would expect 6 to be higher when consecutive shows in the same industry are closer together, attract more similar audiences and are characterized by a lower rate of new product introduction. We will return to the latter point below; the main idea is that in an industry with many new products and short product life cycles, the effects of q marketing instrument is likely to be short-lived. Appendix A also provides analytic results on the deployment of resources required to maintain a steady state or equilibrium level of 7. In other words, we consider what level of communications spending in each show is needed to permit 7 to remain constant from one show to the next. Our results indicate that for a given steady state value of 7, communication

expenditures decline as the carryover parameter 8 increases, and the extent of that decline is lower when the steady state value of 7 is higher.

EMPIRICAL ANALYSIS Data collection The data for this study involves 40 firms that participated in 142 trade shows held between 1985 and 1991. Exhibit Surveys Inc., an independent exhibit research firm, collected the data in two phases. In the first phase, Exhibit Surveys mailed a questionnaire two to three weeks after each show to a probability sample of about 1100 show attendees taken from the show registration list. Firms used the results of that audience survey to answer a number of key questions. For example, a firm could infer the number of visitors at the show who were interested in its products from the question What products were you interested in seeing at the show? Similarly, the question Which booths did you visit at the show? provided an estimate of how many visitors were attracted to a specific firm s booth. We used these two questions to estimate the number of attendees who were interested in a firm s products and who also visited the firm s booth, giving us our dependent measure, the booth attraction efficiency (q). Several other
.

questions about the visitor s influence in the buying decision, his/her actual plans to buy specific products etc. were also included in the questionnaire. These surveys represent routine audience profile measurements which Exhibit Surveys conducts for hundreds of industrial trade shows. Exhibitor personnel were excluded from the sample and an incentive was included with a personalized cover letter to maximize the return rate (approximately 33%). In the second data collection phase, Exhibit Surveys requested specific information from a number of Grms that participated in each show. The requested information asked for data on a number of show-related tactical variables, such as square feet of booth space, expenditure on preshow promotion, the use of attention-getting techniques, objectives for exhibiting at the show, the products exhibited at the show etc. Table 1 provides descriptive statistics for some of the key variables. ____________________---Table 1 about here ____________________----

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We linked the firm-specific data from the second data collection phase with the data on the audience profile from the first phase. The trade shows included in the database represented a variety of industry categories such as telecommunications, computers, food processing, housing, medical and health care, nursing, paint, radio/TV/cable, welding and robotics. Since we are interested in the dynamics of trade show participation, we identified f%rms that exhibited at shows (within the industry) on a fairly regular basis. Since the timing of each show was known

(month/year), we were also able to calculate the duration between two consecutive show appearances by a firm. In our database, this inter-show duration ranged from 1 month to 20 months. Overall, we had 267 useable data points, each representing a firm s experience at a show at a specific time. Consistent with our focus on booth attraction, our empirical analysis considers the impersonal promotional variables that affect this process. We do not consider personal

promotional variables such as number of booth salespeople, type of training given to them etc. that are most relevant for objectives such as lead generation. We review the three decision variables that we include in our empirical analysis -attention-getting technique, booth space and pre-show promotion. The two other variables (type of show and f!rm size) which moderate the impact of the decision variables on performance have been discussed earlier. Note, however, that we use a dichotomous variable (large versus small) to represent firm size; exploratory analysis with other ways to operationahze firm size gave results that were less robust than this simple dichotomy. Attention-getfing techniques: Firms employ various methods of attracting visitors to their booths. These methods include sampling, giveaways, product demonstrations etc. which attempt to selectively attract the attention of interested visitors to make them enter the booth and ask for more information (Hatch 1991). We classified firms based on whether they used some form of attention-getting technique to attract visitors to their booths (A=O) as opposed to not using such techniques (A=l). We hypothesize a positive effect on v.

11

Booth space: The attractiveness of a firm s booth is directly related to booth size, other things being equal. Swandby (1982) has suggested that the amount of booth space should be decided in relation to the size of the potential audience. In order to achieve the same attraction efficiency, a larger booth would be required if the size of the potential audience is larger. Similarly, for a given size of the potential audience, an increase in booth size results in a higher attraction efficiency. Thus, we consider booth size (i.e. square feet of space) relative to the size of the target audience and hypothesize a positive effect of this variable on q. This is analogous to retail product movement related to shelf space (Bultez and Naert 1988). Pre-show promotion: Many firms promote the fact that they will be exhibiting at a
.

particular show well in advance (Business Marketing 1990b). Based on advance registration lists available from show organizers and their own customer/prospect lists, firms use direct mail and advertising in trade magazines to contact customers and invite them to visit their booth at the show. The impact of such expenditure on q clearly depends on the size of the target audience. For example, a given level of expenditure will have a smaller impact on q when the audience size is larger, other things being equal. Therefore, similar to the discussion on booth space, we considered total expenditure on advertising and direct mail relative to the size of the target audience. We hypothesize a positive effect of pre-show promotion on q. It is important to point out that better measurements of some variables would be desirable. For example, attention-getting techniques might be treated as a continuous variable if data on actual expenditures incurred by the firms could be obtained. Also, pre-show promotion

expenditures can be analyzed in finer detail assuming information on direct mail, telemarketing and press advertising. However, we have had to tune our empirical analysis to the richness and quality of the data that we have had available.
Results

We have data on 40 firms that participated in various trade shows on a regular basis. Most of the firms (37 out of 40) exhibited at shows within a single industry category, while three firms--AT&T, Hewlett Packard and IBM--participated in shows in multiple categories (for
12

example, Hewlett Packard exhibits at computer shows as well as at medical shows). In such multiple category cases, we tracked each firm s show activity separately within a specific industry group. Also, in order to retain a firm for analysis, each firm we kept exhibited at least three times in total and at least once in a calendar year. We used this rule to focus on the carryover effect (i.e., dynamics) of trade show participation, eliminating cases involving long gaps in trade show appearances by a firm. Overall, the average number of show appearances by a firm we retained in the database was 5.68. We used a nonlinear least squares estimation procedure (PROC MODEL, SAS/ETS User s Guide, Version 6, 1988) to estimate the model parameters. We report our results in Table 2.
____________________~~~~~~~~~~~~~~

Table 2 about here ____________________~~~~~~~~~~~~~ We see from that table that the model fit is good and that the carryover effect parameter 6, the attention parameter cul, the show parameter CY~, the firm size parameter cu3, the booth space parameter & and one parameter for pre-show promotion (6) are all significant at the .OOl level or better. The other pre-show parameter (f12) is significant at the .OS level. Based on these estimates, we can infer that attention-getting techniques such as sampling, giveaways and audiovisual

demonstrations (aI) provide an increase in booth attraction efficiency of about 10%

compared to not using such techniques (all else being equal). Similarly, vertical shows provide an incremental efficiency of about 35% when compared to horizontal shows(cr2), while large firms appear to have a nearly three-fold advantage over small firms (cY~), again, with all else constant. The carryover parameter (0) suggests that a duration of 6 months between successive show appearances provides a carryover effect of 68% { (0.9@} while an inter-show duration of 12 months provides a 46% carryover effect. The pre-show promotion parameter (6) indicates that with all other independent variables at their maximum values, a firm with no expenditure on preshow promotion would be able to achieve a minimum communication effect of 44% (l-6) with positive expenditures providing an increase in the communication effect.
13

Estimation Issues Serial Cowelation: The model as specified in equation (3) contains a lagged dependent variable. If the error terms are autocorrelated, OLS estimates will be biased, inconsistent and inefficient (Judge et al. 1988). For each fkm, we tested for serial correlation using the Durbin hstatistic, appropriate for models with a lagged dependent variable (Durbin 1970; Judge et al. 1988). First-order autocorrelations were not significant (at the .OS level) in any of the 47 cases.
MuZticoZZinearity: The square root of the ratio of the largest to the smallest eigenvalue of

the correlation matrix of the set of independent variables, called the condition index, provides a single measure of the severity of multicollinearity; a value of 30 indicates a high degree of multicollinearity (SAY System for Regression 1986, p. 8 1). In our analysis, the condition index is
5.6, .

suggesting that multicollinearity is not a sign&ant problem for our data. To test for model reliability, we estimated the model separately using randomly split halves

of the data set. We split the data by randomly assigning each of the 47 time series to one of two groups (as stated earlier, each time series represents one firm s appearances at trade shows within an industry category). Thus, we had 24 time series representing 171 observations in one group and 23 time series with 96 observations in the other. The estimation results using the split-halves appear in Table 3. Based on a pair-wise t-test of equality of the coefficients (Morrison 1983, pl6 l- 172), the hypotheses of no difference in the parameter estimates for the two halves could not be rejected (p-values ranged from SO to .80). Also, the significance levels for the parameters for the two halves are similar to that obtained for the entire sample. Therefore, the reported parameter values appear to be stable. ____________________~~~~~~~~~~~~ Table 3 about here ____________________~~~~~~~~~~---Following our discussion above, our estimation so far has assumed the same carryover effect parameter for every firm. However, our sample of hs comprises two qualitatively

different categories -- those in the telecommunications and computer industry and those in other industries like nursing, paint and welding. The short life cycles of the telecommunications and
14

computer industries might suggest a much lower carryover effect for shows in these two industries than in the other industries. In order to run this analysis we decomposed 6 as follows: K = e c (@k) ; zk = 1 if show belongs to industry k, 0 otherwise (ok 5 1) (5)
k=l

A model run with K = 2 yielded eO.27 in telecommunications/computers and HI.97 in the other industries. These values are different Tom each other at the .OO 1 level and are both different from 0 at the .O 1 and .OO 1 level respectively. Thus, not only do carryover effects appear to be

signifkant, they also appear to vary by industry. While these results are exploratory--we have come across no other results on the dynamics of trade show effects--they are significant for several reasons. First, while the factors we have identified that affect trade show performance are qualitatively consistent with previous results (Gopalakrishna and Lilien 1992), our new dynamic results strongly
support

the existence of

carryover effects. As we established earlier, theoretically (and will conf5-m empirically below), the optimal level of trade show spending and the allocation of that spending is intimately tied to the carryover effect. In addition, our exploratory work has also established significant,

explainable differences in the level of that carryover effect by industry. Thus, while there may be no, single value for the carryover effect (a universal value for 0), it does seem likely that, in the spirit of meta-analysis, and with enough follow-up research, a good predictive equation relating 8 to firm and industry variables could be established.

MODEL USES

The model we have developed is a response model: it provides a prediction of the level of a firm s performance--as measured by booth attraction efficiency--as a function of several variables under the f?rms control. The model and the findings here have a number of uses for marketing planning and control. We outline three such uses here: a performance audit, trade-off analysis and multiple show performance optimization.

15

Performance Audit: The model can be used as a norm for performance evaluation. In the same spirit as ADVISOR (Lilien 1979) and PIMS (Buzzell and Gale 1987), the models we have developed here allow a fitm to provide inputs on key decision variables, and compare the firm s actual performance with the performance the model would predict. The model can thus serve as a benchmark against which performance may be compared. For example, consider the information about two actual firms that participated in various computer shows in our data set in Table 4. ____________________-------------Table 4 about here ____________________-~~~~~~~~~-~ Firm I appears to be doing quite well at the most recent computer show it attended, exceeding its model-predicted performance level while Firm 2 seems to fall below expectations. The use of the model as an audit-tool focuses management s attention on sub-optimal or superior execution. Firm 1 is doing things better than expected, so its execution can be used as a benchmark for its performance at other shows. Firm 2 needs to carefully analyze its execution to determine why it is not getting the expected return on its trade-show investment. Assessment of trade-offs: A f$-m can use the model to determine the least cost
.

combination of pre and at-show activities that would result in a given level of efficiency. Consider, for example, a large firm that is planning to participate at an upcoming, vertical show. Assume that this firm had achieved an attraction efficiency (70) of 40% at the previous show, six months ago, and that management has set a goal of 60% efficiency for the upcoming show. The decision variables under consideration are the use of attention-getting techniques (Yes/No), the amount of booth space and the expenditure on pre-show promotion. Table 5 provides the

solution to the mixed-integer programming cost minimization problem, obtained using a nonlinear optimizing routine (Modeling and Optimization with GINO, Scientific Press, 1988). Note that the total expenditure as well as the relative emphasis on the three decision variables changes considerably tihen the carryover effect is taken into account. In this illustration, we see three effects when the carryover phenomenon is considered: (i) the total expenditure drops from

$79960 to $46780 (a 41% decrease), (ii) booth space becomes relatively more important in the
16

mix - the expenditure ratio of booth space to pre-show promotion increases from 0.93 to 1.58 and (iii) the use of an attention-getting technique is deleted from the mix. Thus, it appears that considering carryover effect can have a major effect on optimal firm behavior. ____________________~~~~~~~~~~~~~ Table 5 about here ____________________~~~~~~~~~~---Multiple future shows and profit maximization: Given estimates of the model parameters and the firm s objective of maximizing its discounted profit stream over an n-show planning horizon, the model can be used to calculate optimal expenditure levels of booth space, pre-show promotion and whether or not to use attention-getting techniques for each of the n shows. In this situation, given the attraction efficiency for the most recent show (SO), the optimal efficiency level for each of the n future shows under consideration, is determined endogenously. As an illustration, we report results for a situation where no budget constraint is imposed (see Table 6). However, if resource limitations or planning/budgeting considerations dictate any specific constraints, these can be incorporated into the optimization problem (for example, a constraint on the total communications budget for each show). Using the parameter estimates along with other relevant data Corn the empirical application, we obtain the optimal spending levels for booth space and pre-show promotion. We report comparative results for a time horizon that involves four future shows considered jointly by a far sighted manager versus a myopic perspective, where each show is considered independently.
__________________~u_________

Table 6 about here ____________________~~~~~~~~~~~~ A comparison of the single-show versus four-show solutions illustrates the impact of the length of the time horizon on the results. First, the long term optimization yields a different solution (and higher profits) than the myopic (single-show) case because of the carryover effect of communications captured via the parameter 6 in our model. The smaller the value of 6 (i.e., the smaller the carryover effect), the closer the multi-show solution will be to the single-show one.

17

(If 6=0, the multi-show problem is reduced to a series of single-show problems.) Second, the optimal expenditure, in the multi-show case, will be higher initially than in the single-show case because the far sighted optimize takes advantage of the carryover effect; a higher level of efficiency in the current show helps in the future. Table 7 formally states the general optimization problem for the scenario involving N future shows and illustrates an application of the model for the four-show situation. The results show that as the carryover parameter increases, a long-term perspective leads to a correspondingly higher average profit per show compared to the myopic view. In our illustration, where the numbers are drawn from information about a specific firm in the database, we see that average per show profit can be higher by as much as 35%. _-______Y_--~____-_----~ Table 7 about here ____________________-------------For an ongoing application we suggest that the multi-show solution be used for planning on a rolling basis: that is, as new data become available, the model parameter estimates and consequently its recommendations should be updated periodically. The recommendation for the first show can be used directly as an input for budgeting for the next show. Some caveats are in order. These results are illustrative; as with other optimizing models, the recommendations should be used as an input to planning and not replace managerial experience and judgment. The models include only a limited number of variables and do not explicitly include operational constraints that a firm might see. But these calculations do illustrate the potential use of our results for auditing trade show performance and for allocating trade show resources more cost-effectively.

CONCLUSIONS AND FUTURE RESEARCH

We have developed and empirically evaluated a dynamic model of trade show effectiveness. While we developed the model from first principles--trying to make the model
18

simple but logically consistent--we found that even this simple model form gives some important theoretical insights about the level and allocation of trade show expenditures. Our empirical results support the general structure of the model--that several key variables largely determine the short term effectiveness of trade show expenditures and that the carryover effect of trade shows is both significant and appears dependent on industry type. Our emprical illustrations show how results such as these can be used for performance audits, for show resource trade-off analyses and for long term trade show planning. Although the results are exploratory, they suggest that important managerial questions are now open to quantitative investigation. There is good news and there is bad news here. The good news is that we have been able to conceptualize and empirically validate a model involving carryover effects of trade shows. The bad news is the same--as with any fist report of such a phenomenon, the full use of these findings must await further study, verification and validation. Our positioning this work as exploratory is critical--we believe that we have identified and made some preliminary measurements of some important phenomena. But use of these early results requires caution. Consider some theoretical and empirical limitations of this work. On the theoretical side, we have suggested a fairly simple analytical form. That form was developed with an eye toward available data, included only measurable variables and, indeed, was further limited by the specific measures we had available. While the model looks at the dynamics and synergies of trade shows, it views trade shows in isolation from the rest of the business marketing mix. Selling activity, product quality, pricing, brand image etc. are ignored here: while we have investigated trade-offs within the mix of trade show elements, we have not modeled the trade-offs across the mix. The dependent measure--booth trtic flow effectiveness-- is no more than a means to the true end of a profitable sales relationship with a satisfied customer. Competitive activities have been ignored as well. Empirically, we used commercially available data, collected for other purposes. We have commented on the limitations of the measures above; our investigations were constrained by those
19

limitations. For example, the firm-size variable, among others, should be refined and we might investigate other transformations of the measures. In addition, while other firms besides Exhibit Surveys collect such data, no data that we are aware of are available either in the volume or the quality one might like. Finally, none of our data traces the financial return on these trade show investments; such a study must await future work. We believe this study contributes to the understanding and to a more dynamic and effective use of an under-studied element of the business marketing communications mix--the trade show. Future research in this area should consider experimental work, varying the levels of effort in the activities under study here. Such research would allow an experimental validation of these quasi-experimental results. Future work should also look at the trade show as an
.

investment, studying those who come to the show and those who don t, tracking the level and timing of resulting sales. Finally, the diverse nature of the industries represented here might better be replaced by studies of a larger number of firms in fewer industries to focus on the industryspecific nature of the carryover effect. On net, we hope that we have contributed in some small way to the understanding and more dynamic and effective use of an under-studied element of the business marketing mix.

20

Table 1 DESCRIPTIVE STATISTICS OF KEYTRADE SHOW VARMBLES

_______~_______________________________.~___________________________~~~~~~~~~~-~~~~

Std. Dev. Variable Mean Range ______________________________________________________________________________~~__~~~~~ 508 - 87959 14208 Target audience 12065 Booth space (sq. A.) Pre-show promotion (!) Attraction efficiency 2541 4303 0.488 2167 10187 0.189 100 - 15000 0 - 85000 0.088 - 0.866

Attention-getting techniques 15%* Size of Firm Type of Show 61%@ 88%#

* Proportion of firms employing the variable @Proportion of firms classified as large (following investigation of sdeslshare histogram) # Proportion of shows classified as vertical

21

Table 2 PARAMETER ESTIMATES: EFFICIENCY OFATTRACTING TARGET AUDIENCE TO THE BOOTH

_________________________________________~________________~~~~~~-~~~

Estimate Variable ____________________________________________________________~~~-~~-~~~ Carryover effect (8) Attention (al) Showtype (cu2) Firmsize (cy3) Booth Space (/31) Pre-show promotion (a) Pre-show promotion(p2) 0.937* (0.012) 0.919* (0.099) 0.741* (0.158) 0.373 * (0.065) 10.725* (3.006) 0.558* (0.056) 0.068** (0.034)

p < 0.0001 ** p < 0.05 N = 267 R2 = 0.50

Standard errors in ( )s

22

Table 3 SPLIT-HALF PARAMETER ESTIMATES SHOWING RELIABILITY OF ESTIMATION PROCEDURE

0.930* 0.935* (0.016) (0.022) Attention (cu 1) 0.899* 0.987* (0.117) (0.134) 0.711* 0.732* Showtype (a2) (0.196) (0.188) Firmsize (0~3) 0.334 0.369* (0.097) (0.071) Booth Space (/31) 6.679** 33.750 (2.053) (31.795) Pre-show promotion (6) 0.514* 0.541* (0.075) (0.082) Pre-show promotion(fl2) 0.226*** 0.021 (0.130) (0.030) -------_____________~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~---~~~------------------Number of Observations 96 171

Carryover effect (0)

* p < 0.001 ** p < 0.002 *** p < 0.10 Standard errors in ( )s

23

Table 4 ILLUSTRATIVE USE OF THE MODEL FOR PERFORMANCE AUDIT FOR TWO FIRMS IN THE DATA BASE Firm1 Present Show Month/Year Previous show attended Month/Year Inter-show duration (months) Attraction efficiency at previous show (~0) Current show details: Target audience Attention-getting techniques Firmsize Showtype Booth Space (square feet) Pre-show promotion Expected attraction efficiency (qexp) Actual attraction efficiency (Tact) Educom October 199 1 Educom October 1990 12 80.3% 1250 Yes Large Vertical 1200 $0 64.7% 83.2% Firm 2 Seybold September 1989 PC Expo June 1989 3 72.3% 15076 No Large Vertical 600 $400 65.2% 47.4%

Interpretation: This table shows thatfintt I per$orms better than expected (Actual > Ekpecteg while the situation is reversedforjhm 2.

24

Table 5 ILLUSTRATIVE IMPACT OF CARRYOVER EFFECT ON OPTIMAL, RESOURCE ALLOCATION USING DATA DRAWN FROM ONE FIRM IN THE DATA BASE Previous attraction efficiency (~0): 40% Inter-show duration (t): 6 months Target audience size (Q): 5000 Target attraction efficiency for next show (9): 60% Cost per square foot of booth space (k2): $30 Cost of using attention-getting techniques (kl): $10,000 Solution to mixed integer programming cost-minimization problem: Optimal Solution __________c________________________u____~~~~~~~~~~~~~-~~~~~~~~~~~ cost % of total $20 c o s t % of total e=O.93 42.2 45.3 12.5 __W___ 100 __-_-956 18100 No $28680 $18100 -_------$46780 --------61.3 38.7 _W____ 100 ------

Variable

1124 $33720 Booth Space (sq.R.) 36240 $36240 Pre-show promotion ($) Attention-getting technique Yes $10000 -----_--$79960 Total Expenditure --_-----Problem Formulation: Find (A, S, P} to MinimizeZ=klA+k2S+P subject to:

7 = et70 + (1 - &O)alAf 1 - exp(-PlS/Q)} (1 - 6 exp(-p2PIQ)) A=Oor S,P 20 Values for k 1, k2, q, ~0, t and Q are indicated above. Values for 8, cul ,P 1, /32 and 6 are as reported in Table 2.
1

25

Table 6 OPTIMIZATION: SINGLE VERSUS MULTIPLE FUTURE SHOWS Recommended Expenditure Level ____________________~~~~~~~~~~~~~~~~~~~~------- _____________________________ Four Shows Single Show 3 Show 4 Show 2 show Show 1 $23,765 $2,345 $42,663 $71,633 Yes $124,300 $21,610 No $21,610 No $20,850 No $15,140 $20,850 $15,140

Variable Booth Space Pre-show promotion

Attention-getting technique No Total expenditure Profit/show $26,110 $125,250

$163,900 (average per show)

Note: In addition to the parameter values from the empirical analysis, the following assumptions were made for the above illustration (the numbers are closely related to a specific fh~ in our database): Inter-show duration = 3 months ~0 for the most recent show = 40% Cost per square foot of booth space = $30 Cost of using attention-getting techniques = $10,000 Size of target audience = 5000 Proportion of booth visitors converted into leads = 30% Proportion of leads converted into sales = 20% Unit price = $3000 Gross margin = 30% Interpretation: This exhibit illustrates that higher proJits can be obtained with lower expenditures when considering multiple shows in a planning program.

26

Table 7 COMPARISON OF PROFIT PER SHOW FOR VARYING LEVELS OF CARRYOVER PARAMETER 8
8

0.2 $83,280 $83,430 1.0017

0.4 $85,410 $86,610 1.014

0.6 $91,460 $96,060 1.0502

0.8

0.95

A. Single-show B. Four-show Ratio B/A

$82,980 $82,980 1.0

$105,470 $127,740 $121,130 $168,960 1.1485 1.3227

Problem Formulation: Notation: t = Inter-show duration 70 = attraction efficiency for the most recent show = attraction efficiency for show i Tl k = Cost per square foot of booth space Q = Size of target audience p = Proportion of booth visitors converted into leads X = Proportion of leads converted into sales p = Unit price g = Gross margin Si = square feet for show i (i = 1 to N) Pi = pre-show promotion expenditure for show i (i = 1 to N) Ai = Use of attention-getting technique for show i (i = 1 to N) N Max~~e II = g P X P Q C {(vi) - k (Si) - (Pi) - (4)) i=l rli = et vi- 1 + ( l - &i-l ) ~1 Ai { 1 - exP(-P 1 Si/Q)) { 1 - 6 exp(-B&/Q)}
l

Ai = 0 or 1 (i = 1 t0 4); Si 20; pi 20 For the above illustration, values for 8, al, &, p2 and 6 are the same as reported in Table 2. Values for g, p, & p and Q are as in Table 6. Interpretation: 7Ks exhibit illustrates how four-show profit increases relative to single-show profit as 8 increases: the higher the value of 0, the more long-term planning matters.

27

Figure 1 THE BUYING AND SELLING PROCESS AND THE COMMUNICATIONS MIX

New Customer/ Prospect Buying Phase (Robinson, Faris & Wind. 19671

Key Seller Communications Objectives and Tasks (Churchill, Ford, Walker, 1993)
Communications Obiectives Senerate awareness T a s k Prospecting Opening relationship, qualifying prospect Qualifying prospect

Relative Communication Effectiveness (Kotler, 1991) AOW High

A
2. Developing product
specifications J 3. Search and qualification of suppliers & 4. Evaluation 1 5. Supplier selection 4 6. Purchase feedback Feature comprehension Lead generation

Performance comprehension Presenting sales message Negotiation of terms/ Offer Customization Reassurance Closing sale Account Service Advertising \ Trade Personal Show Selling ?

APPENDIX A: SOME ANALYTICAL RESULTS ON OPTIMAL TRADE SHOW EXPENDITURES

For ease of exposition, we consider the two continuous variables, S and P in equation (4), and set

t=l in equation (3) without any loss of generality. We restate the model as: (Al) ~=8770+(1-8770) The objective function is: (A2) Maxn=gq-cS-P where g translates q into sales revenue (g is assumed constant) and c is the cost per unit of booth space First order conditions: (~3) adas=gaqias-c= 0 (A4) &r/aP = g &$aP - 1 = 0

Ww(-&S/Q)) (l-~qW$'~QN

Equations (A3) and (A4) imply (5)

agas = c agap

From equation (Al)

l-sexp(-P2PIQ)}(P1jQ)exp(-P1S/Q) W) WaP = Who> {l-exp(-P1SjQ)}G(P2jQ)exp(-P2PjQ)

(A6) arl/aS = (1-orlo) { Substituting (A6) and (A7) into (AS), we get

l-sexp(-P2PIQ))(P1jQ)exp(-P1S/Q)= c(~-~~~(-P~S/Q)~G(P~/Q)~XP(-P~P~Q) or (A'W (l-Gexp(-P2PjQ))Plexp(-P1S/Q)=c(l-exp(-P1SIQ))GP2exp(-P2PjQ)

(A7a) { which on simplification, yields (A8) Pl (exp(P2PjQ) - S> = c 6 P2 fexp(P@Q) - 11

Equation (AS) shows the relationship between P and S at optimality. Given a budget B, i.e., (A9) cS+P=B

equations (A8) and (A9) may be solved to get S* and P*. If the budget B is not specified, we find S* from equations (A4) and (A7) (AlOa)gk(l-@TO) U-exp(-Pl

s/Q)>G(P2jQ)exp(-P2PjQ) = 1 or
29

@lob) & Cl-ho> { l-exp(-Pl S/Q)} s(Pz/Q) = eq(PzP~Q)

Substituting for the RHS of equation (AlOb) from equation (A8), we get (All) gk (I-0~0) {I-exp(-PlSlQ))s(&/) = 6+ c 6 P2/Pltexp(P1SIQ) - 11

Let exp(&SIQ) = u, gk (1-0~0)6(&/Q) = V, and (c 6 &I&) = w.

Thus equation (Al 1) becomes (A12) v(1 - I/u)=~+w(u- 1) Note that equation (Al2) is a quadratic equation in u and yields the optimal S*. Similarly, we can derive the optimal P*. Second or&r conditions: (A13) a2r/B2 = g 32,/aS2 = gk (l-8qO) (1-Gexp(-&PIQ)}(-p&exp(-&S/Q) which is < 0. (A14) (Ai 5)

a&da@ = g a2gap2 = gk (i-eTo) ( I-exp(-Pl S/Q))(-?$22)exp(-P2PlQ) which is < 0.

a%asap = g a277/asap = gk (M~O)@31&exp(-p1 S/Q)exp(-&P/Q)

Hessian must be positive definite: (a%@) @2r/aP2) > (a2T/aSaP)2 which implies (Al5a) { l-kxp(-&P/Q)} { l-exp(-P1 S/Q)} > 6 exp(-P1 S/Q) =p(-&P/Q) or

(Al W ( l-~xp(-&PIQ)) > exp(-P1 S/Q)

On simplification, (Al 5a) yields (AM) (exp&SIQ - l)(exp&PIQ - 6) > 6 We now prove the result on the impact of carryover effect on the optimal budget. A.1 The Effect of Carryover Parameter (0) on Optimal Resource Deployment: From equation (A8), we get PI {exp(P2P/Q))(fl2/Q)(aP/ae) = c 6 P2{exp(PlslQ)f(P1lQ)(as/ae) i.e.,

(AIT) {exp(&PIQ)}(aPlae) = c

s{exp(plslq)}(aslae)

Differentiating equation (AlOa) with respect to 8 and letting gkS(&IQ) = k , we get (l-ho) {~xP(-PzP~QN WQ) {exp(-P$IQ)) ww - u-k9 WW(-WQ)~ WQ)

exp(-PzP/Q) @plae) - r70 { l-=p(-01 S/Q)} (qW2PIQ)l = 0

This implies

WV W-~rloYQ~ [PI {exp(-P$/Q)) (exp(-P2P~Q)WW - P~WXP(-P$IQ)I P2PIQ)I Wae)l = r10 t l-exp(-P1 S/Q)) Wp(-P2PIQN
Substituting for (WH) from equation (Al7), we get

@xP(-

(Al9) W-~~oYQ)WW [(Pl/c6){exp(-2PlS/Q)} - P~U-~~P(-P~S/Q)I bwW2P~QNl= r70

{l-ex~(+WQ)) {exp(-&P/Q))
The expression within [ ] in equation (A19) when combined with equation (A7b) yields (PllcNexp(-&S/Q)) {exp(-&S/Q) - WWW2P~Q))~ which from equation (A15b) is negative Therefore, @P/M) in equation (A19) must be negative. From equation (Al 7), this implies that @S/a@ must also be negative. Result I: Hence, the expenditure on booth space, pre-show promotion and therefore, the total budget all decrease as the carryover effect increases. A.2 Steady State Analysis: Results on Expenditure Needed to Maintain 7 in Equilibrium We now consider a situation where a firm reaches some sort of equilibrium i.e. the fkm maintains a level of communications spending such that the attraction efficiency from one period to the next does not change. We rewrite equation (Al) as: (MO) 7t = erl,_1 + (1-@t-l) Ct where C, = (l-exp(-Pl St/Q)1 {~-~v(-P$ t~Q)l At equilibrium, we have qt = qt_l = q Therefore, equation (AZO) becomes 7j =

erl + (i-eq) c (i-ejq / (i-eq)

Rearranging terms, we get (~21) c =

It is easy to show that as 8 increases, C decreases. From equation (Ml) Xl&9 = q (q-l) / ( l-eq)2 which is negative since q < 1 Now, consider a steady state efficiency level ql . At this level, the effect of communications expenditure is
31

At a higher steady state efficiency level 72 (say ~2 = k YQ ; k> l), the communications effect is C2 = (l-e)72 / (I-eT2) = (l-e) kql / (l-ekql). Therefore,

(A22) C2Kl = k (l-8771) / (l-8k7Q) From equation (A22) iI(C+ 1 )lM = k (k- l)ql / (l-8kq 1 )2 which is positive since k > 1.
Result 2: As 8 increases, C& increases.

32

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