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Jan 2012 - Vol 7, Issue 1
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Welcome Back!
This issue starts the seventh year of AV Matters. It is hard to believe that time has moved that quickly. When I started consulting late in 2006, the AV economy was booming. By mid 2007, a recession seemed inevitable - then the worst happened. The impact of that downturn cascaded across North America like falling dominoes and my consulting jobs moved east to west with it. I can't say that consulting is recession-proof, but I was called in to businesses on the way up, down, or in some sort of transition - so work has been steady. My thanks to everyone for the continuing opportunities! Today in 2012, most of my clients are adapting to the new normal and things look a lot like 2006 again.

In this month's issue there is reader email on an old but newish topic of exclusivity in venues. Another reminder that things are cyclical. Please send me more emails with your questions. I enjoy the challenge.

The Best Practices column is a primer on Value Propositions. It's a big topic, but we can at least identify the strategic issues and take on tactics in upcoming editions. You will be hearing more about this topic from me.

Finally, I have carved out some time to finally put something on my Stimson Group Facebook page. If you don't mind, please take a moment to follow this forum.

As always, I could use your help to grow subscriptions. Forward or share this email.

Thanks for Reading,

Tom Stimson
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Reader Mail
Dear Tom,

I was hoping to pick your brain and discuss the ever worsening effects of the drastic increase in rigging, power and liaison charges being imposed by [in-house AV providers] as a way of keeping us independents out. It seems to have reached the ridiculous point. Just 2 weeks ago I was quoted over $5,300

to rig 1 40' downstage truss w/ 3 pick points and I had to supply the lift. After getting on the phone with my client, the hotel Convention Service Manager, the in house av rep and myself, we got the price down to $2800. 

 

It seems the price points that venues are trying to hide in their "3rd Party Agreements" are just getting

out of hand.  These agreements are not provided to our clients when booking the space unless they know

to ask for them in advance.  Once the space contract is signed, they have little room to get the charges/fees reduced. I am looking to get a forum to make this a more known problem in the events industry and get this info in front of the event planners. 

 

What are your thoughts on this and have you heard any discussions in your travels?

 

-Frustrated Stager

 

Dear FS,
This is a timeless discussion topic. After all the philosophical discussions about who is better equipped to perform the work or who is gouging whom, it all comes down to the same conclusion now as it was in 1980: The venue owns the space, the venue assumes the risk, the venue gets to decide what profit it wants to make and how it makes it. Clients have the power to change contracts before signing them and have a great deal of influence afterwards too. MPI has been teaching Meeting Planners about the ins and outs of convention services contracts and third-party provider clauses for years. We can complain about stupidly expensive and occasionally inept rigging services, but at $300 per gallon of coffee - that rigging charge is chump change to the overall meeting costs.

And before we blame the in-house AV company for the pricing, the hotel owners have a great deal to do with this. Since the hotel gets between 50-70% of the revenue (40-60% of the service cost plus a hotel service charge on top of that), the net revenue to the supplier often looks like what you would have charged. The hotels can be very greedy and downright illogical about these fees. (What do you think the hotel service charge would be if the client wanted to bring in its own caterer?)

So, you have my sympathies, but the in-house AV provider has to pay a huge fee to get the contract, is constantly ordered by the hotel to comp charges that were fair, has to provide tons of free support to the hotel itself (from editing the GM's kid's birthday party video to handling AV for weekly staff meetings) - all for the privilege of watching you come in and do the show. Stagers complain all the time about individuals selling shows from their apartment and renting the gear from [insert your competitor's name here]. These independents have no overhead, insurance, or responsibilities that legitimate companies like you have. Now imagine that you are the one that built a huge convention center and hopes to pay it off by providing services to the guests and then some stager that only has a couple of employees and much lower overhead wants to take that away. I think it is a wonder they let outsiders in at all!

Educate your clients, explain their options - you are supposed to be the expert. Bottom line is that this situation is one of the unchangeable conditions of our industry. It will sometimes cheat you out of business, therefore it is your job to be aware, be resourceful, and educate your clients. In my opinion, the venues are not going to change any time soon.

- Tom

 Comments? Email me.

Social Media Update
Facebook Page
So here's the story. I setup my Stimson Group Facebook fan page a long, long time ago but never promoted it. At this writing I think I have 12 Likes. The problem was that I did not know what to do with the page that didn't duplicate my personal FB page, my website or newsletter or whatever. Being a one-person shop, I also struggled to find the time to explore this concept thoroughly. However, over the past two years many of my clients have setup and promoted pages and quite successfully. I continue to encourage new clients to do the same, but...uh...where...is....my...page?

Constant Contact came to my rescue and is beta testing a new interface for FB. The page you see on the left (go ahead, click on it) took me about ten minutes and that included rooting around for photos. So please "like" my page and I promise I will put up posts and content exclusive for FB. 
 
Best Practices Series
 
What's Wrong With My Company's Value Proposition? 
Capturing value is hard, selling on price is easy 

When I hear folks blame their poor margins on low-ball competitors, my heart sinks a little because I understand that low margins are sadly, self-inflicted. There is no law that says you have to take business that doesn't make sense. And more importantly, not every job, project, or customer is right for you. The big question is how do you get the right customers to pay what you are worth? In other words, how do you negotiate value instead of price?

If I ask you what your value proposition is, and your answer begins with "We have the best...", then I expect I am going to hear a lot of platitudes about quality and service - probably the same things most folks say about their company. If your response is about how you help the customer maximize their return on investment, then we might be talking about a true Value Proposition.

Your Value Proposition is your service or product that will improve your client's condition in measurable ways.

How do you determine what is valuable? There are customers that clearly express what is important to them only to have prospective suppliers offer something else. In talking with buyers, they often cite that the existence of an RFP (request for proposal) actually triggers lowball bidding. The assumption is that because more than one supplier will propose on the job that the customer is looking at price first. If your value proposition is high service instead of low price, then you have to learn to recognize when the customer isn't buying what you are selling and when they are.

"You get what you pay for" is the rallying cry of those that feel cheated out of work by lowball competitors. Sometimes they are right - some low margin sellers deliver poor results. The question we need to ask is, "What did they do or say that convinced the customer this performance was acceptable given the price?" Upon analysis one of two things has happened. Either you were not able to prove why your solution and price were more valuable - or - the other bidder was able to prove why their offering was better for the customer. All things being equal, take the better price, right? If you strongly feel that you were the better choice, then you only have yourself to blame for not demonstrating a value proposition that proved it or finding a customer that cares about the things that make you cost more.

The real obstacle to having a winning value proposition is that it can't look like everyone else! If we reviewed the sales pitches from a dozen integration companies, I suspect that the buyer would learn that EVERY company has the best people, never makes a mistake, and always finishes on time. When every company promises the same thing, there is no discernible value in it for the buyer. The seller with a winning value proposition will take the risk that their unique approach will win profitable business and accept the risk that some buyers won't choose to pay more for that product.

In the final analysis, the reason many companies end up with low margin work is that they are addicted to revenue and are not willing to risk losing any project on price. These companies are leaving money on the table (not to mention losing money on some jobs), because they have a very low risk tolerance. Let's look at a consumer example: Do you think that Starbucks understands that some folks won't pay $4.00 for a cup of coffee? Of course they do. What they do understand is that the Starbucks value proposition increases what a cup of coffee is worth to some consumers. Starbucks is willing to forgo the folks that don't value this customer experience. In fact, so many consumers prefer to pay four bucks instead of one that McDonald's has introduced a new line of fancy coffee. They can't beat Starbucks at their game, but they might lure some of coffee drinkers back with this new value proposition. In both cases, the value proposition is about the customer experience. In a blind bid on a cup of coffee, we'd all probably choose Dunkin Donuts because it's coffee and it's cheap - but it is probably the last place I'd like to spend time in drinking coffee.

Value propositions are both discoverable and invent-able. They can start with a marketing catch phrase or a strategic idea, but the best ideas come from your TARGET customers. Let's presume your ideal customer is willing to let you make a decent profit in exchange for something. Find out what the something is and under what conditions the buyer would allow you to charge a fair price. You might want to build a value proposition around that.

Do you have an opinion or idea to share? Email me.

 

Closing Thoughts

Here's a few scribbles from the margins:
  • Most owners believe they know what their companies are worth. It's only when you understand what the company is worth to others that you make really smart decisions.
  • What is your value proposition? If it includes the word "best" in the description then you are missing the point. Everyone is best at something...
  • If the proposal is the tool to win orders, why are you working with last year's model?

 

About Thomas R. Stimson, MBA, CTS
Stimson Portrait
 


Tom Stimson has thrived for over twenty-five years in the information communications technology industry. As a Consultant, Tom helps companies define their goals and then design a plan that will take them there. For more information visit the website.