AT the “Industry Pricing Summit” at The Special Event 2006, held Jan. 9-13 in Dallas, event pros discussed the methods they use to price their services and expertise. Moderated by Howard Givner of New York-based Paint the Town Red, panel members were Peter Cwalino, CSEP, of Cadbury Schweppes in Plano, Texas; Richard Foulkes, head of the New York office of London-based Imagination Inc.; Robert Hulsmeyer, CSEP, DMCP, of New York-based Empire Force Events; Mona Meretsky, CSEP, of Comcor Event and Meeting Production in Fort Lauderdale, Fla.; Kathy Miller of Total Event Resources, Chicago; and Dina Velasquez, CMP, of International Truck and Engine Corp., Chicago. The panel covered topics including how event companies make money, how corporate planners think event companies should bill for their event services, and how to address the challenges of the procurement process.
Q: For those of you on the event agency side, how do you charge for your services — a flat fee, the cost of event elements plus a markup percentage, or by itemizing everything with the profit embedded in line items?
Robert Hulsmeyer: At our company, we do it any of the ways you outlined. We ask our clients how they want to have our pricing come to them, because we don't want to do a proposal with a cost-plus scenario if they want it another way. How I think pricing should be in the industry — not that I prefer it this way, but how it should be — is very much a management fee based on the time spent and the skill levels of people involved in the project. For companies like us, we don't own anything — we subcontract the lighting, the catering, etc. — and if we are to make money on those services, I think we should have a contracting and handling fee. I think that shows the true value of the professional services of the people doing the work.
Mona Meretsky: When I started my company 22 years ago, I said, “If you don't charge a professional fee, no one will consider you a professional.” Until our industry starts charging a fee upfront, we'll never be recognized or paid the amount we should be for our capabilities. My company charges a professional fee for our creative services, but we list staffing on-site separately. Anything it takes to put the program together in the office is part of the professional fee. We also charge a management fee because we're not only contacting the vendors, we're signing the contracts, we're making sure they have the proper permits and insurance. It's usually 10 percent to 15 percent. We also have a job code for everything associated with an event, from photocopies to phone calls, like a public relations agency.
Q: For those of you on the corporate planning side, would you prefer to see things embedded in a higher fee or itemized?
Dina Velasquez: As a corporate planner, I would never pay for every piece of paper that a company uses to plan my event. But it depends upon the scope of what's involved. If the event company is duplicating 2,000 color copies specifically for my event, I would absorb that cost. But I don't believe the client should be charged for the everyday tasks of running your event company.
Kathy Miller: Each client is different on how they'd like to see things. Dina {Velasquez} is one of my clients, and as a corporate planner, she has to go back internally and fight for each thing, and answer why she needs an outside company. We look at a scope of a project and figure how many hours it should take. We used to bill for pre-production hours — the hours it took to do research, contract negotiations, to find the venue — and that was an hourly rate. Our management fee was something different, and that was our profitability. But we got resistance to that because people didn't understand the difference between the two. We have now merged those into one fee, which we call a management fee; it includes pre-production hours and cost of doing business. If someone wants to be billed hourly, we make so much more money because we keep track of every hour. But most clients don't want to do that because they understand they'll pay more.
Peter Cwalino: From the corporate event side, I like to look at it as educating your customer. As long as the client is aware of how you're billing, there shouldn't be any problems. I think the bid process is the most challenging because you're trying to compare apples to apples on a bid; you pick your top three contenders and try to narrow it down to make sure all your costs are in that bid. If there's an administration fee or charges for copies, I know it needs to be done, but I don't need to see it. Our company put a template together that we ask bidders to fill out so we can compare the bids as fairly as possible.
Howard Givner: I think that's more the exception than the rule — that sounds like a great bidding process to figure out which company provides the best value. I know we've been in cases where we've moved to a transparent fee for a project, and we estimate how many hours we'll put into it. We take our lumps if we go over, if the scope of the work doesn't change. The hardest conversation a company has to have is going back to a client and asking for more money when the scope of the event changes.
Q: What about charging for the work that goes into creating an RFP?
Richard Foulkes: I know that in Germany, a lot of the bigger event agencies now do charge a minimum fee for proposals — they have actually managed to change the client's behavior. The fee doesn't cover the cost of doing a proposal, but what it has done is make the corporations behave differently. Instead of sending out 20 RFPs, it has made the corporations research the event companies they really want to use and narrow the number down.
HG: I think that charging for proposals will be an uphill battle in the United States — there are so many event companies that would bid for the business without charging a proposal fee that a company that did charge would have to be willing to risk losing a few opportunities.
Q: A lot of clients have started to ask for transparency in pricing. How do you deal with that?
RF: For one of my biggest clients I have no markup, no management fee — we are paid by the day. Under that agreement, the client can come in and look at all the invoices from the suppliers, etc. That is happening more and more in Europe, and it's going to come this way. It is being driven by procurement specialists coming in, who you tend to think of as dealing with nuts and bolts. Initially there is the tendency to say, “We're a creative business, we don't do that.” However, once you have a relationship with procurement people, they can be your best friends. At first you'll hate it, but it has led us to put in a process that we now follow to evaluate how we do things. It has made us much more efficient and saved us a lot of money.
RH: If a client asks for it upfront, I'd be happy to share that information with them and charge them in a way that shows that.
MM: It's different if the client comes to you at the end. I had a client ask to see everything after an event, and I had a problem with that. I ask all of my subcontractors to sign independent contractor agreements — part of that is they don't speak directly to my client or solicit business from them. Because what is happening is corporations are bringing in-house people in and they get my list of vendors, and I see less and less business. I'm not willing to give away my vendor information, but I will show clients where their money went.
KM: Our profession is a profession — if you're not out there with your clients and showing them the value-add you bring, shame on you. Because the reality is, your clients have to justify their decisions, and the added value they bring to their company is when they can walk in and say, “I was able to negotiate X dollars in savings.”
HG: The common theme seems to be that no matter how you charge, you have to take a hard look at how you're bringing value to clients to cost-justify how much you charge.
For an audio recording on CD-ROM of The Special Event panel “Industry Pricing Summit,” contact Sound of Knowledge at 858/635-5969 or www.tsok.net, or visit www.thespecialeventshow.com/conference.
