Conferences are not the kind of three-way you’ve been hoping for

Like a magazine, a conference is typically a three-way relationship between content, participants, and advertisers, with the producer/organizer in the middle of the triangle.

I’ll add a diagram here shortly — it will look like a triangle 🙂

As the producer, you might choose to have no sponsors (or, on the other hand, not charge your attendees anything), but most conferences derive revenue from both attendees and sponsors, and so if you’re like most, you serve two masters. With both attendees and sponsors, you have two sets of customers, with totally different, and in some ways conflicting goals.

Don’t have any sponsors or advertising

Having two types of customers at odds with — and yet dependent on one another — makes your life very complicated. My first piece of advice is therefore: don’t have any sponsors at all! How? Easy: just make your attendees pay the full, fair price, without any subsidy from sponsors.

Easier said than done, but not impossible. Some speciality magazines have little or no advertising, and while the issue price is high, there’s no advertising to distract the reader. Many podcasts are going with a no-sponsors model as well (although most have sponsors/advertising). There are plenty of conferences without sponsors as well. The advantage is that without advertisers, the business is far less complicated. And I mean WAY LESS COMPLICATED. Those sponsor dollars may seem like easy money; not at all. To earn and sell sponsorship, you need to

  1. define what your sponsorship products are, and how they are to be priced — and doing this takes time and energy away from your primary product, which is serving your audience.
  2. employ marketing and sales staff to find sponsors and sell sponsorships — which inherently detracts from serving your audience.
  3. do all the legal, accounting and other work to contact, keep track of, and collect on sponsorship deals — all of which inherently detracts from serving your audience.
  4. and of course, you have to actually fulfill your obligations to sponsors — which necessarily detracts from serving your audience, often quite directly, by devoting precious time and physical space to sponsors.

Most conference producers overestimate sponsorship revenue and underestimate the costs of selling sponsorships and servicing sponsors. For these reasons, most producers would be better off to simply not sell sponsorships at all. So — if you are considering selling sponsorship — be sure to consider the alternative to selling sponsorship: raise your prices. 

The full and fair price

You can have a very successful conference business without any sponsors or advertisers, if you can successfully get participants to pay the full and fair price (FFP). What is the FFP? Simply: the FFP is what you would need to charge each participant to make back your costs, plus enough margin so that you end up with a 20% net profit. (I won’t go into the details here, but 20% is an excellent general target for net profitability; if you’re making any less than this, you’re not likely to be in business — or want to be in business — for very long).

Keep in mind that you’re not going to end up with a 20% net profit by simply adding 20% to your own per-person cost (PPC). Using one of my own three-day conferences as an example, let’s say that our cost of hosting each participant is about $1800/person. This is the cost of producing the individual conference (COGS) + a proportional share of our ongoing overhead (SG&A), divided by the number of participants. The FFP would therefore have been in the range of $1800+20%+X, where X is enough to cover not just taxes but also the fact that of course some events were less successful, etc. Realistically our FFP would have to have been something like double our PPC, i.e. about $3500.

So, if we were able to get participants to pay $3500 per person, we could have offered the conference without sponsorship. And we tried, but in our case it just didn’t work. The audience that we were serving was relatively cost-sensitive mid-level staff, not senior management, and they just couldn’t stomach the FFP.

In this situation, you have two further choices: 1) don’t offer the product, or 2) find a way to subsidize the price for participants. For conferences, #2 usually leads directly to sponsorship — although there are other lines of business that can bring in revenue (membership, research, sponsored content, consulting, training, job boards/recruiting, etc). Leaving those aside for now, let’s talk about sponsorship.

How to keep everyone from hating you

Again using my own business as an example, we set our full price registration at about the PPC: $1800. After taking into account free passes, discounts and the like, our average registration revenue was about $1000/person. Given that we needed something like $3500/pp to make a real business, that leaves $2500/pp to make up. This is real money: for a 100-person conference, the revenue gap is $250,000. That also shows pretty clearly that our revenue was skewed heavily towards sponsors: in that example of a 100 person conference, we would have collected $100K from participants and $250K from sponsors.

Given that the reason that any conference exists is to serve the audience, the fact that most conferences end up making most of their money from sponsors is a real problem. It’s way too easy to play fast and loose with what you’re offering to sponsors, and end up with everyone up to their eyeballs in advertising, which will suck real bad. Everyone will hate you, go home and tell everyone how much your conference sucked, and (hopefully) not come back. Bad conferences don’t deserve to exist!

That said, it’s not impossible to do sponsorship well, just difficult. I’ll leave the details of how to do sponsorship well for another post; for now, just remember that advertising is a terrible way to fund anything good and real, and that how you earn the right to be in business is how you serve your audience, not your sponsors. Don’t fall into the trap of finding more ways to sell your customers’ time, burying sponsor pitches in the agenda as “content”, and plastering logos on everything. Sooner or later, you will pollute the well, and once the water is tainted, it’s very difficult to lose that taste. More likely, someone else will find a way to sell clean water to your audience.