As a CEO of a software business with customers all over the world, one of our biggest lead sources are conferences or trade shows. They also happen to be one of the most expensive channels for marketing with shows costing $5,000 - $20,000 to sponsor plus the expenses to travel, ship gear and the time out of the office. I overhead one vendor at the last conference I attended say he thinks we’re in a “conference bubble” as the pricing is getting so high it’s almost cost prohibitive. That may be true but here’s how I like to look at conferences and the ROI:
1 - Marketing Opportunity - There is no doubt that having conversations with prospective customers is of tremendous value. The investment in the conference is worth the marketing if you can have enough conversations that turn into customers. So how do you figure out if it’s a good investment? Keep reading...
2 - Visit with Customers - Because our customers are all across the globe it’s too costly for us to get together face to face with each of them. We’ve hosted Meetups in different cities like London last year and this year, Miami earlier this year, and New York before that and it’s been beneficial. So any time our customers come together in one place (usually for a conference) it’s a phenomenal opportunity to see them face to face.
3 - Churn Prevention - Inevitability during a conference we’ll speak with a handful of customers that are not 100% happy or are dormant customers not really using our software. Once we identify those customers, we immediately want to make sure we get them in contact with our team and back on track. I really respect those that are upfront and say they aren’t happy, because they typically give us an opportunity to make things right.
4 - Hear About Market Trends - I love the opportunity to have multiple conversations with customers and learn what’s top of mind for them. What’s keeping them up at night and is there anything I can do to help with it? This is a great driver for our educational webinar series and how we came up with the last two on How Customer Success Drove Our MSP Growth and Best Practices of Client Reporting.
5 - Show Off New Features / Integrations - It brings me great joy to meet customers face to face at our booth and show off the new stuff we have recently released. That always jump starts a conversation and gives us an opportunity to make sure they are happy with BrightGauge.
6 - Hit the Road with my Team - The BrightGauge Team always has a good time on the road. Usually it’s me on the road with my road warrior partner (and Director of Sales) Larry Garcia and after a dozen conferences we have the process down and know how to make the most of our time together.
From the list above, only #1 and maybe #3 can mathematically impact a ROI calculation. For the others, they are “soft benefits” and if I had to reproduce the customer contact by flying to each city it’s a no brainer to sponsor conferences. So it’s not a simple question to answer about whether conferences are “worth it”. However, I want explain how the actual financial formula we use works in case it can be a resource for you...
Marketing ROI for Conferences
For SaaS companies reading this that are interested in learning about the ROI of conferences, you’re going to need the following input numbers:
Sign Ups from Conference - You need a way to associate a sign up to someone you met/closed at the conference. This could be manual or you could use a unique coupon code.
Average Sale Price (ASP) - When you take your monthly revenue and divide it by the number of customers you have, that is your ASP or sometimes you’ll see it as ARPU which stands for Average Revenue Per Unit.
Churn Rate - This has many ways to be calculated but it’s basically the percentage of customers that are leaving you every month. The easiest way to calculate is to take the number of Customers that canceled during the month and divide by the number of Customers you had at the beginning of the month.
Gross Margin - Revenue minus your Cost of Goods Sold (COGS).
Life Time Value - The formula for this includes your ASP divided by your Churn Rate multiplied times your Gross Margin % or ASP / Churn Rate x Gross Margin % = LTV
Conference Expense - The total expenses for the conference which includes the sponsorship and all expenses at the conference (hotel, travel, meals & entertainment, booth gear, etc). For this exercise, this is also your Customer Acquisition Cost (CAC)
LTV to CAC Ratio Target - SaaS best practices say your LTV should be at least 3x greater than CAC (which translate to a 33% CAC). However, at BrightGauge we target 5x to try and keep CAC 20% of our LTV.
From here, the formula to calculate your ROI is simple:
So to identify how many sign ups you need at a conference, you can use this basic formula:
Let’s put this into practice with actual numbers of:
5 = LTV to CAC Ratio
$8,000 = Conference Expenses
$4,000 = LTV
That's it! Now you're able to determine if those conferences make sense from a numbers perspective.
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