July/August 2005 Article                      

Understand DMC Pricing

Cost Plus Pros

• All costs including DMC pre-program and on site management staff are included in the invoice.
• Perception of better value.

Cost Plus Cons

• While every effort is made to control costs, the unpredictability of this model means the DMC cannot offer the same price guarantee as with other methods.
• Does not include such costs as FedEx, database management, radio/cell, etc that are typically absorbed by the DMC.

II. PACKAGED

• DMC guarantees delivery for price quoted
• Absorbs the risk of any errors or omissions that may have been made during the costing and proposal process.

Packaged Cons

• Perception of overpaying
• Harder to customize without DMC assistance

III. MENU BASED

 

	What:	Major categories are identified and presented in a menu format
	How:	How Calculated: The profit is factored into each element
	When:	Complex events with multiple elements and a wide range of variables
	Example:	Menu Based Transportation $ 500.00 Lunch Cost per person: $ 20.00 Staff $ 100.00 Amenity Cost per person: $ 10.00 Musician Hitchhiker $ 500.00 Combination Tour Cost per person: $ 35.00 Optional: Amenity Cost per person: $ 10.00 Musician Hitchhiker $ 500.00

Menu Based Pros

• Allows for client customization
• Less need for recosting

Menu Based Cons

• Supplier costs have to be built into each line item since the supplier has no way to know how many items the client will select. This means loss of more favorable package rates that have discounts built in based on volume of elements included and dollars spent.

IV. FEE BASED

Fee Based Pros

• Easy to understand or simplistic
• Perception of paying less

Fee Based Cons

• Unpredictable as fees for services not listed and typically absorbed are added.
• Unpredictability of this model means the DMC cannot offer the same pricing guarantee as with the inclusive format.

The bottom line, Rhonda says, is that regardless of how the information is presented, the
ultimate cost to you will be the same. So it’s not so much how the price is figured as how the client or the procurement office wants it presented, she continued.

And back to that survey, why would planners prefer the menu approach and DMC's the packaged one? "The menu approach seems the most straightforward and would satisfy procurement departments who like line by line accounting. This might be why planners prefer this one," Rhonda suggests. "DMCs, on the other hand, rank the packaged method high as it allows them to get the greatest value for the client’s budget."

"We prefer to have a client tell us what the objective is for hosting the event…what the client want to accomplish, who the attendees are and what the budget is," Rhonda explains. "Knowing the answers to these questions, the DMC can design an event that will best accomplish the goals within the client's budget parameters. When a supplier knows that we are going to spend a minimum of $X for an event, he is more likely to extend a volume discount. It is just as easy for a DMC to provide a line item menu cost, but for the cost-conscious client, the package price is the better option." she concludes.

What are you paying for in the end when you use a DMC? What is their value?
It all adds up to giving back to meeting planners the scarcest resources in today’s high pressure society, "Time and Focus," Rhonda emphasizes. One telling example she cites is a study showing that a DMC can make as many as 1,200 phone calls in organizing the program for a single client. Those are calls and distractions that the strategic meeting planner is freed from. "The meeting planner’s time is better spent measuring ROI, not table linens," Rhonda insists.

DMCs are experts on their location. They have buying power in their areas that you can’t match. They have contacts that get you into venues, restaurants, and shows that
you couldn’t do on your own. They take care of millions of details so you can focus on the broader picture. And they have training, experience, and creativity that adds up to making your guests feel special and making your meeting a success. That’s their value, regardless of how the pricing is presented.

For more details on the GEP Summit pricing presentation, contact your GEP or Krisam representative or e-mail newsletter@theeventinsider.com.

Rhonda L. Marko, CMP, CMM, DMCP, is president and CEO of Destination Nashville. Presently, she also serves as president of the DMC Network, board member of the Association for Destination Management Executives (ADME) and commissioner of transportation on the APEX Commission.