So you're back from CES. Was it worth it?January 14, 2014: 1:09 PM ET
Is there return on investment for showing at consumer technology's biggest annual event? It's a bit fuzzy.
By Alex Halperin
FORTUNE -- Klipsch Group Inc. came to the International Consumer Electronics Show this year to make a statement. Speakers blasted AC/DC at the company's booth, and signs featured burnished electric guitars and irreverent slogans like, "Your music could sound better, just sayin'," "Big sound, no bullshit" and "A little heresy is good for the soul."
Taken together, the Klipsch pavilion seemed intended to evoke an image that's a cross between Clint Eastwood and Johnny Cash: a grizzled, whiskey-cured outlaw returning to the road for one last ride. The Indianapolis-based speaker company wants to sell $249 headphones that buyers associate with this hoary but still powerful American archetype. It wants to be the Marlboro Man of high-end audio.
Chief executive T. Paul Jacobs, who wears a goatee and whose gray hair curls slightly below the ear, has been coming to the CES for 30 years, 22 with Klipsch, which is now owned by Voxx Corporation (VOXX). Last year, Klipsch made a low-key appearance at the industry's biggest confab. This time, with prospects for his sector looking up, Jacobs said he wanted to go big.
CES is the trade show where consumer technology companies go to show their stuff. But to actually attend requires a serious commitment in time and money. For many, CES has become more about marketing than moving product. With so many of the exhibiting companies focused on the fourth-quarter "selling season" a year away, it can be difficult for companies to determine what return they're getting for their time and money.
The show has "transformed from a traditional buyer-seller market into people looking for more business opportunities, people looking for new partnership opportunities, people who are trying to establish their brand," said Karen Chupka, a senior vice president with the Consumer Electronics Association, the trade group that puts on CES. She emphasized, and many companies in attendance echoed, that the show enables companies to meet with everyone they need to see in a few days, find international partners, and get in front of the press.
Klipsch approached this year's CES thinking, "Let's be who we are and show some swagger," Jacobs said. He wanted to downplay the pink earbuds it has started to sell -- "I know why we did it, but that's not who we are," he said -- and emphasize what he described as Klipsch's "outsider" roots.
To do so, Klipsch moved its booth from the convention's boondocks to the main floor and flew in Lynryd Skynryd, the aging kings of Southern-fried classic rock, to play a private concert at the Hard Rock Hotel, just off the Las Vegas Strip. The show -- with open bar for its 700 attendees -- cost between $300,000 and $400,000, Jacobs said. That's roughly half of what Klipsch spent on CES this year.
When it comes to determining the return on this kind of spending, executives are less certain. Jacobs said he won't know if his investment this year pays off until a year from now, but suggested that big spending at CES has benefits, like making a "strong statement for everyone who works for this company" that can be difficult to quantify in dollar terms.
At CES, the return on investment is "a little bit indirect, as it is in all things marketing," said Jon Kirchner, CEO of audio company DTS Inc. The Calabasas, Calif.-based company erected a small theater at its booth to demonstrate its new surround sound technology.
Several companies described CES as a place to galvanize the rank and file and kick off the year before salespeople fan out to close deals.
Still, at a time when more business functions are conducted online with ease, the commitment CES requires is immense. Companies say they spend months planning their show, a process that can include settling on a message and assembling a booth worthy of their name. Major players such as LG and Panasonic present showcases that can be the size of city blocks.
Space on the convention floor starts at about $4,000 for 100 square feet, according to CEA. A good rule of thumb is that the cost of that raw space amounts to one-third of the total cost of a similarly sized booth. The cost of shipping materials to the site, assembly, and providing services necessary for it to function takes up the rest. A working electric outlet, for example, is a service. So is hanging a banner from the ceiling.
And then there's the cost of flights and lodging for the team needed to man such a space. It should be noted that CES takes place in Las Vegas, a city purpose-built to extract visitors' every dime. (The city's prevailing attitude toward visitors might best be summed up by the presence of $6-per-transaction ATMs in casinos.) Though there are far cheaper places to hold a convention, no other city in the U.S. has the hotel capacity to host the show, which attracts well over 100,000 conventioneers, Chupka said.
On top of all that, companies strive to stand out among the thousands of exhibitors. Those efforts come at a cost. Polaroid installed a skateboard ramp and hired kids who knew how to use it. A number of companies hired "booth babes" to pose with merchandise or dance on platforms. Car audio system companies often brought vehicles onto the exhibition floor, including at least one Lamborghini.
"It's almost impossible to judge" return on investment from CES, according to Michael Newman, president of Miami-based Craig Electronics Inc. Even so, he said it's the only trade fair his company attends.
Craig, which sells products like sound bars, home audio, headphones, and accessories to big box stores, brought about 10 employees to its 1,200 square foot booth at the show, but he said about 50 had been involved in preparing for it. (He declined to say how many employees the private company has.) Even if the numbers don't add up, CES's sheer size suggests that, at least for now, it is too big to fail.
"Everything here is in a setting we've prepared," Newman said. It beats "showing up at [customers'] offices with a brown box."