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The main objective of Batibouw is to be the first construction fair in Belgium. As explained, there are two agents on the market: exhibitors and individuals who are the clients. To fulfill the objective, the strategy is twofold: firstly, attract a wide range of exhibitors on one side to interest all types of customers and on the other side to inform customers that all agents in the sector are represented and all their answers about this sector will be given. Second, attracting a large number of individuals to gain fame and also to justify the high price paid by the exhibitors. Indeed, the two agents pay an entrance fee. The entry price of the customer is not a big part of the turnover of the fair. This is only “bonus”. However, the price for exhibitors is very high (130 € / m²). I think a small price to customers is explained in 2 ways: first, it prevents disinterested people to not come and completely congest the exhibition. Second, it indicates to the exhibitors that the potential that customers come to buy in the near future is high, and they will spend less time explaining to undecided people.
The expensive price of the stand tells customers that the exhibitors have sufficient income to participate in this fair cost. We can assume (with exceptions) that the exponents are serious and will not ditch the customer in the future.
Compared to the question of where to start, I think here Batibouw must focus initially on the arrival of customers. Indeed, once a reasonably small number of exhibitors come, others will feel compelled to follow in order to appear as an important actor. So it is important to first attract customers. We see that Batibouw made efforts to attract more individuals, making promotions, advertising, reducing entrance prices for some period (also to avoid too many people at the same time in the exhibition) or providing other services (daycare, restaurant, cash withdrawal, etc.)
It is however important to note that the organizers also highlight the arrival of exhibitors. A big topic “Why Participate” is made to encourage exhibitors to come. Several means are put right and ahead (spot advertising, competition between exhibitors, advertising on the site).
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Following Evans (2003) typology it is clear that we can talk in this case about Market-makers market since members of distinct groups are spurred on agreeing transactions with each other. In what is following I will expound how this platform is increasing the likelihood of a match and reducing time to takes to find an acceptable match. The mean by which this is obtained is price-setting which is mainly focused towards balancing the demand among both exhibitors and visitors, rather than cost-based.
Following the paper of Parker and Van Alstyne (2002) which states that if the client side generates a much greater degree of externalities for the exhibitants than the other way round, the clients may tend to get a lower price. I would like to apply this to the Batibouw exposition. For visitors it is really a unique opportunity to get in touch with many exhibitants at one place in one time, so this is a big opportunity seen as they can find a lot of information while this is much harder to come across in other situations. Although, if there is a minimum amount of exhibitants presented this can already be satisfying for them since each extra exhibitant will bring every time less marginal value and maybe in the end even get negative because the client has an overflow of choice. So the externalities from the exhibitors to the clients can be seen as indispensable in the beginning but after that point doesn’t seem to bring much added value.
On the exhibitant side, I think the degree of externalities are higher because of the fact they can meet the clients in an interesting phase. Because of the 12 or 10 (online) tickets Batibouw allows to only focus towards clients which are considering building, renovating or buying a house but didn’t yet embark with an particular company so this is really the most interesting moment for exhibitants to get in touch with the potential clients. So each additional client still brings an externality for exhibitants since there might be a chance of agreeing on a contract. Furthermore, since we are speaking about a sector in which the contracts deal about substantial amounts of money. Therefore, the exhibitants can look ahead on high potential gains which result also in a higher willingness-to-pay for them.
Useful classification, thanks.
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As already mentioned in previous comments, exhibitors benefit from a larger number of exhibitors that attract a greater amount of people, but at the same time they are negatively impacted by the higher competition that arises from this large number of firms.
However, this issue seems unavoidable, because each company will try to maximize its own benefits, and therefore will assume that by participating to the fair, it will be better off than without doing so. But since all firms will do that, there is a potential risk of seeing the negative competition effects become larger than the positive networking effects.
I think there might be a certain amount of firms after which participating in the exhibition might become unprofitable for an additional one, but without an external regulator, all the firms that will have the possibility to participate probably will, because they won’t take this into account.
Nevertheless, from the point of view of Batibouw, it might still be interesting to attract the maximum number of firms, if we consider that the first objective of this platform provider is to maximize its own benefits and not the one of the companies. I think that Batibouw found a balance between the prices it sets for visitors and exhibitors, with a price just sufficient to attract only “quality visitors” with a real willingness to pay for the presented products, and an attractive price for the exhibitors. Indeed, maybe for us as individuals, the prices set for the companies seem high, but from their point of view, this is not necessarily the case, especially when talking about construction companies that probably have enough resources to invest in that type of events.
Show lessAs you rightfully guess, the platform operator sets its prices by taking into account the various externalities that exist between and within the different groups of users; thereby, the operator internalizes some of these externalities.
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I would be intersting to know how the FISA sets actually their prices.
Because how to know which side is the most reactive to a change in prices. Which side has the highest elasticity with respect to the price their charged.
I think it might be the regular people, the individuals, the customers, the visitors. Because it actually can’t be the firm, the exhibitors, because i think it is a very good deal for them, it is much cheaper than an advertising campaign and they can measure the effects on sales immediately.
Then again since there are two markets and there are network effects, what about the influence of a price change on the side that is not affected ? what about their elasticity ? is it affected ?
I hope we’ll see that in class.
Show lessWe will indeed!
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The previous comments on the matter already identified the main elements of a two-sided market by shedding the light on Batibouw’s strategy. However, I think it might be possible to go deeper in the analysis and to emphasise on differences between particular two-sided markets.
According to me, there is no congestion effect in the platform enlighten above (payment system, OS, Video games) or else in virtual platforms such as Google. The more crowd in the two groups, the better for everyone. Value grows as the platform matches demand from both sides.
In the case of Batibouw, the platform stands as a fair. It is limited in its duration and in its capacity to accept people from both sides. Accordingly, congestion might appear if Batibouw is willing to let anyone in. With respect to this matter, Batibouw’s two sided market is closer from traditional businesses where growth beyond a threshold triggers diminishing returns.
In the following lines, I am going to try to show that there exists a link between congestion on a type of two-sided platform and the degree of competition.
We often see that virtual two-sided markets are dominated by a couple of large platforms. This is the case in video games, payment system or search engine. The reason for this is that the competition on these markets is enhanced by the promise of increasing returns. Platform leaders can leverage their higher margins to invest more in R&D or lower their prices, driving out weaker rivals.
In the case of Batibouw, returns are decreasing when it reaches the “congestion point”. In my opinion, this is a particularity that should be taken in account as we can expect that it reduces the competition effect between platforms. Indeed, Batibouw is only able to reap a small fraction of the total market, other platforms fighting for the residual market share. Thus, as one platform cannot take all the market at once, the degree of competition on these kinds of physical two-sided plaforms is reduced.
According to me, this might be one of the explanations for Batibouw to price higher than its marginal cost.
(I found the following paper very useful to detail my argumentation: Strategies for Two-Sided Markets
by Thomas Eisenmann, Geoffrey Parker, and Marshall W. Van Alstyne)
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Very interesting thoughts! This makes me think of a potential research question: What are the effects of capacity constraints in two-sided platforms? As you rightfully speculate, capacity constraints induce some form of rationing, or of sorting. The objective for Batibouw is to allocate its limited (time and space) capacity to the right mix of exhibitors and visitors. So, it is not just the size but the ‘quality’ of the pool of participants that matters. As was suggested in some other comments, having a positive access fee for visitors may be seen as a screening device aiming at discouraging visitors with a low willingness to buy the exhibitors’ products.
(By the way, the paper you are referring to is available in the Documents section of the course’s iCampus site.)
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We see with this article that Batibouw is a two-sided platform: there are indirect network effects between the two sides (the exhibitors and the visitors). Indeed, each side benefits from the high number of agents in the other side.
We also see that Batibouw uses the strategy divide-and-conquer: Batibouw subsidizes the participation of visitors (divide), hoping to recover the loss on the other side (conquer). Indeed, Batibouw doesn’t ask a lot of money to the customers while it asks very much to the exhibitors.
Batibouw does more effort to attract exhibitors by offering them a lot of advantages such as tools of communication, awards,… in order to give them a good visibility. Moreover, it’s the biggest fair in Belgium in terms of size and notoriety, and as the customers are divided in two parts (professionals and public), they can reach really a lot of people. Nevertheless, there are also negative effects: there is a bigger competition because customers can see on the same place a lot of companies.
Thanks to these advantages (that overcome, I think, the disadvantages), the exhibitors have incentives to pay a higher price to come to this fair.
On an other hand, we can ask ourselves why customers have to pay something. I think it’s to attract only customers that are really interested by the fair and to avoid a problem due to a too high number of visitors.
Show lessYes, you’re right. It seems that I won’t have many things to teach you tomorrow in the lecture; you all have understood the main ideas already. 😉
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In order to earn a bigger piece of cake, there is basically two ways to do it.
One is make the whole cake size bigger so everyone can benefits it, the other method is to fight for a bigger share of the already existing volume. And in a fair like this both parts are involved.
From FISA’s point of view, his job is try to make the cake bigger, because regardless the winner of the cake he will gain from him. That is to say, as an intermediate, the aim is ensure the size of the platform to growth over time.
As for the players on the market, their job is highly likely to steal market share from other players. The idea of win-win? Sounds good, but that’s not between rivals.
So if FISA’s fair to be a success one, there are two things he needs as the foundation: enough players on the platform and enough customers interested in this platform.
For the players, FISA needs to offer promises that player will gain after attending his fair, what do they want? They want bigger share of the market, so FISA will do a large scale of media coverage to promote their product, and also encourage competition between firms to use more energy, and money of course, to take part in their Award thingy. Of course, he can charge a good price, since there is no free lunch, and he benefits from this.
For the customers it’s easier…if I’m correct, FISA’s fair is the biggest one on the market…at least in Belgium, so in the market of intermediates he is already the boss, that makes thing much easier through his reputation and such.
Show lessYou perfectly express in your own words the two effects that I just underlined in Gauthier’s comment.
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” I would also like to add that it could be very bad for sellers not to go to Batibouw, because a high number of competitors will have a higher visibility to potential consumers “. From Amandine Seny’s comment
If I’m not mistaken, I’d disagree with that. Because, it is the same example that the one of the wall we took last lecture: the fair has a limited size, and because the firms would not buy all the space available (because they anticipate that the more companies available, the more potential consumers it will attract), I think there is a limit where because there are too many visitors, firms might not be able to attract a large number of consumers because the exhibitors would «block » eachother (as for the students who want to have dance with the blond in a famous movie and as Jean-François explained), so at some point, they’d prefer not to be part of the fair, using those ressources to get the potentials consumers by other means, or go to another fair. And those ressources could be quite high (David Charlier says « company who wants a place of 15m2 they will have to pay 2521,5€ » ).
This can be coupled with the fact that the consumers coming to Batibouw are certainly reluctant to pay a price that does not meet with their expectations. I mean that consumers who come to Batibouw, make the effort of coming to Brussels, paying an entry ticket, will expect a price that is below « normal prices »(price normally charged for the services available). So that the company, plus the fees they have to pay to have a spot, will lose a certain amount of profit they could have had by searching for consumers by another means. (If we think that companies look for consumers and not the other way around)
Batibouw should also take that into account the fact that high visibility means high visibility of prices and so consumers might compare more precisely the prices of each exhibitors, so that they would lose if one of them put a price so low that he beats all of the others, in a theoretical Bertrand price war. So companies would better ask the price of exhibition to be decreasing with the rise of exhibitors (what could bring other problems). In this particular view, at some level of exhibitors, Batibouw does not serve exhibitors: he serves consumers, who can force prices down (probably not once and for all) by comparing offers. I don’t know if they do it, but as I imagine companies propose « special offer », as the «salon de l’auto » of Belgium, during Batibouw.
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You are right to point that conflicting effects arise among exhibitors: on the one hand, each exhibitor welcomes an additional exhibitor because that increases the attractiveness of the fair and thus the presence of visitors, which increases potential sales for all exhibitors; yet, on the other hand, any additional exhibitor increases competition with the exhibitors that are already present… The former effect is a positive cross-side (inter-group) effect; the latter effect is a negative within-side (intra-group) effect. We’ll start the lecture tomorrow by trying to map all these effects.
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According to me, the role of FISA is not only an intermediary role. Indeed, by offering lots of services, FISA is a real player. Otherwise, exhibitors could appear on other fairs for a lower cost. So, why do exhibitors go to Batibouw and not to another fair?
We know there are other fairs available but, after doing some researches, I can say it is not easy for exhibitors to find information about the prices without sending an e-mail to the organizers.
For example, on this website : http://www.salonhabitat.be/0147/fr/Pourquoi-participer; we can see that prices can vary from 65 to 120 euros/m² which is quite lower than for Batibouw. I think that Batibouw can put a higher price thanks to its notoriety. Exhibitors want to buy to be present because there is a big opportunity to be seen by visitors (see next paragraph) and only visitors who want to know about new technologies will have a willingness to pay. Thanks to its price policy, FISA attract only the interested visitors, which is what exhibitors want and so, they have a higher willingness to pay, which is what FISA wants!
Moreover, on this website : http://www.batimoi.be/les-infos-exposants-de-batimoi-2012-au-wex-a-marche-en-famenne/; we can read : « Nous vous assurons également que nous allons planifier une vaste campagne de promotion via différents médias et supports tels que presse écrite, radio, télévision, affiches 20m2, newsletters, site http://www.batimoi.be etc, … ceci, afin de renforcer l’attrait du Salon auprès des visiteurs mais aussi de le positionner comme LE premier grand rendez-vous de l’année organisé en Wallonie. » but we know FISA already proposes those services.
Thanks to these two webstites, we can see that Batibouw is a leader in its category. It plays a role of a reputation platform as we can see on their website : “Enfin, tirez avantage de nos divers outils de communication pour attirer l’attention sur votre entreprise : invitez vos clients, profitez de notre base de données de visiteurs professionnels, confiez-nous vos communiqués de presse et bénéficiez de tarifs publicitaires préférentiels ».
This fair offers already lots of media campaign. For example, it is possible to put ads on Batibouw’s website which is visited by more than 1.5 million of people per year. So, a company can affect persons during all the year (not only during the fair). For Batibouw, it is also a mean to attract people on their website. There is also the possibility to create pack during the fair but also, and it is very important, the possibility to be present in the pormopacks, which are given to all the other exhibitors at the beginning of the fair. Thanks to all this ads, the exhibitors can be known by the visitors, but also by the other exhibitors, which can maybe result in a future collaboration. And even if all the consumers cannot visit every stand, they will find information about the exhibitors in their packs. In this manner, they can take contact with companies also after the fair.
We see that competition will be harder in the future since other fairs try to use the same advertising strategy as FISA. Fortunately, Batibouw is already well known and is the biggest fair at the moment. Indeed, there are also strong thanks to the partnerships with other medias (see page 7 of the promopack :
http://www.batibouw.be/index.cfm?Content_ID=157958495). These are added services that allows Batibouw to be different than other fairs.
Precious additional information. Thanks!
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As the article defines the two-sided network, the requests of both groups are interdependent: the good or the service for group 1 is interesting only if it is used by the group 2.
In the case of Batibouw, this one plays a complex part. Indeed, the decisions which they will make will depend on their capacity to coordinate the request of both groups. The main problem of Batibouw is that they must offer attractive services to both groups. The prices have to become attractive respectively for the visitor and the exhibitors but also fair and efficient.
I will speak about price ticket and price exhibition.
Firstly, the visitor has to pay his ticket to be able to see what companies propose. It is also necessary for the platform to make pay the two parts. Although Batibouw offers several advantages of price to the visitors, this meeting place is not completely free. If visitors could come free, everyone could come without having a real need to go to this kind of meeting place. However, if Batibouw makes pay a certain price, only people interested by this sort of meeting place will come. These people are extremely important for exhibitors. Indeed, free ticket could give crowds of visitors but I think that benefit (loss of time, explanations, demonstrations, etc) would be lower for exhibitors because they couldn’t make the difference between freeloader and interested people.
Secondly, Exhibitors have to pay a higher price because I think that they have a higher need than visitors. Indeed, people don’t come for a specific company but for new concepts and designs. For my part, I find that the exhibitors must pay a more expensive price because Batibouw offers them possibilities of high visibility beside potential buyers. As Amandine Seny and David charlier underline in their comments, Batibouw proposes to join its name to exhibitors, proposes a reward system which give a bigger visibility for a particular product for example, and other interesting concepts. This sort of concept allows a recognition towards the customers. This concept of visibility from Batibouw offers a good advertizing investment which can be very useful for companies which want to introduce themselves without to spend extravagant sums of money in marketing and publicity.
Moreover, the concept of price works also for exhibitors. Indeed, if the price is not raised enough, too many companies will want to settle during this meeting place and visitors will be lost among the large variety of similar companies. If they invest some amount to appear in Batibouw, exhibitors show to their potential buyer their serious, their willingness of quality, their motivation and their innovating products.
I think that the concept of price can limit freeloaders and make this meeting place profitable for both groups. Indeed, visitors can come and meet new products and new designs without to be confronted to too many people because the price is there even if it’s attractive. And Exhibitors can be more competitive and focus on interested people and don’t be disturb by freeloaders.
By this short demonstration, I think that we have to consider the concept of quality of groups for an efficient result and not only on the number of people.
To conclude, Batibouw uses clearly the two-sided market. They suggest attractive solutions to both groups and only keep people and companies which are the most interested. All three parts win.
Show lessAs you perfectly shows, the “quality” of a platform is endogenous and multi-dimensional. We will stress this during the classes.
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I had the chance to meet the CEO of Velux Belgium last week and talk a little about Batibouw with him.
He said it is very interesting as we can think for companies in the building sector to participate in Batibouw to meet potential clients, to develop his image or to see what are the innovations and what the competition is doing. But it is also very significant to meet and build relationships with all partners that we can have in the building sector. Indeed the building sector works often by networking. If I want to build or renovate a house, I will first choose an architect and he will advice me a builder in his/her network of relationships. If I want to replace a window and its frame, I will seek someone who knows how to do it and he will advise me a brand of windows. Therefore it is very important for companies in the building sector to be well seen by their partners to be advised by them.
So as it was said before, Batibouw can play a role of intermediary between buyers and sellers but also between the stakeholders of the sector. So I think we can actually talk about three-sided platform and the fact that there are days exclusively for professional visitors confirms it.
For these reasons, it is essential for major companies in the sector to be present at the fair. Then the goal is the same for everyone, to be visible to a maximum and establish a maximum of contacts. Indeed if the exhibitors benefits from a network effect to attract visitors to the fair, inside it is not at all alike. Each visitor spends some time with his visit and he can’t visit all the exhibitors. Every minute he spends with an exhibitor decreases the time he can spend with another.
So there is excludability and exhibitors must make every effort to ensure that visitors come to them. For this, they can play on the location of their stand, their size and form. They can act on advertisements at different levels (on billboards, on the ground, in catalogs, magazines, …), they can give gifts of welcome or goodbye, they can make special offers for the fair,… All these actions require a certain investment strategy to determine which do and which ones are most profitable. But for large companies, the amount of money to invest is not a big deal with respect to profits that may result in the event. So there is a great competition to occupy the strategic areas. And there, the influence and loyalty to the organizers are as important as the investissement. Hence the importance of being present every year and having a good network of relationships and influences.
I think if the organizers do not increase more all their prices (while big companies are probably willing to pay more). It is to allow an opportunity for smaller players to enter in the fair with a reasonable price. This allow Batibouw to not miss some trends they can bring and attract visitors with specific requests they can answer.
For “normal visitors” I think it’s a bit simpler. The organizers set prices and discounts to attract a number of visitors which meets the capacity of the fair without causing too many bottlenecks (discounts during slack periods). And this number of visitors attracts itself a number of exhibitors corresponding to this capacity. The fact that visitors must pay an entry is important because thanks to this, there will be more visitors really interested in doing business and fewer visitors who come just to visit.
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Good! You rightfully make the distinction between cross-side (or inter-group) effects and within-side (or intra-group) effects. The former effects have already been well identified in all comments: the attractiveness of Batibouw for visitors (resp. exhibitors) increases with the number of exhibitors (resp. visitors) who attend the fair. As for the latter effects, you suggest that among exhibitors there exist both positive and negative direct effects: positive effects due to networking with producers of complements, negative effects due to competition among producers of substitutes.
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For the case of Batibouw, the two groups of agents are, in the one hand, the exhibitors and, in the second hand, the visitors. In this commentary, I will discuss first a series of benefits of such a “trade show” for exhibitors and for visitors. Then I’ll present some strategies implemented by the organizers to attract more agents of the 2 groups.
Pros and cons
Exhibitors:
+ Canalize the potential buyers of different market areas
+ Significant increase in turnover
– Not at home (travel, not everything at hand)
– Additional costs (location / staff)
Visitors:
+ Acceptable admission (discounts, free passes)
+ Wide range of products (in one place)
+ Place for walking
+ Can benefit of “Salon” terms
+ Be aware of innovation in construction sector
– Limited information on the exhibitor (“scene” of exposure, no visit to the exhibitor)
Strategies
Strategies to attract different groups are different.
Visitors:
– Digital Brochures are made available to ease the visitor (no more 10 kg of catalogs when exiting the show). Ecological responsibility.
– Reduction of 2 € for purchasing tickets online.
– Potential preliminary research (list of exhibitors on website).
Exhibitors:
– Give privileges
– Ensure an acceptable attendance
– Installation Help
– Price for locations not prohibitive
– Advertising outside the stands is prohibited to ensure fair competition.
Finally, the organizers should make a priority to make the show “Batibouw” a key institution for both exhibitors and visitors. What is, for me, the ultimate goal of a two-sided platform.
Show lessNice contribution to the discussion! In our models, we will concentrate on prices as the main strategic variable. But you are perfectly right to point that platform operators have a vast array of non-price strategies at their disposal.
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In any fair, attracting consumers is more difficult than exhibitors. Batibouw know well this fact and for this reason their strategy was focused more on attracting consumers, (low price ticket 12 Euros, a discount on online tickets 10 Euros and on b-daytrip between 16.30 and 24.70 Euros).
After being able to attract consumers Batibouw were more confident that exhibitors would participate in their fair, actually, exhibitors can indirectly attract each other to participate in the fair by participating themselves. So it’s enough for Batibouw to attract a small number of exhibitors, and that will insure that more exhibitors would rush to take part in the fair.
Maybe someone can criticize my point and argue that if attracting consumers is more important than exhibitors, Batibouw should allow a free entrée to the fair. In this case, I think the entrance is not free because it’s a very specialized fair which attract very limited number of people who are really interested in it and who are willing to pay a small amount of money to attend it. However, if we take an example of a two-sided platform which is more general like a book fair, consumers can enter freely and only exhibitors have to pay.
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A potential reason for a low, but still positive, price for visitors could be that the organizers of the fair fear that too many people would come at the same time, which would cause some form of congestion. Or, as someone suggested, a positive price would act as a screening device: only visitors with a sufficient interest in the fair would come, which is what exhibitors are looking for.
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FISA has rightly spotted a sector where they could run their business profitably by becoming an intermediary in the – broadly speaking – building industry. Briefly, FISA’s strategy was about developing and holding specific assets that will interest both sides of the platform. The point was to offer value to each side with services that they cannot enjoy alone or without FISA. And that works, mainly because of the size (understand: namely network effects) of FISA organization that allows a huge bargaining power and other cost advantages with different shareholders. That’s how the core business of Batibouw’s organizers has become successful. Let’s deepen the subject.
In my opinion, the most important feature of FISA business is that they have perfectly fulfilled the gap that existed between building firms and their customers. They have indeed played on the network size effect of the intermediary position in this market to hugely facilitate the fit between demand and supply. For both sides, Batibouw solves a kind of moral hazard/information problem: visitors can indeed (partly) experience the good by entering a room or observing in real a façade, etc. and vendors enjoy a lot of face-to-face contacts with current and (a lot of) potential customers to inform them and increase hence the likelihood to convince them. From an economical theory point of view, we know the importance for firms’ profit to inform people about their products.
Beside of this, Batibouw has enjoyed a snow ball effect after having reached the critical mass. We can indeed now assert that due to the huge media coverage of the event (its notoriety), Batibouw is become in some sense a “must-stock item” or a “place to be” for building firms. There are several reasons that explain why they are so powerful in their position. On one hand, they managed a huge relations network in the media sector which ensures them a high coverage of the national media audience at preferential tariffs. The fact is that they are more able to bargain with media firms than each building firm separately, which confers to FISA a cost advantage that they can exploit by “selling” this large visibility to building firms. On the other hand, this large coverage has allowed FISA to capture a large audience, which moreover perceives Batibouw as a “quality insurance” for purchases in the building sector, and hence has enhanced Batibouw’s attractiveness among building firms (raising in turn FISA’s bargaining power with respect to them). A perfect illustration is that Batibouw’s exhibitors are willing to be allowed to diffuse the “turtle logo” on their products when they have signed contract with FISA.
Furthermore, another part of FISA’s strategy consists in setting an “award mechanism” to add still more value to both side of the platform. I see indeed this mechanism as way to induce both side of the market to come to Batibouw. On one hand firms try to improve their products’ design or to find innovative solutions, being sure that if they succeed they will immediately enjoy a large advertising and recognition of the public. On the other hand visitors are more inclined to come to Batibouw because they are precisely aware that firms will compete for these awards, which rises the likelihood that they will find beautiful designs, or innovative solutions, etc. They have more incentives to be there to see the results of this “awards race”.
Finally they also use other assets they have to make them unavoidable for firms of the building sector. For instance they offer to all exhibitors a promopack with a lot of ads services but above all the free access to their huge database.
If we want to link these arguments to the economic framework we should say that FISA is conquering exhibitors while dividing the visitors because these latter are subject to pay a lot to enjoy all the services. On the contrary visitors are low charged because they are the audience that make FISA profitable, they are a complement to FISA’s profit, therefore FISA set very low entry fees for them.
Show lessVery good! You add one more role that FISA plays as an intermediary: reducing asymmetric information between sellers and buyers.
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As suggested in the text, Batibouw is based on a “divide-and-conquer” strategy. I would say that Batibouw is working the same way as the annual “Salon de l’auto”.
In both cases, the consumer will have to pay a fee to enter. Of course, the total price’s tickets isn’t the only revenue of the exhibition. Exhibitors will have to pay to install a stand.
How does it work? How are they earning money?
The most important thing for Batibouw if they want to earn money is to have exhibitors. To interest them, they need to have customers. Even if they have more than 300.000 visitors per exhibition, I don’t think it’s their major revenue. A fourth of the customers are professionals who receive invitations. Moreover, there is a possibility to have a free entrance if a company invites you like in “Le salon de l’auto”. I assume that customer who is giving money to enter, has a high willingness to pay.
In my point of view, visitors’ ticket is just extra money. It’s quite complicated to find figures on Batibouw. But, they have 70.000 m² with a price around 130€/m². Each exhibitors, 1000, have to pay an extra fee for their stand. But there are another hidden aspect of the cost (stands, catering, electricity, parking slot, marketing campaigns,…).
http://www.lalibre.be/economie/batibouw/article/723485/les-fondations-de-batibouw.html
The purpose of the development of their cost isn’t to know exactly how much they earn during those 11 days of exhibition but just to have a rough estimation. So, based on the definition of the text of a “divide-and-conquer” strategy, (they subsidize the participation of one side (divide), hoping to recover the loss on the other side (conquer)) it seems to me, in this case, to be true.
Show lessThanks for the reference; very useful.
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The organisator of this fair is FISA, a specialist in organization of fairs and exhibitions events. It gives the fair an advantage since they have a standard for how it works.
Exhibitors have a pretty high price to pay in order to take part to the fair. This price is amortized by the very large amount of advertisement given without any extra cost (beside the entry cost). A promo pack is proposed for everyone taking part to Batibouw. By signing in, companies enjoy the mediatic cover offered by the event; they also get the right to use the Batibouw logo, their products are put in a the Batibouw magazine (online and paper), they get free stickers, have the opportunity to expose their novelty and even have an access to a VIP room. All these offers give extra advantages to companies that are taking part to this event.
In order to increase to impact of the event, even after the fair is over, there is the opportunity for the best stand, product to receive different awards (communication award, innovation award, design award, eco award). Thanks to this, winners can enjoy from the Batibouw reputation for much longer than the 11 days of the fair. These examples are only a few ones. Batibouw is putting everything on its side in order to make the exhibitors realize how profitable it can be to take part to this event.
The fair first took place in 1960; by the time it raises a strong reputation. By being the only fair as big on this sector it creates a premium advantages for exponents but also for visitors. The two sided platform is perfectly represented here, both main participants are pleased with the size of the needed platform. They both enjoy each other participation and the huge size of the event.
Show lessYou are right to point that Batibouw (or more exactly FISA) plays various roles as an intermediary. Not only it allows the interaction between buyers and sellers (as several comments have already stressed) but also it serves as an advertising and reputation platform.
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Batibouw is clearly a platform operator as it provides a place where sellers, the exhibitors, and buyers, the visitors, can interact. As mentioned in the article above, the ‘two-sided platforms’ refers to the indirect network effects on the two sides of the market. Batibouw’s role is to manage the access to its platform that exhibitors and visitors want to use in order to interact.
The question is : which group (exhibitors or visitors) attract the other? Because, on the one hand, the utility functions of the visitors increase in the amount of exhibitors. The visitors want to be able to compare a lot of building competitors in order to find the product/service that come up to their expectations indeed. On the other hand, the utility functions of the exhibitors also increase in the amount of visitors. From the exhibitors’ point of view, the more they are visited on the platform, the more they get opportunities to attract new clients. We can observe that the visitors face a low access fee compared to the exhibitors’ one (525€ +133,1 per square meter). As Batibouw is the only intermediary, it seems that the visitors exerts a larger external benefit on the exhibitors than the reverse. So a ‘profit-maximizing Batibouw’ has an incentive to subsidize the visitors (cheaper ticket if bought on line, etc.) so as to generate a higher amount of trade and thus, higher profits on the exhibitors.
According to me the fact that Batibouw provide a platform where the visitors and the exhibitors are able to interact add a large value to this platform. In a decentralized market, it is not easy to compare all the building competitors “effortlessly”.
I wonder about the competitors of Batibouw. After some researches, I found some building shows as ‘Batimoi’, ‘Salon Energie Habitat’ or ‘Maison Belle Expo’. But I think that these competitors are not really big enough to put in jeopardy Batibouw. I believe that the access fee of Batibouw (whatever for exhibitors or visitors) reflect the network effect of this market: the entry for visitors is not free and the price paid by the firms is quite high.
Show lessVery nice summary. The question of whether there exist other fairs that compete with Batibouw is important. Some people may want to address it in later posts.
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Another point I noticed while checking the website was the distinction of visitors. From my point of view this is an important aspect, which drives the indirect network effect of the fair.
So visitors are divided into two groups: public and professionals. As outlined in a recent post, professionals do not benefit from any price reductions and even pay higher entrance fees than public visitors do. But they benefit from other features, which might be more suited to their business intentions. Professionals are granted exclusive access to the fair on the first two days and they receive badges to increase their visibility for exhibitors if professionals and public visitors are mixed (as on Saturday and Sunday). In addition, the second day for professionals includes late night opening, which implicitly offers a longer possibility to make business. According to Batibouw, the fair has introduced this distinction “to encourage interaction between professional visitors and exhibitors”.
To me, this distinction is another way to support the fair’s overall divide-and-conquer strategy. By lowering the entrance fees, more public visitors are attracted. Professionals on the other hand are attracted by special features mentioned above, so they don´t need any monetary benefits. For exhibitors, this distinction is also certainly important since it can be assumed that professional visitors might be more valuable consumers and might need a different approach to be targeted than public visitors. Hence, the distinction is also beneficial for exhibitors.
Overall, all three groups (exhibitors, public visitors and professional visitors) reveal an increased interrelated attractiveness through the participating parties (exhibitors and visitors in general), which is enhanced through Batibouw´s supportive incentives.
Show lessInteresting! Do you suggest that Batibouw is a three-sided platform?
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I will present how I understand the strategy of Batibouw by dividing it in two sides: the side of professionals and the side of visitors.
Professionals:
When you go on the website of Batibouw, in the section for exhibitors, they expose the benefits of the event. They promote their well-known logo, the contacts that the professionals can create with new clients, the media coverage of the event, the opportunity to monitor the competitors,… They try to convince the professionals. And it’s necessary because this is not cheap to be exhibitor.
The companies have to pay 525€ + 133, 1€/m². And the profit is increased by encouraging professionals to invest in extra promoting pack or in participation to get awards, etc. So, this is expensive for companies.
And they also make money on professionals who are just visitors by creating special days for them but with an entrance more expensive (40€ against the normal price of 12€).
The visitors:
If we make the assumption that there are many professionals because they expect many visitors and in the same time, there are many visitors because they expect many professionals (this is well an indirect network effects.), when the professionals have confirmed they presence, Batibouw doesn’t need to attract the visitors. The goal is to promote the date of the event and let the network effects act.
So, when you go on their website, you see the practical information for visitors (how to access, the services, the calendar, the exhibitors…) but there is no real intention to convince people to come. The only way to encourage them to come is the low price and the list of exhibitors.
There are several reasons which explain why it’s cheap. The price is low to not repulse the visitors and in the same time, to attract people interested to invest in the companies represented at the exhibition. It will avoid the “IKEA effect” were some people just go there to see and not especially to buy.
And many visitors don’t pay the entrance because they receive it from the companies which have seen a potential client in them. So, the advertisement is also done by the exhibitors themselves. Which reduce the costs of Batibouw. Moreover, they encourage them to promote the event by selling them entrances at a reduced price (2.50€ instead of 12€).
To summarize this strategy:
Focus on the professionals and do the major portion of the profit on them.
So they have to convince them that they will derive a profit.
When this part is done, they promote the date and the list of exhibitors.
As people see that there will be many professionals, they come in large number because they will be able to compare prices,… The entrance is cheap, it encourages them to come and it increases the profit of Batibouw.
Moreover, the companies have invested to be viewed by many people so they invite them which ensures many visitors.
To conclude, I have read that the location of space in Batibouw corresponds only to 15 % of the investment of the companies. They have to pay the stand, the catalogs, the hostesses, the electricity, the parking, other marketing campaigns,… This is a proof that the event has a real impact on their sales.
Show lessWe’ll have to discuss further what you call the “Ikea effect”; this is interesting.
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The most obvious strategy adopted by Batibouw seems to me to be the following: set low prices for visitors, and recoup these low prices with high prices for the exhibitors. Indeed, exhibitors have to pay a fixed cost of 525€ + (129,5€ + 3,6€ / square meter), while the price for visitors is only 12€/day with a possible reduction of 2€ if they buy their ticket online.
This is possible for many reasons.
At first, because Batibouw is a two-sided network, visitors are important for exhibitors: the more visitors, the higher the willingness to pay of exhibitors (because visitors are potential clients). By setting low prices for visitors, and thus making sure they will be of high number, the fair becomes attractive for exhibitors, even if it is costly for them to participate.
We could ask ourselves why the price is still of 10€ for visitors, and why it is not lower or even zero, in order to attract even more visitors. We might argue that it is a way to attract only consumers who are really interested by the construction sector (for example people who want to build a new house, people who want to make big renovations in their home, real estate companies, etc.). This is a way to ensure the exhibitors that visitors are interested in the products they sell.
The first question Batibouw needed to answer, knowing the fair was a two-sided network, was who between visitors and exhibitors was willing to pay the highest price. Intuitively, exhibitors have higher incentives. First because they seem to have more money to invest in such an event. Secondly because they are the ones who will make a profit thanks to the fair by selling contracts.
Consumers may find Batibouw attractive to compare prices and services of the different competitors, but the price of the entry should not be higher than the “comparison price” (understand: the price that they grant to the fact of comparing the sellers when they don’t go to the fair).
The willingness to pay of exhibitors is thus certainly higher than the one of visitors.
I would also like to add that it could be very bad for sellers not to go to Batibouw, because a high number of competitors will have a higher visibility to potential consumers.
Another strategy adopted by Batibouw is that it allows exhibitors to use their well-known logo for their campaign. This may be a good marketing point for them because the logo is well known and well reputed. Consumers may see it as a kind of “label of quality”.
Batibouw also gives many advices to exhibitors. For example: the “Promopack” proposes many possibilities of promotions that will facilitate the visibility of the company.
Exhibitors are also allowed to use the database of the professional visitors of the fair. They may also benefit of lower prices for advertising.
All these benefits are given to attract exhibitors, and it is therefore even more unprofitable for sellers not to participate to the fair.
Moreover, Batibouw attributes each year different awards for innovation, design, communication and ecology. These awards may also be seen by consumers as a sign of quality, which is even more beneficial for awarded companies.
The example of Batibouw is clearly a two-sided network platform : they attract many consumers interested in the construction sector by setting for them a quite low price, and this makes the fair attractive for exhibitors, who are thus willing to pay a much higher price to expose there. The many benefits granted are an additional way to higher the willingness to pay of the sellers, and to convince them of the importance of participating to the fair.
Show lessVery good. The case-study is taking shape. But I’m sure there is more to be said.
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In my opinion, Batibouw is clearly using a divide-and-conquer strategy. Indeed, they handle a typical two-sides platform (Exhibitors from one part, customers from the other part which can be divided into professionals and particulars).
After surfing on Batibouw’s site, I discovered several payable services for the exhibitors:
– It costs 525€ + 133,1€ per m2, so for a company who wants a place of 15m2 they will have to pay 2521,5€
– It costs 1000€ for a company to put their logo in the thank mail from Batibouw to the customers (lots of other advertising possibilities are offered from Batibouw to the companies).
– Awards during the fair : companies can pay to participate to some awards (ex: the best novelty product) which are highlighted by Batibouw during the fair to inluence the customers
– Communications of Batibouw : companies can pay Batibouw to talk about them in their communications to customers and professionals. It can also give the company free entries which they can give to their customers to come.
All those payable services give me the feeling that Batibouw conquer companies and make a big part of it thanks to companies which use their platform.
On the other hand, It seems that Batibouw subsidizes the customers by offering several reductions:
– Cheaper tickets if bought online
– B-day trip tickets to attract people who live far from Brussels
– Cheap catalogue to buy (2,5€) to discover more easily the fair
All these reductions are indicators that Batibouw try to divide visitors’ side. Nevertheless, it seems that professionals visitors are not subsidized by Batibouw. Indeed, their entrance fee is really more expensive (40€ in spite of 10€ for particulars) and I did not find any reductions for them on the website.
As a conclusion, I really think that Batibouw manages its platform by using the divide-and-conquer strategy. It will be interesting to see if other people agree or not, and if not, have they found other information on the website which contradict my little findings.
Show lessThis is a good start indeed! Let’s see what else can be found about Batibouw.
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We could broaden the discussions watching another framework.
In fact Some markets could be organize around multi-sided platforms could be viable as traditional one-sided markets ( contrast this with , for example , the Payment card industry , where it’s simply implausible to imagine the integration of the two sides of the business ( payers and payees) into a traditional , single-sided market .)
Show lessFirms can choose to integrate vertically into the supply of component rather than relying on the market. For example, Apple’s iPod could be operated as a multi side’s market platform, but apple has decided to build its business model around a fully integrated single sided Product. Apple produces the hardware and software platforms; it operates its own content-provision service and licenses the content from music publishers. Some of its competitors have decided to take a multi-sided approach , creating portals through which consumers buy music or other content from third parties and music devices that combine separately produced hardware And software platforms.