A series of surprise announcements rocked the industry earlier this summer. The first came June 1 when the Electronic Retailing Association (ERA) announced that it would be shutting down after 28 years of operation. The second came a month and a half later when the Direct Response Marketing Alliance (DRMA) announced it would also close its doors. That latter news came on a Friday, and for one weekend in July our industry had no trade association for the first time since its founding.
The following Monday, a new organization was born – the Performance-Driven Marketing Institute (PDMI). It turned out the former leaders of the old organizations — Bill Sheehan from the ERA and John Yarrington and Thomas Haire from the DRMA — had teamed up to launch something new.
This past Tuesday, I had the chance to get to the bottom of all the many questions raised by this series of events. I spoke to Tom Haire by phone for about an hour. Below is an edited transcript of that conversation.
TOP TAKEAWAYS
- In the last few years, control of the ERA had shifted to an outside management company
- This led the organization to lose touch with its members, which was likely the cause of the “declining dues receipts” and “overall shortage of revenue” the ERA cited when going out of business
- Rumor also has it the “burdensome expenses” cited were in the form of high salaries paid to the top execs
- Response helped hasten the ERA’s demise by forming the DRMA and winning away its members
- They accomplished this by heeding industry insiders’ concerns – that, plus charging much less than the ERA for dues and shows
- Interestingly, one of the catalysts of the DRMA was ERA entering Response Magazine's turf by starting its own magazine
- As for the DRMA, its parent company (Questex) had shifted focus to hospitality, travel and beauty, so it wasn’t hard to persuade them to shut it down
- The new PDMI will be a nonprofit like the ERA
- The organization envisions having two annual shows: a West Coast show in the fall (likely October) and an East Coast show in the spring (possibly in Miami)
- Unlike those eventual shows, this first Las Vegas event will consist of three days of town halls focused on a single question: What does the industry want this new organization to be?
-----
Jordan Pine: The timing of the announcements was interesting with the ERA and then the DRMA closing and the PDMI opening up. From the outside, it kind of seemed like a planned merger or maybe just three guys that wanted to bail out and do their own startup. What’s the real story?
Tom Haire: Well, the closing of the ERA obviously set off alarm bells in the industry. John and I were really fielding a lot of incoming calls and e-mails asking, “What is going to happen?” People wanted to know what we were going to do, particularly about Vegas at the start and then beyond. So we started kicking around an idea about doing something as far as a trade association.
There wasn't a ton of interest from our parent company (Questex). They've gone in a different direction. A lot of their properties are in travel, hospitality and a lot in luxury, high-end stuff. It kind of became apparent that what might make the most sense was for us to go our separate ways. During the six-week period between ERA closing and when we announced the closure of Response, it became clear that we needed to go out and do our own thing, and Questex felt the same way.
As for Bill [Sheehan], when he joined ERA in 2017 he was one of the first people at the staff level to really reach across and welcome us in a long, long time. The staff of the ERA, not the board members. The board members are our clients, our friends, our speakers, our cover stories. We worked with the board members for years with no problems. But there was always a rift with the staff, and Bill was the first guy in a long time to work to bridge that and reach a hand out and say, “Let’s try to do this.”
After getting to know Bill and his knowledge of the association world and the [Washington] DC landscape, it just seemed like a really good fit when we started looking into doing PDMI to bring Bill on board. John and I, we do everything else, but we really have never gotten into the government affairs aspects of this – and with good reason. We felt this was the ERA’s job, and we supported what they were doing there. But if you're looking at starting an association, you need somebody who’s got that expertise. Bill’s that guy.
Jordan: I don’t know how much you can speak to the ERA, but as far as I know that organization – if you include NIMA – was as old as the industry itself. I’m really curious what happened there. I’ve only heard rumors.
Tom: When you look at where they were at financially when they got rid of staff – this is just me surmising – when they cut the staff down and went the management route with MCI, that was a sign things were changing. MCI is basically a management company that operates trade associations, trade shows and the like. It's their expertise. So instead of having ERA staff, like it had for years, it was the MCI staff that was operating the day-to-day efforts.
One thing that I can speak to is that John and I, our day-to-day touch with the industry was always one of the reasons I think we were so successful. We are out talking to people across the industry every day. The ERA lost that touch over the years. Their staff was trade-association people who were about running a trade association. They weren't DR people. The ERA lost the personal touch, which I think was a real problem for them. It’s what I think led to what were clearly some pretty nasty financial issues when they went out of business.
Jordan: I heard some other things, for example that payroll was really high and that was a big factor.
Tom: I don't know what the ERA’s day-to-day [expenses were], but the way things went down would give you the idea that financially there was a definite struggle happening there. There was no payroll: They were paying MCI a management fee. I don’t know this for certain, but I believe that even the folks we knew as long-time ERA employees, the ones who were still around, were MCI employees at the end – though I believe they lost those roles when the end came for ERA.
I think what happened – and again I don't know for sure – is that when MCI took over everything all the internal staffing of ERA went out the window and all the people we knew as ERA staffers either were gone or had become MCI employees.
Jordan: It’s weird that a management company would take over and then just shutter it – unless the financials really didn’t work?
Tom: Well, it was the ERA board's choice to close down the association, not MCI. But, from either perspective, if you look at the base of membership availability and the split between the two groups: We had won the magazine battle. Their magazine had ceased, essentially. Based purely on attendance, we had won the trade show battle fairly clearly over the last four to five years.
The expenditure to keep something going when you don't have a magazine anymore, trade show attendance is going down and when you're battling against people on the other side of it who have 18-20 years of experience in the industry – I just think it was a hard task to look at. Both the ERA board and MCI had to know John and I were around in this business for the long term.
Jordan: Let's talk about the DRMA. When it was first formed, I think many people wondered why. We had the ERA, so what was the deal with this rival organization? What was the thinking back then? How did it all come together?
Tom: When we created the DRMA, it was actually part of creating Response Expo and, beyond that, looking at creating networking events around the country. The idea of the DRMA was always networking and education and creating a low rate to enter the “club,” and then you would get a lot of perks for being in that club. If you look at us versus the competition, it was always free to come to our parties. ERA was charging. Our badges were always cheaper than ERA’s badges. The idea was to build a roster of companies that were loyal to what we were doing and then give those companies perks. At one point we had a list of 12 or 15 direct benefits. You had access to historical research we kept on the site just for you, you had access to DRMetrix research that was only via us – so forth and so on.
Jordan: But why initially form it? What was the impetus to form a competitive organization to the ERA?
Tom: When ERA started a magazine in an effort to siphon off dollars from what was at that time the only product we offered, Response Magazine, we realized that to survive we were going to need to start a trade show. And then we thought if we're going to start a trade show, the easiest way to build a loyal base is to start a membership club that will also give discounts for the trade show – whether you're buying a booth or getting a sponsorship or buying a badge. Those were really the first three benefits of DRMA membership.
When we priced DRMA membership at $595, the idea was for it to be the same discount you got for two all-access badges. So if you joined DRMA for $595, you were now part of this membership group. But if you bought two all-access badges for the show, you just paid for your membership because the discount was $300 dollars per badge. That was the first thing we put together, and we built it out from there.
The core idea of the DRMA was to build a group of like-minded people who wanted to have the opportunity to network among their members without the kind of politics that was always involved with the ERA. I think in the industry there was always the idea that the ERA was very political. I'm not talking about "government affairs" political. I’m talking about the leadership and who got what. There was always this idea that certain aspects were bought and paid for.
I’m not saying that was actually the case, but that was the image of the industry, and we wanted to create a different image, a nonpolitical group. That’s why our “Member of the Year” was always a public vote. Our “Marketer of the Year” was always a public vote. It was about democratizing and taking away those levels of perceived favoritism that existed with the ERA.
Jordan: I imagine you plan to bring these egalitarian aspects to the new organization as well?
Tom: Yes. I mean, we're going to have to run it in a certain way because it's going to be a nonprofit. There have to be certain things that we do more like ERA as a nonprofit, but that’s not going to include that perceived extra opportunity for people just because of who they are. There's going to be a pricing structure to membership, a pricing structure to sponsorship, a pricing structure once we get the magazine launched – but other than that, every member is going to get the same opportunities and access as everybody else.
We actually just got our tax ID number for the official 501(c)(6) designation, and we're hoping to have that in place either by the start of the Vegas event or shortly thereafter. That’s when we’ll get started accepting memberships to the new organization, and why we're not selling memberships now. This [Vegas show] is a one-off event, a way to make sure the industry can get together at a time and place they told us they want to. We’re going to do some town-hall meetings during the event, an open forum where we explain what we see as the plan going forward and get feedback from everybody in the industry. It's really a chance for people to finally have an open say on an open floor about the direction they want to see this go.
Jordan: You mentioned a bunch of different things that could be part of this organization. What’s on your must-have list? A magazine?
Tom: Right now, we're looking at starting a quarterly magazine next year just because we have other educational goals in mind. We didn't want to take up a bunch of my time and our graphics team's time doing a magazine every month to start. We're going to have a regular weekly newsletter like we had at Response. I'm hoping to have that under way no later than November of this year.
As for the trade shows, right now we are looking at a late winter or early spring show on the East Coast, hopefully March, hopefully in Miami. That's something that we're working on right now. That show would probably not have a full trade-show floor. It would be more of networking and education type event. We'll have some sessions. We’ll have a bunch of networking opportunities and so forth. The full-blown trade show event will then be late summer or early fall. We’re targeting early October of next year.
Jordan: Talk to me about that trade-show floor. I only move in a certain circle of people, but most of them have no use for it. Is it a necessary thing? Is there a contingent that really needs it?
Tom: For suppliers, it's still of value. But we’re looking to expand the breadth of what the PDMI is and drive more outside attendees and exhibitors into our fold. I loved the Response name, but honestly being able to rebrand and restart is a huge bonus for us because as Response we’d go to those shows and no matter what we were doing, no matter what e-commerce guy we had on the cover, no matter what we were talking about – people would say, “Oh yeah, we know you guys. You’re the infomercial guys.” So that was always the barrier for us.
The goal of the trade show floor next October is not only to have a place for our current suppliers to stay, if they want to, but to bring more visitors in from that e-commerce world. Those people love to exhibit. Companies like Magento and Shopify, it's like a beehive. They show up and 20 others show up because they handle so much business.
Anyway, that's the idea of continuing the show floor. But we are looking at how a trade-show floor makes sense. We would probably have 30 or 40 exhibitors from our traditional base that we’ve worked with for so long, but if we can add the same number of exhibitors from that outside world – then you have a really viable, exciting trade-show floor that makes sense financially for the PDMI and for those who are exhibiting. You would then actually get some traffic to it.
That said, we know things are changing and we want to give people the opportunity at the Vegas event to say, “You guys don't really need a trade-show floor.” If there’s a huge majority of people that say that, we’re going to have to start listening and thinking about how to make that shift so that, financially, the show makes sense for everybody.
Jordan: What’s your business model now that you don’t have the financial backing of Questex? Is it a membership and sponsorship model like ERA had?
Tom: I wouldn’t say we had the financial backing of Questex. We had the services backing of Questex. That is, they provided all the services for us. We had to bring a certain number in to them every year and, as long as we did that, they would continue providing us those back-end things.
A big goal when you’re running a nonprofit is to create a reserve fund. That’s where the “profit” of a nonprofit goes – into a reserve to be used for regulatory stuff should things pop up, any legal issues that need to be handled. Whatever there might be, a strong association has got a strong reserve. So the first thing we're really going to have to build up is that reserve. It's going to start a little slow the first year, but in the following years we hope to have a very strong deposit going into the reserve. Instead of trying to make a profit, or what Questex called a “contribution,” we need to make deposits into that reserve.
Jordan: How is the initial capital working? Is someone backing you?
Tom: We are fundraising currently. We're on a two-pronged attack right now. We're creating this event for Vegas, and that's one bucket of funds, and then we are fundraising for a high, six-figure number from some benefactors that we've targeted. We're hoping to announce a success about that here in the next few weeks.
This is really where Bill comes in handy. He showed us that when you create a trade organization, you really need enough money to build a 12-to-15-month runway. That's actually good timing for us because we’re looking at the end of 2019 to be a fully self-sufficient, in-rotation trade association where we’re getting regular dues from members and the regular influx of cash we’ll get from selling badges and sponsorships and so forth. And we’ll need that money to fund things like getting a hotel for Miami. People don’t realize, but we put this Venetian deal together in two weeks. That kind of deal usually takes three to six months. The response has been great and the Venetian has been great about adding rooms, but you obviously don't want to do that with every show. It just can't work that way.
One of the key factors is going to be to using that money we’re raising to book and finalize contracts with a location for the spring event and a location for the fall event. They need money up front. For this Venetian thing, John and Bill and I – our credit cards are getting a heavy workout. We’re financing this entire Vegas event out of our pockets, and I can tell you that when I look at our registration numbers every day it’s very exciting to see that I’m getting that much closer to being able to pay off some of these credit cards!
Jordan: So going back to the initial question, it’s American Express? That’s your backer?
Tom: Yeah, exactly! For the Vegas event, American Express and Visa are the two top backers.
Looking forward, we’re focusing on having the funding in place to go out and lock down those event locations and then having the funding in place to get a regular paycheck to the staff. The staff of the PDMI will be John, myself and Bill plus a salesperson and a graphic designer. We’ll be taking, fingers crossed if the funding comes in, a “get by” salary for the first 12 months of the organization so that we don't have to stress about our lives on top of stressing about work. We’re just looking to start paying small salaries to all of our staff, so that everyone feels secure moving forward.
Jordan: You mentioned government affairs. Do you see that being a big part of this? Is that what part of this town hall discussion is going to be about?
Tom: I should tell you that we're not doing any official educational sessions in Vegas. There’s a town hall each of the three mornings, 9:30 to 11. It’s going to be the same topic. It's going to be what is PDMI? What’s it going to be? Let's get your feedback. Day One is designed for marketers, both international and domestic, to get their feedback. Day Two is for everybody in the media world: agencies, networks, publishers – anyone who touches on media. And Day Three is going to be for the supply chain for them to share their thoughts. So those three things are happening.
Venable is a sponsor. They agreed to sponsor last week, and they will be putting on a special session, the only other “educational event,” which will take place on Tuesday afternoon. We’re working to bring in experts from the Electronic Retail Self-Regulation Program to sit and talk about what's effective and what isn't. We do want to continue with some sort of self-regulation program. We've heard the complaints, and we want to make some changes to how it works. But at the end of the day, we think it's a net positive for the industry to have faces and names that people know in the halls of Congress and the halls of the FCC and FTC. We want to definitely be a part of that.
We always believed that the ERA was missing the forest for the trees and should have been more focused on government affairs than they actually were. Now that we're going to be operating a nonprofit trade association, we know that we need to have some strength in that and it will be a big part of what we do. Everything's a work in progress as it stands now right. But it's part of the plan.
Jordan: You mentioned international. What plans do you have for international shows, international people, etc.?
Tom: You know, one of the things we could never do at Response and the DRMA was get the internationals to come to our events. They were very tight with the ERA, and understandably so. ERA Europe is a really strong organization and has done things really well for a number of years there. This is a doorway for us with the internationals. When the ERA went out of business, one of the first people to contact us was Julian [Oberndörfer], the leader of ERA Europe, and we've been working very closely with his group through this whole process to make sure that they're a full part of this Vegas event.
We really want to make a full partnership with the ERA Europe group. It’s important to us. It's important to constituents domestically, and it's important to the international folks to feel like they have a place to go in America.
Jordan: You speak about them as a separate group. Didn’t they go down with the ERA?
Tom: No, ERA Europe is its own operation, so for us to continue to work with them we’re going to have to make some sort of deal. The goal is to create a similar symbiotic relationship between ERA Europe and PDMI as the one that existed between ERA and ERA Europe.
Jordan: How does that work with the branding?
Tom: That's a good question. That's one of the questions we've got to figure out. But they’re excited. Julian's been great to work with. I think if we can build on the success of what it looks like is going to happen in Las Vegas, we can overcome that and any other issues we might have going forward.
Jordan: All right. What else would you like prospective members to know?
Tom: Like I said, we’re hoping to be able to announce the official 501(c)(6) designation at the show or shortly thereafter. We should be open for business soon, and we'll be announcing a membership structure in the weeks after the event. And then the 2019 calendar that we talked about. The idea of quarterly magazine starting in first quarter, the events in March and October right now. All that is crucial information.
We can't thank the industry enough for their response to what we announced in Las Vegas. It has been unbelievable. Today is the sixteenth day of open registration – twelfth if you take out the weekend date – and we have over 410 registered attendees to this event. Our target when we started this was to hopefully get 500 people. It’s only going to grow.
When I look at who is registered and who is not registered that we know is going to register, we're very hopeful now of reaching closer to 800 attendees, if not more. John and I were talking about it this morning: We’re averaging over $2,500 per weekday in registration, so that's 25 new attendees every day since we started doing this, which is just great. We know from running trade shows how attendance works and how registration works. You get kind of a slow trickle usually until you get up against an early-bird deadline or you get right up against the show. We're nowhere near either deadline, and it's been great.
Additionally, we want to thank the industry for their response to the Venetian, how they’ve packed that hotel and they are packing the Palazzo as we speak. We’re nearing a full sellout of our special rates. It's been great to see. We're very thrilled by the response, and we're very hopeful about what this means going forward. This is just the beginning.
Jordan: All right. Thanks, Tom.
-----
Don't miss out! Badges for the inaugural PDMI show in Las Vegas are just $100 until Sept 1.
Click here to get yours now.
