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Interview with Michael Freter, Managing Director PSI

Interview with Michael Freter, Managing Director PSI 2016-10-21T14:21:52+00:00

“We will definitely uphold our closed structure“

 

 

The PSI’s plans to hold a so-called “Promotional Products Day” on the third day of the show in Düsseldorf, have triggered off huge discussions among the European promotional products industry. The PSI has now outlined concrete details: 50 promotional products distributors – according to the current concept – are to be given the opportunity to invite one industry customer each to the show. According to the PSI the fine tuning is to be determined following “constructive dialogues” with industry representatives. eppi magazine talked to Michael Freter, Managing Director of PSI, about the details of the project, the industry’s irritated reaction and the closed-shop structure of the PSI.

 

Mr. Freter, in an interview with WA Nachrichten at the end of last year you assured us that opening up the show to industry customers on one specific day “didn’t make any sense” in your opinion and that the “PSI Düsseldorf would remain a closed-shop show, purely for the trade”. What has prompted this change of mind?

Michael Freter: I haven’t changed my mind, we are not opening up the show. We are not opening up the doors and letting everyone in. The debate that is currently raging is totally superfluous. As far as we are concerned this is an unbiased trial, a targeted, controlled test, which allows the distributor, and exclusively the distributor, to invite industry customers to the show. The latter are then to be interviewed by the market research institute that we cooperate with. We hope that this will provide us with information on whether their visit can contribute to the value of the promotional product and hopefully increase the turnover.

 

What are the reasons for carrying out this test?

It is our aim and indeed our duty to ensure that the promotional products industry develops further. That is my personal intention and also that of the PSI, which our work over the last 50 years documents. We are actively cooperating with the German promotional products umbrella association, GWW, to reinforce the image of the promotional product. With the ongoing aim of putting the industry as a whole in a better light. At the last PSI Show – the 50th – our joint presentation of the promotional products effect survey with the GWW proved to be an impressive success and we received excellent press coverage. This has encouraged us to reinforce the potential of the promotional product to the outside and to intensify the external communications. The “Promotional Products Day” is an opportunity to increase the industry customer’s recognition for the promotional product and create additional turnover potential – this is what we are hoping to achieve and that is why we are checking the situation. However, the PSI Show 2013 will not be dominated by this comparably small trial, it will almost go unnoticed: We are more importantly planning a range of tangible innovations, the intention of which is primarily to encourage a high number of qualified distributors to visit the PSI Show.

 

What is the current status regarding the plans? Will the “Promotional Products Day” still go ahead in spite of the current protests of many of the PSI members?

We definitely want to carry out this market research test and subsequently evaluate whether the measure is effective in practice and whether it contributes towards the industry gaining more acceptance, recognition, and ultimately result in the allocation of a higher budget. We have presented our concept now and intend to have laid down the fine details after holding discussions with the industry representatives by the late summer, i.e. by the end of August/beginning of September. We welcome constructive improvement proposals at any time.

 

What are your detailed plans? We have heard that 50 wholesale companies will each be allowed to bring one top customer with them. According to which criteria will the 50 distributors be chosen?

The basic idea is that the distributors have to apply in order to participate in the “Promotional Products Day”. Whether we will receive 50 or 500 applications remains to be seen. If there are not enough places available for the amount of distributors who apply for this project, the market researchers will decide which distributors from a range of differently sized organisation are most suitable for random testing purposes in order to secure a qualitative representation.

 

Can the distributors chose the industry customer they want to bring with them or will the decision be influenced by the organiser, i.e. to secure the representation of the selected industry companies?

The distributor is solely responsible for the selection of the respective industry customer. This is an exciting question for us: Who will the distributors bring with them to the show? Renowned brands, big industry organisations or smaller middle-sized firms? Of course they might also invite regular customers to the PSI for customer bonding purposes, or potential new customers who are not yet quite sure whether they should implement promotional products or not. This depends on the self-awareness of the distributor, i.e. how much he trusts the customer. Whereby I personally regard the fears that the industry customers could leave the sides of their accompanying distributors and tour around the show alone, and that they could then possibly be approached by other distributors, to be just as unlikely as the assumption that the customer would secretly pass the exhibitors his business card so that they can deliver goods to him directly. Companies with customers like that are never going to be happy with them – whether the PSI trial takes place or not.

 

Will the industry customers have to pay to visit the show?

No, the industry customers will pay nothing. The accusation that we are allowing the industry customers access to the show in order to rake in additional revenue, is absolute nonsense. The PSI will not profit financially from this measure, on the contrary it will involve a significant increase in the costs.

How will you make sure that there will be no misuse of the tickets for industry customers?

The industry customers won’t receive their badge and ticket from the distributor until the very day of the show. Their tickets will be completely different to those of the other show visitors, we have made sure in advance that our ticket system can be adapted accordingly. The badges are colour coordinated, so that the industry customer can also be immediately identified by the exhibitors. The suppliers, I am sure, will deal with this theme very sensitively and refrain from providing the industry customers with net price lists. Otherwise, they would risk losing their good reputations and turnovers in the future. The exhibitors are familiar with the procedure from other events, where this system also works very well.

 

Can international distributors also take part in the test?

Of course. We are an international platform, so this offer is available to all of our members.

 

According to your special newsletter on the “Promotional Products Day”, market research has revealed that the small and medium-sized companies within the industry represent a turnover potential of around one billion. Is the “Promotional Products Day” in its presently envisaged form a suitable way to gain access to this potential?

I consider the “Promotional Products Day“ to be one of the suitable methods. We will know more after the PSI 2013. However, it is quite clear that it is not the only method and it mustn’t remain the only one either.  We have to start thinking about other measures. But we cannot do this on our own, we need the cooperation of the entire industry. It is, nevertheless, extremely important that the decision-makers from the middle-sized companies have promotional product in their sights. The promotional product is a must for the big industrial companies, however its potential actually lies idle within the medium-sized businesses. The GWW survey proves that the promotional product is a unique communication tool.  We were very pleased about the response that the presentation of the advertising effect survey by GWW President, Patrick Politze, triggered off at the last PSI, including the press coverage.  And we had hoped that the industry would show more enthusiasm. We joined the ZAW (the German Central Association for the Advertising Industry) with the intention of reinforcing the promotional product in the marketing mix, even if that has brought us criticism due to the hyper-sensitivity of the industry, because one feared that we could open up to the advertising agencies. However, when a ZAW President publicly speaks out at the PSI Show against doing away with the tax injustices inflicted on the promotional product, we can talk about it being a success, and the same is true of the adjustment of the ZAW turnover statistics. From 2013 onwards it will be possible to compare the money spent on promotional products with that of other advertising media. All of these are measures that help the industry to move forward. And yet I get the impression that these measures are not acknowledged by many of the industry members. Many of them overlook the fact that we have put great effort into consistently pursuing a strategic goal for years: Attracting more attention for the promotional product.

 

Many distributors pointed out that the multitude and diversity of the exhibitors could be too overwhelming for the industry customer – the industry customer wants to purchase everything from one source and not visit 20 writing instrument manufacturers or more. Isn’t the PSI’s range of exhibits too overwhelming?

The PSI Show is the largest promotional products show in the Western world, including the USA. Its purpose is to demonstrate the diversity of the industry, arouse the fascination for the promotional product, it is supposed to inspire and ultimately underline the huge significance of the trade partner. There is no other platform that presents the promotional product as impressively. The distributor can show that he fulfils an advisory role. I think one ought to see the chances rather than the alleged risks. Furthermore, we have experienced again and again when we showed politicians or media representatives around the PSI, how fascinating this world of products is. Some people were almost “overwhelmed” as you say, but in an incredibly positive way. We kept hearing: I would never have thought that”. What could be nicer for a member than conveying such a feeling to an end customer? It will improve his relationship with the expert more than ever. We have experienced exactly the same phenomenon in other industries too.

 

Some of the distributors are also rejecting the “Promotional Products Day” because accompanying an industry customer would take up too much of their valuable exhibition time at the PSI, they would miss out on a whole day for their own work.

This is an argument that we have heard quite frequently and we are happy to hear this because it means that the distributors use our show very intensively. Our statistics have shown that the average time the visitors spend at the show is two days. Participating in the “Promotional Products Day” is not obligatory, but instead an offer that anyone who wants to can make use of.

 

A further point that of criticism: The limited opening of the doors to the industry customers would merely legitimise the “smuggling in of industry customers” that has since become normal practice. How do you react to this accusation?

It has indeed apparently become general practice for industry customers to be “smuggled” into the trade fair. We have been combating this problem since the inception of the show and still the problem increased again this year. Of course, we are not delighted about this and we have expelled several people from the fair. We are going to have to implement measures to intensify the control proceeds in this connection. A side effect of the “Promotional Products Day“ could therefore be that the number of end customers who enter the show is kept down to a limit, but that isn’t the main idea behind it.

 

You acknowledged that the PSI’s communication about the “Promotional Products Day” was “not perfect”. The reactions of the industry were very intense. Were you counting on the discussion becoming so explosive?

The impression is being conveyed that there has been exclusively negative reactions. This is not true at all. There has also been some significant acceptance and positive reactions. Perhaps we left too much room for speculation in this first notification. In hindsight this was a mistake, even if we did have good reasons for initiating the project at the time, because we wanted to prompt the industry members to try and co-shape the landscape. We were naturally fully aware that we would trigger off a controversial discussion with this intention. We are quite happy to stand up to this and to constructive criticism. What actually surprised us was the quality of the discussions, because they were full of speculation, allegations and false reports. What personally annoys me is the hypocritical way people have tried to emotionalise the theme in order to preserve their own interests. I am very much opposed to this and react very emotionally here.

 

The fact that the PSI’s first publication on the theme gave the impression that the idea for the “Promotional Products Day” was developed with the consensus of the associations, which the representatives of the associations are now protesting about, has also prompted irritations. How did this misunderstanding arise?

We are indeed very surprised how this impression came about. We wrote that we were “in dialogue” with the associations. It is absurd to deduce from this that the associations were involved in the decision about the “Promotional Products Day”. We are indeed carrying out discussions with over 30 associations and organisations – also on an international level. In April we already informed the bwg in their capacity as the representative of the German promotional products trade about our plans. We quite consciously chose this wording to show that we are open to suggestions from the associations regarding the contents – a drawn-out process that is to be completed by the end of the summer. But please let me emphasise once again: One cannot interpret the word “dialogue” as “consent”.

 

According to your own statement the measures are designed to counteract the danger that the show could take on a similar development to that of the German drugstore chain, Schlecker, which went bankrupt at the beginning of the year. Is such a development a realistic scenario?

Schlecker is a current example of how quickly an organisation that has clung to old structures for too long, can vanish from the market. Once the mistakes had been recognised it was too late to do anything. Every company, including ourselves, has to face the changes and develop accordingly. For instance one of our big tasks is to make the member model fit for the future, because one thing is very clear, a dilution of the target groups, a weakening of the quality principles cannot be in our interests.

 

Industry experts have been observing an erosion of the industry structures for a long time and this is exemplified by the industry customer platforms that are cropping everywhere. The PSI on the other hand has been acknowledged by its members for decades and has had a market-regulating influence. Do you also consider this to be one of the PSI’s tasks or do you define yourself primarily as an exhibition organiser?

The industry is presently faced with several areas of tension: Due to the globalisation and the transparency resulting from new forms of media and new distribution channels. Furthermore, the players are currently displaying great mistrust towards the market and the other market players. This is leading to a fragmentation of the industry, more and more platforms are emerging. The PSI on the other hand keeps the industry together, this shouldn’t be underestimated. It is the PSI’s task to keep up a constant exchange with the market participants to find out where the journey could lead to and how the industry can find its way into a good future. The show definitely takes on a lighthouse function, whereby the PSI platform as a whole with all of the services it offers is important for the preservation of the structures. The industry structures have fused to a large extent in other industries. The distributor function between the manufacturer and the end customer is disappearing. This is not the case on the promotional products market and in my opinion this is greatly due to the PSI. If we want this to remain so, we mustn’t erect fences, we have to adjust the sails correctly to make sure we catch the wind properly. The stubborn type who protests against any change has never helped a company, let alone an industry, to develop. Not that I am saying that we are against constructive criticism – that is precisely what we are looking for, because this is the only way to avoid making mistakes. Why would we invest in expensive market research measures otherwise?

 

Many market participants are still assuming that the PSI is gradually moving away from its closed-shop structure…

We are definitely retaining our closed structure. The closed-shop structure is an integral part of the PSI philosophy. It ensures that the good, better and leading (top) companies in the industry have clear market advantages compared to those companies that do not fall under this category. This brings them clear purchasing advantages, advantages when searching for products, the advantages of a closed trade show at which countless novelties are exhibited, networking advantages between the distributors and suppliers, trend-scouting advantages and much, much more. We are not that crazy that we would saw off the branch we are sitting on and abandon this model. Other trade fairs have demonstrated that shows between suppliers and the end customers do not work. Why would we want to copy these failures? How crazy do some people think we are?

 

One of the presumptions that is repeatedly cited is that PSI’s owner Reed Exhibitions wants to achieve further growth in its capacity as an exhibition organiser. The attendance figures have declined – presumably due to the crisis – some of the big exhibitors have reduced the sizes of their stands or announced that they will not exhibit at the show. Isn’t it conceivable that the show would be opened up to the industry customers mid-term against this background?

I don’t like to repeat what I have just said, but our owners know the market inside out and are anything but gamblers. We had a very successful show in 2012 with record exhibitor participation, we have taken a huge leap forward in terms of visitor satisfaction, and the exhibitor registrations for 2013 are higher than in 2012. The show is showing fantastic development and is one of Reed’s flagships. Opening the show up to the industry customers would turn the philosophy of the PSI Show upside down and would completely change its concept. This wouldn’t even bring a short-time success, let alone a mid-term or long-term success. So, let me stress once again so that it is clear to absolutely everybody: This couldn’t possibly be in our interest! On the contrary our aim is to attract even more qualified distributors to the PSI. We are of course also aware that the attendance figures can only be increased to a limited extent, precisely because the PSI is a closed-shop show. And of course there is a certain volatility that is dependent on economic fluctuations – for example in 2009 we had record attendance figures both in terms of exhibitors and visitors following the boom of the previous years. It has been difficult to repeat this over the past few years due to the crisis. But every show has to deal with these difficulties and our owners are the largest private exhibition organisers in the world. You don’t achieve this status without competence, market know-how and long-term thinking.

 

A further new PSI project is the database of the European Certified Distributors, which the PSI set up recently. Could you explain the project to me?

This is a joint attempt together with the cooperating suppliers to identify European distributors outside of Germany, Austria and Switzerland more accurately and win them over as PSI members. Which also involves their more efficient integration into the overall industry.  We have no reliable figures on the size of the respective markets, we have to rely on estimations. The project is part of our quality offensive. Promotional products distributors can register in this database. We then check their trade register entries, websites and other documents to see if these distributors would also fulfil the PSI membership criteria, whether they are qualified promotional products distributors. If they fulfil the requirements they can remain in the database, if not their entry is deleted.

 

Is it true that distributors who are registered in the database are allowed to attend the PSI Show – as was printed in this year’s June issue of the PSI Journal?

Only if they have become a PSI member beforehand, or if a supplier has sponsored their membership for a year, something which incidentally is occurring more and more frequently at the moment.

 

Finally: What do you consider to be the USP of the PSI Show, what should prompt the distributors to visit the show?

The PSI Show represents all possible facets of the promotional product, more so than any other trade fair. With a 56% share of foreign visitors – which is extremely high compared to other industry shows – the PSI has a very high international alignment and is also the central meeting point for the industry. We have further novelties planned for 2013, we will further reinforce the Technology Centre in Hall 12 and enhance it with training measures on production techniques, we will organise breakfast events before the show on specific, appropriate themes and we want to put the spotlight on the international associations and their respective stands. Our aim is to increase the number of qualified promotional products distributors at the PSI Show. Whereby the decisive argument is: Imagine you didn’t attend the PSI Show for a few years – what effect would that have on your know-how, your product knowledge, your industry knowledge and your industry network?

Dr. Mischa Delbrouck spoke to Michael Freter