CORPORATE HOSPITALITY: How client events prove their worth

Hospitality must be well-targeted to make most of falling budgets, says Robert Gray.

Corporate hospitality may soak up an estimated £760m a year from UK business, but it's not immune to the effects of the economic cycle.

According to the Corporate Event Association (CEA), revenues have contracted by about 20% over the past few years as clients have tightened their belts.

With marketing budgets falling victim to this downward pressure, it's easy to see why many companies have pruned back their corporate hospitality spending.

At a time when some businesses have been forced to lay off staff, the lavish entertainment of clients can be misconstrued as insensitive or even wasteful. This leaves the onus on the corporate hospitality sector to prove its worth.

Of course, many marketers realise that in a downturn it's more important than ever to look after your best clients because you can ill-afford to lose any. What they really need to know is whether activities like these deliver a worthwhile return on investment. Will they underpin existing client relationships and help to generate new business? And are they more than a jolly?

Programme evaluation

Wayne Moss, managing director of corporate hospitality agency Jarvis Woodhouse, argues that client entertainment has a big part to play in the marketing mix: "How else could you spend so much time with your top customer - the whole day and not just a 20-minute phone call?" he asks.

Moss argues that there is a "crying need" to evaluate hospitality programmes so that clients can judge whether they are spending their budgets effectively, but a true picture can sometimes be hard to obtain.

"It is difficult to measure their success," admits Julie Warren, senior commercial and marketing manager at Wembley Conference Centre, Exhibition Halls and Arena. "You can't just turn around and ask someone who has been to one whether they will now give you their business."

What marketers can do is improve targeting by basing activity on customers' interests. As with all sensible CRM, it's about building relationships.

If marketers take the trouble to find out what their customers like and tailor a corporate invitation to their interests, it stands to reason that the recipient will be more likely to accept. "There's no point inviting someone to a Rolling Stones concert if they have a strong aversion to Mick Jagger," says Warren.

David Spicer, director of UK events at agency Rodber Thorneycroft, believes many clients go wrong by doing the same thing year after year without any justification. Some invite guests with little or no idea of whether they'd enjoy such an event.

To counter this problem and benefit its clients, Rodber Thorneycroft sends a questionnaire by post or e-mail to prospective guests, asking them to rate their top five favourite activities. They are also asked their personal preferences: whether they'd like to bring partners to events, if they are interested in family-oriented activities, and whether they prefer to attend during office hours or at the weekend.

Questionnaires are kept short enough to be completed within five minutes.

Spicer claims an average response rate of 65% and that potential guests are motivated by self-interest. Most people like to be asked about their interests and will be more enthusiastic about attending an event they care about, rather than traipsing off to an occasion that leaves them cold.

On the back of its research, Rodber Thorneycroft collates an events calendar that takes account of a client's annual budget. "We are able to build up quite a good profile of guests who our clients can then use for other purposes," explains Spicer. "In the past we have asked guests which publications they read, which helps with media planning and broader marketing strategies."

The growing need for clients to justify every bit of their marketing spend is encouraging hospitality suppliers to offer proper segmentation and analysis systems, so while the economic downturn is creating tough market conditions and squeezing client spend, it may prove a boon to the hospitality industry in the longer term because agencies have to make their programmes more accountable.

"The days of extravagant, unstructured spending on events are behind us, as companies are being forced to analyse their marketing budgets in more detail," points out Simon Gillespie, group marketing director at Sportsworld. "The whole process of event and guest selection is assessed to ensure that money is not being wasted on unproductive hospitality, and, more importantly, that firms are focusing on post-event analysis to assess the value of entertaining."

Recognised benefits

"From an industry perspective this can only be a good thing as companies are forced to understand more about their industry and are in a better position to recognise the benefits of dealing with official agencies at events, rather than risk being let down by cheaper, unofficial operators," Gillespie adds.

Giving clients a poor experience can be more damaging than not taking them anywhere at all. Although clients are generally grateful to be invited to a corporate event, they tend to be very busy and might have to rearrange their diary to attend. So a lacklustre or abysmal entertainment experience is likely to leave them distinctly unimpressed.

With many companies having to cut their hospitality budgets, there is a danger that corners may be cut. Undoubtedly, companies need to be wary of fly-by-night operators and use well-established agencies that are either members of the CEA or show a solid track record in the business.

"It continues to amaze me how many blue-chip organisations risk damaging their reputations by taking cheaper packages, often as a result of a 'special discount due to a cancellation'," says Gillespie.

Yet it would appear that this is not happening too often. Rather than spending less on each guest, companies have refined their focus to their most important clients and prospects, and are doing less with those on the periphery. They are now spending the same or even increasing the spend per head but inviting fewer people.

"It is an interesting sector at the moment," says Rob Davidson, senior lecturer in business travel and tourism at the University of Westminster, whose book, Business Travel, deals with the corporate hospitality sector.

"It is quite marked how events are becoming smaller. The emphasis is now more on people from the business spending quality time with their clients. It used to be that there would be ten people from the host company plus 100 guests. People would come and go without speaking to anyone from the host company. The old marquees for 50 to 100 people are getting rarer and rarer."

Some astute marketers use corporate hospitality to meet specific business goals. A good example is the way in which firms including SAP and Sun Microsystems exploit their partnerships and sponsorships.

Sun's partnership with Formula One team McLaren means it uses corporate hospitality agency The Works, to ensure that the clients it invites to the Grand Prix are not only entertained, but are also shown Sun's computer hardware in action in the challenging technological environment of the F1 world championship.

After the event, which The Works prefers to term 'customer engagement programmes' rather than hospitality, guests are sent an evaluation questionnaire, part of which asks them whether they understood Sun's technical relationship with the McLaren team and whether they felt the event provided them with a good example of Sun's technology in action.

This evaluation is important to Sun Microsystems because most buyers tend to only see the product in a controlled demonstration environment. It can be tremendously reassuring for potential buyers to see it being put to the test. Asked by The Works whether they would be more likely to use Sun Microsystems after seeing its computers in action at a recent Grand Prix, 43% of buyers said they would.

"Clients don't mind filling in questionnaires if they have had a terrific evening or weekend, as long as it is positioned as making the experience better," says Ben Pincus, managing director at The Works. "What clients object to is if they are asked about it a week later - if it is in their inbox the next morning and it takes them three minutes to fill in, they won't mind."

Cost variations

There are, of course, huge variations in the cost of corporate hospitality packages. Companies going to town by taking their clients to the Men's Singles Final at Wimbledon could find that it costs them as much as £2500 a head, whereas hospitality at the Henley Regatta may only cost about £200 a head. The prestige and popularity of a big event can push up prices dramatically.

Although the popularity of traditional events such as Ascot, Wimbledon, the British Grand Prix and international Rugby Union fixtures remains fairly consistent, there has definitely been a widening of interest for other experiences. One area of growth has been in participation events such as whitewater rafting, golf, shooting and tank driving, while music hospitality has also increased.

Alastair Scott, sales and marketing director at Sodexho Prestige, points out that there has been huge interest among his own clients as to the possibility of staging corporate hospitality at Robbie Williams' Knebworth concerts this year.

Meanwhile, Rodber Thorneycroft has been developing family-oriented events - a good example being a cinema showing of Harry Potter and the Chamber of Secrets during the days between its premiere and general release. "We're trying to create some unique stuff that clients can put their own stamp on for greater impact," explains Spicer. The agency also arranged a screening of the latest James Bond movie, Die Another Day, for a particular client.

For many clients, the ostentation that was apparent in the hospitality market of the late-90s, and previously in the late-80s, has now been replaced by a more discreet approach. "A lot of companies prefer to keep a lower profile than before," explains Alan Cooper, director of Alan Cooper Events. "They don't want to have their names emblazoned across marquees."

The mood changed after September 11 and this shift has been accentuated by the global economic downturn. It has not stopped companies entertaining, but some look to consolidate such events around more tangible business goals. There is also a fear that senior staff could be seen as living the high life when job cuts are being made.

"There is no doubt that companies are very sensitive about such issues and, quite aside from any concern about potentially bad PR, there appears to be the genuine feeling of a need for a more conservative approach to entertaining," says Gillespie.

"This may, for example, see a reduction in pure jollies, but entertaining is continuing around scheduled meetings or conferences."

MAXIMISING A HIKE IN SPEND

Rob Glenn, Managing director, Staffware

Staffware is a business process management software company, so it is very important for us to get close to our potential clients.

I would say that over the past two years we've increased our corporate hospitality budget by about 100%. I know that some companies are cutting back on spending in this area, but I think that's because they still treat them as a jolly. We treat them as an important part of the marketing mix.

You need to talk to clients to find out what they like before you take them somewhere, so they feel that the event they are going to is special.

Our agency, Rodber Thorneycroft, organises our seminars as well as the hospitality, which gives us an integrated, outsourced marketing service.

I think that this is important because it allows us to keep in contact with customers and move them on to the next stage of the sales process.

We do events such as Ascot Lady's Day, Wimbledon and the Ryder Cup, but most of all, we do rugby events because we have sponsored the Barbarians team for the past two years.

You have to give yourself a unique position so that key people will accept your invitation. For example, before important rugby matches, we have taken customers to a little-known private wine cellar at Twickenham.

HOW TO GET MORE OUT OF LESS

Paul Leonard, Head of commercial sponsorship, BT

We have tried to take a more co-ordinated approach to corporate hospitality and still get greater benefit from the properties we are associated with.

The BT divisions used to organise their own hospitality, but now it is done centrally and linked to our sponsorships.

There's not as much money in the budget as there was two years ago. It has been cut by about 30%. But we have 10,000 major customers in the UK and maintaining good relations with these big spenders is very important.

We still do a lot of sport, especially rugby. We retain a box at Twickenham and also have links with the sport in Scotland and Wales. But rugby can be very male-oriented, so we are trying to get a better balance in our programmes.

We are one of the sponsors of the Tate and we helped to create Tate Online. We use this relationship to host dinners at the gallery, at which curators can talk to the audience about an exhibition. You can do this on week nights, which a lot of our guests prefer to do, rather than giving up their precious weekends.

It is important to be original, so when we take guests to the Royal Opera House we try to add depth by arranging a tour backstage before the performance.

We've had great feedback on that in our evaluations.

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